Transcript Document

Sanders Morris Harris
New York
November 9, 2007
(AMEX: EPM)
© Evolution Petroleum Corporation
Evolution Petroleum Corporation
This presentation contains “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act.
Forward-looking statements give our current expectations or forecasts of future events. They include
statements regarding our future operating and financial performance. Although we believe the
expectations and forecasts reflected in these and other forward-looking statements are reasonable,
we can give no assurance they will prove to have been correct. They can be affected by inaccurate
assumptions or by known or unknown risks and uncertainties. You should understand that the following
important factors, could affect our future results and could cause those results or other outcomes to differ
materially from those expressed or implied in the forward-looking statements relating to: (1) amount, nature
and timing of capital expenditures; (2) drilling of wells and other planned exploitation activities; (3) timing
and amount of future production of oil and natural gas; (4) increases in production growth and proved
reserves; (5) operating costs such as lease operating expenses, administrative costs and other expenses;
(6) our future operating or financial results; (7) cash flow and anticipated liquidity; (8) our business strategy,
and the availability of acquisition opportunities; (9) hedging strategy; (10) exploration and exploitation
activities and property acquisitions; (11) marketing of oil and natural gas; (12) governmental and
environmental regulation of the oil and gas industry; (13) environmental liabilities relating to potential
pollution arising from our operations; (14) our level of indebtedness; (15) timing and amount of future
dividends; (16) industry competition, conditions, performance and consolidation; (17) natural events such as
severe weather, hurricanes, floods, fire and earthquakes; and (18) availability of drilling rigs and other oil
field equipment and services.
We caution you not to place undue reliance on these forward-looking statements, which speak only as of
the date of this presentation or as of the date of the report or document in which they are contained, and we
undertake no obligation to update such information. The filings with the SEC are hereby incorporated
herein by reference and qualifies the presentation in its entirety.
Evolution Petroleum Corporation
Cautionary Note to U.S. Investors Regarding Oil and Gas Reserve
Estimates:
The U.S. Securities and Exchange Commission permits oil and gas
companies, in their filings with the SEC, to disclose only “Proved” reserves
that a company has demonstrated by actual production or conclusive
formation tests to be economically and legally producible under existing
economic and operating conditions. The Company is prohibited from
disclosing other categories of reserves in its SEC filings. We use certain
terms in this press release such as "Probable” or “Possible” oil and gas
reserves that the SEC’s guidelines strictly prohibit us from including in
filings with the SEC. U.S. investors are urged to consider closely the
disclosure in our SEC filings, available from us at 2500 City West Blvd,
Suite 1300, Houston, Tx 77042; Telephone: 713-935-0122. You can also
obtain these filings from the SEC by calling 1-800-SEC-0330. The reserve
quantities reflected above were certified by W. D. Von Gonten & Company
using the 1997 definitions and standards of the Society of Petroleum
Engineers and World Petroleum Congresses. These definitions and
standards may result in estimates of proved reserves which are materially
different from those disclosed in the Company’s filings with the SEC.
Company Overview
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Listed : AMEX in July 2006
Ticker Symbol : EPM
Market Cap : ~$80 million
Shares Outstanding : 26.8 million
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Ownership Profile (fully diluted):
 Management - 19%
 Institutions - 19%
 Non-management Directors - 42% (including affiliates)
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Oil & Gas Reserves at November 1, 2007 (using 7/1/07 prices):
 Proved = 2.5 MMBOE (increased 49% since 6/30/07)
 Probable = 11.5 – 16 MMBO
EPM Operating Strategy
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We acquire known oil and gas resources in the
onshore U.S. and develop or redevelop new
reserves and production using current technology
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We focus on mature oil and gas fields that
matured prior to modern technology and the
relatively recent step level increase in oil and gas
prices.
EPM Investment Highlights
 Multiple ongoing development projects – 22 proved
development drilling locations in inventory
 Balance sheet supports growth with $24+ million in
available cash, ~$4 MM in leases and no funded debt
 Experienced management team with specific expertise in
programs and a successful team record
 Company intrinsic value in:
 $0.90 available cash per O/S share +
 $1.75 estimated future net revenues discounted at 10%,
per outstanding share (prices as at 7/1/07) +
 0.4 – 0.6 bbls of Delhi CO2 (probable) reserves per
outstanding share +
 Ongoing development projects
The EPM Opportunity
 Our Expertise
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Horizontal drilling
Field development
Acquisitions
Ideas
Our Capital
Our Developing Technology
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Artificial lift
Innovative completions
Project Financing
EPM Initiatives
 Enhanced Oil Recovery (EOR) via gas floods
 Bypassed Resources – horizontal drilling
 Unconventional Gas Development – gas shales
Initiative I - Enhanced Oil Recovery
Expand and extend presence in enhanced oil recovery,
through:
 Miscible Gas Flooding
Typically CO2, which combines with crude oil to change fluid
properties – incremental recovery can be 8%-20+% of original
oil in place.
