Evolution Petroleum (NYSE American:EPM) ('Evolution' or the 'Company') announced today financial results and operating highlights for its fiscal second quarter ended December 31, 2019 (the 'current quarter').
Highlights for the Quarter: Acquired oil producing assets in Hamilton Dome Field in Wyoming for $9.3 million of cash, net of a $0.2 million post-closing adjustment.
Paid 25th consecutive quarterly cash dividend on common shares and declared the next dividend payment of $0.10 per share, payable on March 31, 2020.
Generated total revenues of $9.4 million for the quarter, up 2.5% from the prior quarter.
Reported net income of $1.8 million, marking the 17th consecutive quarter of positive reported net income.
Ended the quarter with $20.9 million in cash; the Company has a $40 million undrawn credit facility and notably remains debt free.
'We successfully closed the acquisition of the Hamilton Dome field on November 1, 2019 and seamlessly incorporated the interests into our overall operations, with minimal disruptions or costs' said Jason Brown, President and CEO. 'This was a solid first step in the Company's strategy to diversify and grow our asset base. Hamilton Dome is meeting our projections of production, price realization and cash flow without a material increase in our overhead. Similar to other oil and gas producers, our overall performance during the quarter was impacted by lower price realizations, and further impacted in our case by the short-term effect of repairs to the oil sales pipeline from Delhi, which more than offset increased volumes. This is a good example of why we are pleased with the Hamilton Dome acquisition as a second source of cash flow and are committed to further acquisitions that will support our dividend. The current weakness in oil and gas prices presents an opportunity to acquire long-life production with upside potential at a very attractive price per BOE and validates our decision over the recent years to retain substantial liquidity with no debt. I am proud that we continue to generate earnings and positive cash flow during low commodity price environments as demonstrated by twenty-five consecutive quarterly dividends and seventeen consecutive quarters of positive earnings.'
Financial and Operational Results
Evolution reported total revenues for the quarter of $9.4 million versus $9.2 million in the prior quarter, a 2.5% increase, based on an 11.2% increase in total volumes, offset by a lower average realized oil price of $53.38 per barrel compared to $59.32 per barrel in the prior quarter. This decline was partially offset by an increase in the average realized NGL price of $14.92 per barrel of oil equivalent ('BOE') compared to $11.54 per BOE, in the prior quarter.
The current quarter revenues benefited from approximately $1.1 million in oil revenue sales for the recently acquired Hamilton Dome field, representing Evolution's share of sixty-one days of production. The Hamilton Dome oil production trades at a discount to West Texas Intermediate based on its specific gravity and sulfur content.
At the Delhi Field, the current quarter's lower average realized oil prices were further impacted by approximately $0.4 million for temporary trucking and handling charges due to the planned repair to a section of the oil sales pipeline. This effectively eliminated the LLS premium in the quarter, shifting a positive basis to a small deduction. The pipeline repair project commenced in mid-November and was completed in late January, and all Delhi oil sales are back on pipeline as of February 1, 2020.
Total net production in barrels of oil equivalent per day ('BOEPD') increased 11.2% to 2,124 BOEPD in the current quarter compared to 1,910 BOEPD in the prior quarter. The quarterly results include sixty-one days of production from the Hamilton Dome field, or 292 net barrels of oil per day ('BOPD'), based on sixty-one days of production divided by ninety-two days in the quarter.
Production costs were $4.2 million in the current quarter, an increase of 37% from $3.1 million in the prior quarter. Production costs increased by $0.9 million due to the addition of the Hamilton Dome Field effective November 1, 2019, inclusive of some atypical workovers performed in the field in December. Additionally, Delhi had higher CO2 and other production costs of $0.2 million. Purchased CO2 volumes were 83.6 million cubic feet (MMcf) per day, up 19.9% from 69.7 MMcf per day in the prior quarter.
General and administrative ('G&A') expenses increased by $0.1 million, or 7.3% to $1.4 million for the current quarter, compared to the prior quarter. Increased G&A expenses are primarily attributable to normal variations in professional service expenses often incurred during our second fiscal quarter.
