Evolution Petroleum Ups Proved Reserves, Declares 2009 Capital Budget
Evolution Petroleum Corporation reported total net proved oil and natural gas reserves as of July 1, 2008 of 4.0 million barrels of oil equivalent (MMBOE), consisting of 2.25 million barrels (MMBbls) of crude oil, condensate and natural gas liquids and 10.5 billion cubic feet (Bcf) of natural gas. Net proved reserves increased 133% over Evolution's fiscal year-end 2007 (FY 07) net proved reserves of 1.7 MMBOE. The 2.3 MMBOE increase is in addition to the replacement of 0.44 MMBO of proved reserves in the March 2008 sale of the Tullos Field and 0.05 MMBOE of volumes produced and sold.
The increase in proved reserves is the direct result of Evolution's drilling, leasing and development activity in the Giddings Field in central Texas. During the fiscal year, Evolution drilled and completed six wells in the Giddings Field and added a seventh producing well through a work-over.
The Company also increased its fiscal year end inventory of proved drilling locations from twelve to twenty-seven and continues to add leases for additional pending drilling locations. Estimates of proved reserves are
based on a reserve report prepared by the Company's independent reservoir engineers.
The proved reserves pretax present value of future net revenues discounted at 10% (PV-10) increased from $33.3 million ($1.02 per fully diluted share) at July 1, 2007 to $160.3 million ($4.83 per fully diluted share) at July 1, 2008. The PV-10 of proved reserves was determined as of July 1, 2008 using local market adjustments to NYMEX commodity prices then in effect of $140 per barrel of oil, $13.095 per MMTBU of natural gas and
approximately $84 per barrel of NGL. The PV-10 at July 1, 2007 of $33.3 million was calculated similarly based on NYMEX commodity prices then in effect of $70.68 per barrel of oil and $6.795 per MMTBU of natural gas with
NGLs incorporated in the gas stream.
Evolution also announced that its capital budget for fiscal year 2009 is expected to reach $19 million, subject to oil and gas price fluctuations, of which approximately $3 million is allocated to leasing and approximately $16 million allocated to drilling of 10 horizontal re-entries in the Giddings Field, initial drilling in the Woodford Shale in Oklahoma and three wells in a new development project. This program compares to $21.6 million incurred in FY 08, of which approximately $12.6 million was used in drilling activities, with the balance related to leasing in both Texas and Oklahoma. The 2009 capital expenditure program will be funded primarily from working capital and funds from operations and the balance from other sources.
Robert Herlin, President and Chief Executive Officer, stated, "We commenced our Giddings Field drilling program in central Texas in late December 2007 and that effort yielded a substantial increase in our
production. We currently have a 100% working interest in seven producing wells that in June 2008 produced total daily gross sales of approximately 451 barrels of oil and 0.8 million cubic feet of natural gas, or 468 BOEPD net to our interests. By re-entering existing well bores in this program, we are able to target smaller opportunities while still generating attractive returns on our investment. We have incorporated the knowledge
gained from the first phase of drilling in Giddings to high grade our inventory and focus our efforts in the areas of our better wells."
Herlin further stated, "Even after adjusting for commodity prices much lower than those in effect on July 1, 2008, our proved reserves PV-10 as of July 1, 2008 still almost tripled during the fiscal year to about $3 per fully diluted share. When combined with our 3.1 MMBOE of probable reserves in the Giddings Field and over 13 MMBO of estimated probable reserves in the Delhi Field, our total proved and probable PV-10 is quite substantial. The Delhi EOR-CO2 project remains on track with initial CO2 injection expected in the first half of calendar 2009 and related production on or about late calendar 2009."
"In Oklahoma, we have leased more than 17,000 net acres to date, targeting two Woodford Shale projects at 4,000' - 5,000' and 1,500' depths. Subject to ultimate well spacing, this acreage position could generate 100-200 horizontal drilling locations targeting a gas resource cost of less than $2 per MMBTU. Our FY 09 capital budget includes initiation of drilling operations in Oklahoma during the second half of the fiscal year. We also have budgeted funds for leasing and initial drilling in a new project in Texas that will incorporate technology we tested last year in the since divested Tullos Field," added Herlin.