Evolution Petroleum Corporation (NYSE MKT: EPM) today provided additional information about its expected capital requirements for fiscal years ending June 30, 2015 and 2016, particularly the Delhi Field in northeast Louisiana. Denbury Resources Inc. (“DNR”), operator of the Delhi Field, recently announced its intention to substantially reduce its total corporate capital spending plans for calendar 2015.
Evolution previously announced expected capital expenditures of $25-27 million net to the Company in the Delhi Field over fiscal years 2015 and 2016. Of these costs, approximately $15-17 million comprise its share of estimated costs for a recycle gas processing plant to recover high-value natural gas liquids (“NGL’s”) and methane from the recycle gas stream. We understand from DNR’s announcement that the plan and timing for the recycle gas plant have not changed, with design and fabrication of the key components expected to occur during calendar 2015 and installation of the gas plant during the first half of calendar 2016. Certain other expenditures during the balance of calendar 2014 regarding CO2 flood efficiency and operations also remain on track. Calendar 2015 expenditures for expansion of the CO2 flood into the eastern part of the Field appear to be temporarily deferred at this time.
Based on this information, Evolution’s near term capital requirements in the Delhi Field are now expected to be lower than previously anticipated. We believe that oil production will remain relatively flat during calendar 2015 with the possibility of some decline prior to start-up of the recycle gas plant during the second half of calendar 2016. Production of NGL’s and methane from that plant is projected to increase the Delhi oil equivalent production rate by up to 25%. The lower capital spending will have the benefit of increasing the Company’s free cash flow during this period.
There is no change in expected capital expenditures in Evolution’s artificial lift business.
Robert Herlin, Chairman and CEO, said: “With substantial cash reserves and no debt, we have relatively low financial risk compared to our peers. We are in the fortunate position of generating significantly more free cash flow than the Company needs for its capital program, and are well positioned to return cash to our shareholders through dividends while funding capital expenditures for future growth. We will continue to work with the operator to maximize the value of our interests in the Delhi Field as we complete the project installation.”
About Evolution Petroleum
Evolution Petroleum Corporation develops incremental petroleum reserves and shareholder value by applying conventional and specialized technology to known oil and gas resources, onshore in the United States. Principal assets include interests in a CO2-EOR project in Louisiana’s Delhi Field and a patented artificial lift technology designed to extend the life and increase ultimate recoveries of depletion drive oil and gas wells. 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. Additional information regarding GARP® is available on the www.garplift.com website.