Net income for the quarter was $1.8 million, or $0.05 per diluted share, compared to $2.8 million, or $0.08 per diluted share, in the previous quarter.
Capital Spending
During the current quarter, Evolution incurred $10.7 million on capital projects consisting of $9.3 million for the acquisition of Hamilton Dome field, a $0.9 million non-cash asset addition related to Hamilton Dome asset retirement obligations, and $0.5 million at the Delhi field, primarily for the NGL plant and completion of the water curtain project.
The current expectation for net capital spending for the remainder of fiscal 2020 is approximately $0.5 to $0.7 million for conformance and capital workovers at Delhi field, and $0.1 to $0.2 million for capital workovers at Hamilton Dome. The Delhi operator reported that capital was deferred for the Phase V project until 2021. Evolution anticipates all funding for the Company's share of capital expenditures at Delhi and Hamilton Dome will be met from cash flows from operations.
Liquidity and Outlook
Working capital decreased by $10.0 million from the prior quarter to $21.7 million. The decrease in working capital is primarily due to the acquisition of producing oil field assets in the Hamilton Dome Field in Wyoming for $9.3 million in cash and the payment of $3.3 million in common stock dividends during the quarter. The Company ended the quarter with $20.9 million in cash, no debt and an untapped $40 million reserve-based credit facility. The Company continues to be well positioned to fund further development of its producing assets throughout fiscal 2020 and 2021 while retaining enough financial resources to capitalize on new growth opportunities and funding for the dividend program.
Cash Dividend on Common Stock
The Board of Directors declared a cash dividend of $0.10 per share of common stock, which will be paid on March 31, 2020 to common stockholders of record on March 16, 2020. This will be the twenty-sixth consecutive quarterly cash dividend on the common stock, which has been paid since the quarter ended December 31, 2013. To date, the Company has paid out $66 million or $2.01 per share back to stockholders as cash dividends. Maintaining and ultimately growing the common stock dividend remains a Company priority.
Quarterly Conference Call
Evolution Petroleum Corporation will host its earnings conference call for the quarter ended December 31, 2019 on Thursday, February 6, 2020 at 11:00 a.m. Eastern (10:00 a.m. Central). The call will be hosted by Jason Brown, President & Chief Executive Officer and David Joe, Chief Financial Officer.
Details for the conference call are as follows:
Date: Thursday, February 6, 2020
Time: 11:00 a.m. Eastern
Call: 844-369-8770 (toll-free United States & Canada)
Call: 862-298-0840 (toll International)
To listen live via webcast over the internet, click the link https://www.webcaster4.com/Webcast/Page/2188/32893 or go to our website at http://www.evolutionpetroleum.com/. A replay will be available two hours after the end of the conference call through March 6, 2020 and will be accessible by calling 877-481-4010 (toll-free United States & Canada); 919-882-2331 (International) with the replay pin number of 57679.
About Evolution Petroleum
Evolution Petroleum is an independent energy company focused on delivering a sustainable dividend yield to its shareholders through the ownership, management and development of producing oil and gas properties. The Company's long-term goal is to build a diversified portfolio of oil and gas assets primarily through acquisition, while seeking opportunities to maintain and increase production through selective development, production enhancement and other exploitation efforts on its properties. Evolution's largest asset is our interest in a CO2 enhanced oil recovery project in Louisiana's Delhi field. Additional information, including the Company's annual report on Form 10-K and its quarterly reports on Form 10-Q, is available on its website at www.EvolutionPetroleum.com.
Cautionary Statement
All forward-looking statements contained in this press release regarding current expectations, potential results and future plans and objectives of the Company involve a wide range of risks and uncertainties. Statements herein using words such as 'believe,' 'expect,' 'plans,' 'outlook,' 'should,' 'will,' and words of similar meaning are forward-looking statements. Although our expectations are based on business, engineering, geological, financial and operating assumptions that we believe to be reasonable, many factors could cause actual results to differ materially from our expectations and we can give no assurance that our goals will be achieved. These factors and others are detailed under the heading 'Risk Factors' and elsewhere in our periodic documents filed with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statement.
Contact:
Tel: (713) 935-0122
EVOLUTION PETROLEUM CORPORATION 
