On February 14, 2008, Evolution Petroleum Corporation reported fiscal 2Q/08 results for the three months ended December 31, 2007.
Oil and gas revenues for fiscal 2Q/08 increased 53% to $652,649 from $426,459 for fiscal 2Q/07, ended December 31 2007. This increase was primarily due to a 31% increase in sales volumes and 18% increase in oil and gas prices, from $70 to $82 per barrel of oil equivalent ("BOE"). The increase in sales volumes was primarily a result of the sale of excess oil inventory in our Tullos Field and pre-drilling operations in the Giddings Field in Central Texas.
Net loss in fiscal 2Q/08 was $770,857, or ($0.03) per share on 26.8 million weighted average shares outstanding. This compares to a net loss of $421,657, or ($0.02) per share on 26.7 million weighted average shares outstanding for the comparable three month period in the prior fiscal year. The net losses include non-cash stock based compensation of $441,564 for fiscal 2Q/08 as compared to $371,604 for the comparable three months in the prior fiscal year. The expected increase in the net loss was primarily attributable to a combination of increased staff costs related to initiation of a ten well drilling program in Texas and bonus accruals in the current period compared to no accruals in the prior year period, partially offset by a current period income tax benefit of $282,399. There was no comparable tax benefit or expense in the prior year period.
Robert Herlin, President and Chief Executive Officer, commented, "Over the last six months we have made significant progress in our transition from a primary focus on project development to generating production and earnings. In late 2007, we commenced an $8.5 million, ten well drilling program in the Giddings Field in Central Texas as a part of our Bypassed Primary Resource initiative. We have drilled one well, which is currently being equipped for production, and just completed drilling on our second well. We are pleased with the results to date and expect to report on overall drilling operations in April.
"During the last quarter, we continued to build our staff and infrastructure in preparation for this drilling program, and our operating expenses should decline as a percentage of revenues as our expected production ramps up.
"At December 31, 2007, Evolution had approximately $21.1 million in working capital and remained debt free," added Mr. Herlin. "During the last six months we expended approximately $5.9 million of our working capital on oil and gas leases and development costs. We now have over 24,000 gross and net acres leased to support our projects in Texas and our gas shale projects in the Mid-continent region, and we increased our proved reserves by 49% since June 30, 2007 through the addition of 805,000 net BOE in the Giddings Field. Our leasing activity to date includes 13,000 gross and net acres in our gas shale program with commitments or active negotiations for the balance of our targeted net 25,000 acres."
We sold 3,617 thousand cubic feet ("Mcf") of our natural gas production at an average price of $6.49 per Mcf in fiscal 2Q/08 associated with a well being prepared for re-entry in the Giddings Field, and a total of 7,315 barrels of oil production at an average price of $86.01 per barrel. Combined, we sold 7,918 BOE at an average price of $82.43. For the second quarter of fiscal year 2007 we sold 6,080 Bbls of oil at an average price of $70.14 per barrel and no gas. Volumes in the current period were higher due to the sale of excess oil inventory in our Tullos Field and the pre-drilling production from the Giddings Field re-entry operations.
Lease operating expenses (including production severance taxes) of $381,851 were approximately 18% higher than fiscal 2Q/07, primarily reflecting increased production over the prior year. On a BOE basis, lease operating expenses declined 13% to $46.39 in fiscal 2Q/08 as compared to $53.14 in fiscal 2Q/07.
General and administrative expenses were approximately $1.5 million for fiscal 2Q/08 as compared to approximately $1.0 million in fiscal 2Q/07. Higher overall compensation expenses due to a change in bonus accruals and new staff to support the drilling program, higher legal costs associated with new proxy disclosure requirements and similar filings, and an increase in franchise tax owed to the State of Texas accounted for most of the increase. Non-cash stock compensation expense was $441,564 in fiscal 2Q/08 as compared to $371,604 for fiscal 2Q/07.
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