Mon, 1 Dec 2008|
Automatically Generated Transcript (may not be 100% accurate)
Our very first prisoner is evolution petroleum corporation with. Sterling McDonald CFO and evolution formally natural gas systems is headquartered in Houston. And the firm focuses on acquiring. That your established real and I gas resources in order to better -- redeveloped -- the application. Technology expertise and capital. Good morning I'm Bob -- the president CEO and co-founder of the company and sterling dollar CFOs and back -- rooms here with us today. Like to thank you for joining us this morning and thank our hosts were having this here. At least certain uncertain times the cautionary statement. Is some that we all really need to be paying strict attention to -- cautionary note reserves. I -- to start off after error inspiring words this morning. Evolution has no debt. And evolution has no need to go the capital markets next year. So hopefully we have. Enslave ourselves somewhat from the concerns. Peter spoke to us about this morning. -- symbol company were non expiration company what we do is we -- expertise and technology to develop reserves and production here is of a known resource. Which have basically been -- -- due to low prices or lack of technology being applied. Are we were listed on the -- American Stock Exchange which is is now the New York all connects. Never did get that right now back in July of 06 on the EPM symbol. We have a market cap some forty million dollars but because of our. Strong working capital position we only have. Enterprise value. Maybe thirty million dollars. We have 26 million shares outstanding. As of October 31 about 32 million on a fully -- bases. Employees. Own about 20% -- company and -- fully diluted basis this is very important to me. To have everyone involved to be told we want to shareholder and focused on what is our share -- how to grow that. Institutions are -- out -- about 38%. Ownership in the company. We have about four million barrels of proved reserves. Which is a number that we've increased. 133%. In the last fiscal year we are urging thirty company about way. We have another three million barrels of probable reserves -- -- -- field area. In thirteen million barrels of probable reserves associate you -- -- -- On top of that we have about 181000 net acres -- gas shale projects. In Oklahoma. Just real quick highlights we have a consistent record in our five year history of growing reserves revenue production. We have an ongoing development program we have 27. That's in dark -- field area. We are actually drilling as we speak today. We have to -- shallow would forget shale projects in Oklahoma. And we think that we -- intrinsic assets. -- nine half dollars this year that's peavy to hand of current. At current prices of our. Two. And that includes about -- point six barrels of oil equivalent to. And then -- are working -- is about 37 cents sheer. So very wrong very strong balance -- -- in -- debt. And as you can see in the tables in the charts we have -- demonstrated history of growth. Want to point out just a British reporter Q1 our fiscal Q1 of of 09. And you can see that -- in -- is showing the strong revenues increase in the company. Everything we do falls into one of these three -- -- Activities we have enhanced all recovery we have bypassed reserve development using conventional technology. It we have our unconventional play. Our capital budget -- was announced back in -- I've been some nineteen million dollars which is heavily oriented towards. Drawing up of our it's converting them from a proven developed to a production. Because of what's gone on the last. For months -- so we have decided to cut that back and we have -- ability to do that's a fully elected program. And we've gone from -- re entries down to no more than three for the year. All those being in the Giddings field. We are focusing our money in primarily how do we add -- -- -- per share basis how do we -- crude reserves. To the shareholder valuation. Since our -- Wells typically produce -- high level of production in early on. The price that you see near term extremists pricey gift for large reserves first half reserves are in the next over an eighteen month period. We don't feel it's appropriate this time to really trying convert allows -- reserves and production that's colonel gas prices. That's another reason for holding off on -- of some of these are still attractive at current prices. But just not attractive enough we think there's other things we can do with our capital to add more value to -- shareholder. It -- we'll be doing is will be joined some wells in our -- for. Projects amber at that from possible. Potential resource play into proved reserves. We have a new project in Texas were we doing some -- on begin to convert those in the proved reserves. So everything we're doing really is focused on how to we increase the per share value. Our actual joining of development wells -- Maurer. Directed towards maintaining -- current revenues strain. -- addition to that we did pull off one strategic purchase our repurchase of shares of the market about