Example - Delhi Field
 Immiscible Gas Flooding
Where CO2 not economically available, we utilize a compatible
gas, and may combine with innovative completion technology
when water contact present.
Delhi Field Development
2011/12 – Payout projected
2009 – Material production increase
2008 – CO2 Injection projected by operator to
occur in Second Quarter. Production
response expected to follow shortly after
2007 – ROW and CO2 Pipe Acquisition, followed by
pipeline construction
2006 – Acquired 7.4% of royalty interests for $1.5 million from multiple
sellers. In June, we sold a farm-out of our working interests in
Delhi to Denbury
2004 – Increased production to a peak level of ~145 boepd through
expenditures of ~ $2.5 million
2003 – Purchased the working interest in the Delhi Field for $2.8 million
EPM Proceeds from Delhi Farm-Out
 $50 million in gross cash proceeds
 25% back-in working interest in the Unit
 Retained our separate 7.4% overriding royalty
interest
 DNR commits proved CO2 reserves and financially
committed to install $100+ MM CO2 EOR project
Delhi Holt Bryant Unit Oil Recovery
Estimated OOIP:
400 MMBO
Cumulative Production To Date:
190 MMBO
_________
(<50% of OOIP)
Remaining OIP :
210 MMBO
(>50% of OOIP)
“Current technology makes this recovery
economical even at low oil prices.”
EPM - Delhi Unit Oil Recovery
400 MMBO OOIP (est.)
Cumulative Production
To Date ~190 MMBO
48-64 MMBO EOR (est.)
APO WI
~32-45 MMBO
EOR Recovery
48-64 MMBO est’d
Remaining Resource for
recovery in future through
technology & higher oil price
~146-162 MMBO
BPO WI
~6 MMBO
EPM ORRI
3.5 – 4.8 MMBO
Other Royalties
~6-7.9 MMBO
EPM - Delhi Unit Oil Recovery
400 MMBO OOIP (est.)
48-64 MMBO EOR (est.)
Cumulative
Production To
Date
EPM APO WI
8 – 11.3 MMBO
(est.)
APO WI
~32-45 MMBO
DNR APO WI
EOR
Recovery
Remaining OIP
Resource for
recovery in future
EPM ORRI
3.5 – 4.8 MMBO
(est.)
Delhi CO2-EOR Project Status
Operator is recognized as a leader in tertiary
recovery operations
 invested over $50MM
 ROW and steel being acquired, PL construction underway
 Operator’s total incremental cost likely to be ~$5 per net BO
 Delhi is one of higher valued projects in operator’s portfolio
and firmly positioned in their stated projects-in-progress
 Delhi gives operator strategic positioning to expand CO2
access westward
EPM Cash Flows
EPM Asset Base
PRODUCTION
Cash Resources + existing proved reserves in Tullos Field + quality probable
reserves in EOR-CO2 project under way in Delhi Field requiring no capital
expenditures and limited operating expense by EPM
CASH**
Tullos Proved
Delhi CO2 Project
TIME
Initiative II – Bypassed Resources
Acquire and develop known bypassed resources :
 We focus on dual porosity, fractured, tight, low
energy or heavy oil reservoirs bypassed due to
technology or commodity prices, and we…
 Apply horizontal drilling
 Apply hydraulic fracturing
 Apply innovative completions & technology
Initiative II – Projects Underway
 We are actively leasing in four development
projects in Giddings Field area of central Texas
 Drilling locations – 100% WI in 22 proved locations
 Leases – ~8,000 net acres to date
 Pending – up to 40 locations being leased, and a fifth project area
in development
 These projects involve:
 Horizontal drilling from new wells and re-entries in naturally
fractured Austin Chalk and Georgetown formations
 Potentially applying our proprietary artificial lift technology in
targeted opportunities
 We expect to commence an $8.5 MM, ten well drilling program shortly
 First PUD drilled in Tullos Field (La) to test innovative completion
technology – results expected by end of calendar year, but early
indications are promising
EPM Cash Flows
Business Plan
PRODUCTION
* Cash resources fund Bypassed Resource projects for near term revenues,
income and net cash flows.
