Evolution Petroleum enters Mississippian lime play and provides project updates
Tuesday, Apr 24, 2012
HOUSTON, April 23, 2012 /PRNewswire/ -- Evolution Petroleum Corporation (NYSE Amex: EPM) today reported on two key projects.
Mississippian Lime Development ProjectEvolution has entered into a Joint Venture Agreement (JVA) to develop the Mississippian Lime formation in 38 sections covering more than 24,000 gross acres in Kay County, Oklahoma. Through forced pooling, the 11,700 net acres held by the JVA potentially could be expanded by a portion of the remaining gross acres within the sections. Evolution is contributing upfront cash and a drilling carry to earn its 45% non-operated share of the joint venture. Because the partners in the JVA are in advanced discussions with landholders to add acreage, no financial terms were disclosed.
The joint venture partner is a private company based in Oklahoma with particular focus on the Mississippian Lime formation. The partner will be the operator of the joint venture and is contributing the leases, its portion of the drilling capital and its operating expertise in the area and the Mississippian Lime play.
The horizontal drilling project will seek to redevelop acreage previously drilled vertically to a limited extent into the Mississippian Lime formation. Other operators have already successfully completed similar wells in Kay County, which is within the eastern, oil-prone side of the play.
Not including any future leases acquired through forced pooling or other additions, Evolution's initial interests are estimated to hold between 25 and 33 net potential drilling locations, subject to ultimate spacing per horizontal well. The Company estimates drilling, completion and fracturing costs could be approximately $3 million per well, including water disposal facilities. Field operations are expected to commence in May with the drilling of a water disposal well, followed by the scheduled drilling of two producer wells. The JVA commits the partners to drill between six and fourteen wells over the next twelve months.
Robert Herlin, President, said: "We have been considering a number of development opportunities over the last year and this project meets our strategic criteria for developing resource properties: high oil content, well defined reservoirs with multi-well penetrations supported by geologic study, moderate risk with reasonable well costs which have the potential for delivering superior well economics, excellent land accessibility and expansion, and application of our horizontal expertise. As a bonus, we are working with an experienced operator in the area. Consequently, this project is a strong first step forward in redeploying the considerable current and future cash flows from our foundation Delhi oil property. We will continue to seek and evaluate similar opportunities."
As previously announced last year, Evolution entered into two agreements to commercialize and further validate its patented Gas Assisted Rod Pump (GARP™) technology for artificial lift in horizontal wells. The first application was completed in early December 2011 and first production began that month.
Based on production since mid-December, the Company reports that the targeted horizontal well in the Giddings Field in Texas has been restored to steady economic production. From a settled marginal rate of ~1 barrel of oil per day (BOPD), application of the GARP™ technology increased production to a steady rate of approximately 8 BOPD and more than 20 Mcf per day of rich gas that is being processed for gas liquids. The increased production should extend the productive life of the well and associated leases for potentially many years to come while potentially increasing proved developed reserves by up to 50,000 or more barrels of oil equivalent. Evolution owns a 100% working interest in the formation in the well bore, subject to a 50% net profits interest held by the company that provided the producing well and leases.
The second commercial application is undergoing production testing. Its settled production rate has not yet been established.
Robert Herlin said: "This first commercial test further validates our confidence in the value of GARP™. We expect to install our third commercial test in the coming months and expand our commercialization efforts outside of the Giddings Field."
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 as of June 30, 2011 include 13.8 MMBOE of proved and 6.2 MMBOE of probable reserves with a PV-10* of $375 million and $76 million, respectively and no debt.
Producing assets include a CO2-EOR project with growing production in Louisiana's Delhi Field, horizontal wells in the Giddings Field of Central Texas and producing test wells in south Texas. Other assets include a patented artificial lift technology designed to extend the life of horizontal wells with oil or associated water production. 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).
All statements contained in this press release regarding potential results and future plans and objectives of the Company are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update or review any forward-looking statement, whether as a result of new information, future events, or otherwise. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, those factors that are disclosed under the heading "Risk Factors" and elsewhere in our documents filed from time to time with the United States Securities and Exchange Commission and other regulatory authorities. Statements regarding our ability to complete transactions, successfully apply technology applications in the re-development of oil and gas fields, realize future production volumes, realize success in our drilling and development activity and forecasts of legal claims, prices, future revenues and income and cash flows and other statements that are not historical facts contain predictions, estimates and other forward-looking statements. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved and these statements will prove to be accurate. Important factors could cause actual results to differ materially from those included in the forward-looking statements.
* PV-10 of proved reserves is a pre-tax non-GAAP measure reconciled to the after-tax Standardized Measure of Future Net Cash Flows below. We believe that the presentation of the non-GAAP financial measure of PV-10 provides useful and relevant information to investors because of its wide use by analysts and investors in evaluating the relative monetary significance of oil and natural gas properties, and as a basis for comparison of the relative size and value of our reserves to other companies' reserves. We also use this pre-tax measure when assessing the potential return on investment related to oil and natural gas properties and in evaluating acquisition opportunities. Because there are many unique factors that can impact an individual company when estimating the amount of future income taxes to be paid, we believe the use of a pre-tax measure is valuable for evaluating our Company. PV-10 is not a measure of financial or operating performance under GAAP, nor is it intended to represent the current market value of our estimated oil and natural gas reserves. PV-10 should not be considered in isolation or as a substitute for the Standardized Measure as defined under GAAP, and reconciled below. Probable reserves are not recognized by GAAP, and therefore the PV-10 of probable reserves can not be reconciled to a GAAP measure.
SOURCE Evolution Petroleum
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