two weeks ago. From an institutional holder that was having redemptions -- -- And so we are picked those up at a dollar -- this year. Which -- very favorable deal for shareholders. Our first project is obvious -- crown jewels -- been known for for the last many years. It's -- -- high CO2 project -- northeast Louisiana in partnership with -- in very. This field discovered back in 1940s. This produce almost 200 million barrels of oil -- -- Tom. For -- -- call -- rock high quality or well. For about ninety miles from the Jackson dome when the largest sources of natural CO2 in the US. -- the very shallow 3300 feet right -- the limits permissible CO2 flood. We purchased this fact in 2003. For two point eight million dollars we invested to -- -- million on top of that. To increase our production for that time from twenty girls today 245. Girls -- -- In hand during that whole process we found that 1980. The field in the successfully pilot tested by sun for CO2. Very successful. Lost interest in the down -- -- 86. And forgot about it the world for confidant about it until we found you know these three sheets of paper among these foreign fifty -- -- Quickly begin because discussions with policy -- two operators in the US. And after eighteen months negotiations. Ended up with a deal looked in very end that they paid us fifty million dollars up front. They agreed to fully fund. A CO2 development in the field they agreed to provide all our dedicate the proved reserves CO2 they're necessary for the project. We kept seven and a half percent overriding royalty interest and we also capped at point 5%. Diversionary working interest after it fixed -- That fixed payout as a 200 million dollar and number. So no matter how much -- very actually spins the -- -- fix it 200 million dollars -- represented current -- prices. Somewhere around six million -- are so barrels all on a project disposed to produce about fifty to sixty million barrels over its life. So the pat -- her fairly early in the life of the project. We curb prices are current projections of -- probably around 2014. Would be the actual -- instilled in and we still have our overriding royalty interest. The current status of that project. Is that the CO2 lines being built by Bender is is nearing completion. Didn't very spin. Today. Close to 150 million dollars. On that pipeline related infrastructure plus fifty million paid -- means or. They're really into this project -- over 200 million dollars. They're outside engineering firm to go -- non has given them 33 million net barrels of probable reserves. Associated project. There -- 33 million barrels is equivalent to thirteen million barrels -- us. And there's a table in the presentation handout shows -- -- get -- that calculation. That's again -- 65 dollar -- -- escalating 3% per year. It at 15% recovery which is for -- conservative that's about thirteen million barrels net us. At 17% recovery which is what act in various actually -- and all their projects Mississippi. On average it's actually closer to fifteen million girls and that -- interest. A really like looking at sensitivity east. Where is our exposure up and down side. And as you can see. On the chart there on the left looking at different levels -- recovery. The project next somewhere between five and eight dollars this year of PV -- back. That she's in 65 dollar or all on the table -- the -- on the right is saying okay this is quick fixes that 15% recovery. Programs -- for oil prices. Well if you look at that ranging -- from fifty dollar or -- ninety dollar oil. Through the net -- on the order begin. Five to about eleven dollars a barrel. Sudanese. Per share fully diluted basis. She can see this project has tremendous value to the company. Anywhere from four to eleven dollars per fully diluted share. And we're trading right now a dollar and future. No way look at this is what is a long term impact to this project on the company this project alone. Well project right now scheduled to come on production sometime. In the latter part of 2009. Our override alone an initial race is gonna generate close to two million dollars a year of net cash flow to the company. This product production -- -- very rapidly over the next couple years. It gets to IP production somewhere -- eight to 101000 barrels a day range. That overrides to generate anywhere from fourteen to seventeen million dollars a year again nick cash flow to the company. Going -- we pay off of that is or excise tax. Union is not really my severance tax on tertiary projects until adapters. And of course when the -- your interest hits in 2013. Or fourteen. -- increases are annual cash flow into the fifty to sixty million dollar range begin that's -- per year number. -- and we don't passed in one dollar to make this happen we don't have to do anything this is all being done by denbury. And they very funded the bulk of this so the cost to go forward on this project on their part. Is very low. So that's a very high probability of this happening this the only project they have coming on stream in 2009. -- only project they have to add net proved reserves in -- -- to period in 2009. Again another reason that this is this project is going to happen. And our other areas in the Giddings field which are using our particular expertise in course all drilling in. Completions re completions in drilling our official left. The Giddings field is here who have -- my expertise in operating group. All -- people involved in operations have done this for various -- of their career. -- VP of operations ran and are those production in the Giddings field some 12100 wells my drilling manager. There's -- several hundred wells in the Giddings field for Anadarko in his predecessor union Pacific resources. This is a field this produce -- one quarter billion barrels in this life since the seventies it's where or -- drone was first hand and commercial sense. We have uses and very targeted it's time frame. To develop opportunities. We have by 181000 net acres least today. This is where we have some 47 locations that are on our proved reserves -- began looking net. Sensitivity to price. Note this is a price for -- of oil equivalent this -- mixture of oil and natural gas natural gas liquids. Our average at current prices of 65 dollar or all 650 gas. -- equates to about 45 dollars per barrel oil equivalent. And you can see how our reserves compared at various prices and terms of PV ten number. Right now are two. This a mixture -- re entries -- brand new wells. But -- saw adding. Reserves. And level of about sixteen to seventeen dollars -- all equivalent. That's assuming. Cost -- join. This. 2008 -- those costs are coming down fairly rapidly. So impact these numbers part of that to our benefit. We are drilling two to three wells this fiscal year we've started -- first one as we speak. To -- tree is about one half million typical grassroots about four million. However we think -- costs -- gonna come down by about 20%. Our third areas unconventional gas. It's it would for -- project is smart conventional wood for sale were not drawn at 89101000. The wall base it's. A dozen. Different draw fractures. It's. This is shallow we're drill anywhere from 15100 feet 4000 the first project. It's a shallow one about 15100 -- we have -- 500 net acres. We'll be developed with vertical wells fairly cheap to do. Roughly 12850000. Crew well the very light frak is involved. No three seismic Hoosier park losers -- absence of the extensive. Actually anger faulting going on the area. We have approximately four and fifty drilling locations in this particular area this location. Our acreage that the northern green box there. Is accident offset by another operator these -- some fifty wells offsetting us. It is demonstrated that would -- is very commercial in this area very productive. And therefore we're very confident it's been very successful for us and will be doing that. -- a bunch wells in this here probably -- filed in fiscal non north to demonstrate the personality in the bill proved reserves. The southern area we have about eighty -- -- net acres. We've had one offset to a so far -- a great process horizontal well came in about a million cubic feet today. Is to maintain that rate ever sense. So we're extremely optimistic about the potential and that -- your area. And he is CI is related to remain -- -- -- and here. All these tied together into our business strategy using -- working capital that cash flow from beginnings fielding combined with of upcoming cash flow from our CO2 -- to fund our new projects in the gas shale program. In our other here is we actually have a new area that we're developing. In Texas -- are we heavy oil project in -- known area were actually doing what we think is cases. Leasing proved undeveloped reserves. We are in the process of leasing there we have the most about half -- releasing -- and we should haven't completed. Releases and we expect to be drilling of percent of wells in fiscal 09. Again that's intended to put proved reserves on the books. And how we Elvis. To get torrents or is it value -- working capital about 37 cents. You have. The conversion of options and warrants in this year's and it proceeds there. You never proved reserves again using current on gas prices of about a dollar point four. We have probable reserves in -- -- period in current prices. And in you have -- -- high CO2 project began uses exe file grow oral. Our gas shale acreage is issues and current acreage price our heads up about nine have dollars each year. Again that's about six times our current market price. We're just operational summary. Make a steady progress on all fronts -- moving ahead quickly. We don't need to go the -- -- to raise money and make these happen. We have substantial drilling inventory. We'll continue to add value by at least seemed very limited basis -- very targeted basis -- new projects. We have no -- we have some twelve million working capital pro forma basis after complete -- share repurchase -- near term expiring leases. -- -- ability just are capex plan as needed to -- needs. So. With that. -- opium breakout session not gonna be happy to to visit with anyone on it. One on one basis phone presentation thank you very much.