CASH**
EPM
Cash*
Current
Bypassed
Resources
Delhi CO2 Project
TIME
Initiative III – Unconventional Resources
Gas Shale
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Two mid-continent resource projects in
leasing stage – third project pending
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Over 7,500 acres leased to date
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Initial drilling (core holes) and further
evaluation expected in 2008
EPM Cash Flows
Business Plan
PRODUCTION
* Current cash resources fund Bypassed Resource projects
** Generated net cash flows fund gas shale projects now leasing
CASH**
EPM
Cash*
Unconventional Gas
Current
Bypassed
Resources
Delhi CO2 Project
TIME
EPM Cash Flows
Business Plan
2 new EOR and Bypassed Resource projects are already in the evaluation stage
PRODUCTION
New EOR &
Bypassed Resource
Projects
CASH**
EPM
Cash*
Unconventional Gas
Current
Bypassed
Resources
Delhi CO2 Project
TIME
Executing On Our Initiatives
2 Projects
Evaluation
using
existing
data
Idea
Model &
check
acreage
6 Projects
Leasing
1 Project
1 Project
(Tullos)
(Delhi)
Drilling of test
well(s)
Internal
Project
EPM Expertise & Capital
Develop &
expand
External
Project
Outside
Capital
Successful Record of Value Growth
Net (Intrinsic) Assets
(Proved Reserves + 50% Delhi CO2-EOR)
WC + Leases less Debt
Pvd
Pb-CO2
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
$1
9/23/03
2
6/30/04
3
6/30/05
4
6/30/06
5
6/30/07
6
11/1/07
$(50,000,000)
Note: Proved Reserves estimated future net revenues discounted at 10% by independent engineer
using 7/1/07 prices. Probable Reserves by Company (risked by 50%) include only Delhi CO2-EOR
project estimated future net revenues discounted at 10% using $55 oil price escalated at 3%.
Aggregate ~30% Annualized ROI to
Shareholders (Market Price to Investment)
Equity Tranches by Issue Price, Amount, Date & Current Price Range
$9.00
Net (Intrinsic) Assets
cash + Proved + 50% Delhi EOR-CO2
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
Approximate
Market Price
$2.00
$1.00
$Jun-03
Jan-04
Aug-04
Feb-05
Sep-05
Mar-06
Oct-06
Apr-07
Nov-07
Our Management Team
Robert Herlin, CEO & Director
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Co-founded EPM in 2003 and built company using $8.3 million of equity capital
25 years of leadership experience in M&A, development, operations and finance
in public and private sectors
$800 million in transactions completed
Originated and led horizontal drilling team in early years of horizontal drilling
adoption
B.S. and M.E. in chemical engineering (Rice University) and MBA (Harvard)
Sterling McDonald, CFO
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CFO since 2003
 Former CFO for PetroAmerican Services, PetroStar Energy and Treasurer for
Reading & Bates Corporation
 Responsible for raising ~$4 billion in capital
 B.S. and MBA (University of Tulsa)
Our Management Team (cont’d)
Daryl Mazzanti, VP-Operations
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Joined team in mid-2005
Former Manager of US Business Development for Anadarko
Former Production Manager, Austin Chalk for Anadarko/UPRC responsible for
1200 wells, staff of 65 and 25,000 BOEPD of production
Responsible for numerous innovations in horizontal drilling, completions and
artificial lift
B.S. in Petroleum Engineering (University of Oklahoma)
Edward Schell, General Manager for Drilling and Unconventional
Development
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24 years of experience in oil and gas industry
Various management positions in drilling, operations and business development
at Anadarko Petroleum
Particular expertise in horizontal drilling and tight gas reservoirs
Drilled ~800 wells, 200 being horizontal and 2/3rds being in unconventional
reservoirs
B.S. in Petroleum Engineering (University of Texas)
Our Board of Directors
Robert Herlin, CEO, Director & Co-founder
Laird Cagan, Chairman & Co-founder
Managing Director – Cagan McAfee Capital Partners
Formerly with Goldman Sachs and Drexel Burnham Lambert
E.J. DiPaolo, Director
Energy Partner with Growth Capital Partners, L.P.
Former Halliburton Group Senior Vice President of Global Business Development
Gene Stoever, Director
Retired Partner with KPMG Peat Marwick
Former SEC Reviewing Partner for KPMG
CPA in the State of Texas and member of the AICPA
Bill Dozier, Director
Former SVP-Business Development for Vintage Petroleum
Former SVP-Operations for Vintage Petroleum
Formerly in operations for Santa Fe Minerals and Amoco
EPM Summary
 Multiple new development projects offer great upside
 Growing inventory of proved undeveloped locations
 Development drilling program spudding by EOY
 $24+ MM in available cash to support growth – no debt
 Experienced management team with specific
expertise in programs and a successful team record
 Stock value supported by $2.65 per o/s share of available
cash + proved reserves, plus 0.4 - 0.6 bbls of CO2-EOR
reserves, plus ongoing development projects