Evolution Agrees to Divest Interests in the Tullos Field
Evolution Petroleum Corporation has signed an agreement to sell its 100% working interests in certain oil fields in LaSalle and Winn Parishes, Louisiana, to a private buyer for approximately $4.5 million in cash. The properties include 389,700 barrels of proved developed oil reserves, as reported in the company's independent engineering report for the fiscal year ended June 30, 2007, reduced by current fiscal year sales. The transaction is expected to close in early March 2008 pursuant to the terms and conditions of the definitive Asset Purchase and Sale Agreement.
Robert Herlin, President and Chief Executive Officer, commented, "Considering the approximately $2.6 million we've invested, the considerable operating income generated to date, and the pending sales proceeds, Tullos has been very profitable for us and has allowed the testing of promising completion technology that could be applicable to many other fields in the onshore Gulf Region. However, Tullos has also proven to be both staff intensive and sensitive to rising oil field service costs. Consequently, we have elected to further focus our staff and capital on projects with far greater potential, particularly in growing our Giddings Field inventory beyond the twenty-two proved undeveloped locations containing approximately 2.1 million BOE of proved reserves reported by our independent engineers as of November 1, 2007."
Mr. Herlin further commented, "We expect that our ongoing development drilling program in the Giddings Field, which is being funded from our own working capital, can generate more immediate and higher cash flows to balance our longer term revenue growth expected from the Delhi enhanced oil recovery ("EOR") project. We have completed the drilling of two wells in the Giddings Field to date and should spud our third well shortly."
The operator of the Delhi Field, a subsidiary of Denbury Resources, announced last week that their 2008 capital expenditure budget includes $80 million to complete the last leg of the CO2 pipeline to the Delhi Field. In addition, Evolution has observed increased facility and well work activity in the Delhi Field that supports its forecast of initial EOR production response during calendar 2009, the necessary milestone to begin categorizing reserves there as proven.