Corporate Presentation
March 2011
(NYSE Amex: EPM)
© Evolution Petroleum Corporation
1
Forward Looking Statements and Cautionary Note
The data contained in this presentation that are not historical facts are “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and
Section 21E of the Exchange Act. Such statements may relate to capital expenditures, drilling and
exploitation activities, production efforts and sales volumes, proved, probable, and possible reserves,
operating and administrative costs, future operating or financial results, cash flow and anticipated liquidity,
business strategy, property acquisitions, and the availability of drilling rigs and other oil field equipment
and services. These forward-looking statements are generally accompanied by words such as
“estimated”, “projected”, “potential”, “anticipated”, “forecasted” or other words that convey the uncertainty
of future events or outcomes. Although we believe the expectations and forecasts reflected in these and
other forward-looking statements are reasonable, we can give no assurance they will prove to have been
correct. These statements are based on our current plans and assumptions and are subject to a number
of risks and uncertainties as further outlined in our most recent 10-K and 10-Q. Therefore, the actual
results may differ materially from the expectations, estimates or assumptions expressed in or implied by
any forward-looking statement made by or on behalf of the Company. Cautionary Note to U.S. Investors
–The SEC has recently modified its rules regarding oil and gas reserve information that may be included
in filings with the SEC. The newly applicable rules allow oil and gas companies to disclose not only
proved reserves, but also probable and possible reserves that meet the SEC’s definitions of such terms.
We disclose proved, probable and possible reserves in our filings with the SEC. Our reserves as of June
30, 2010 were estimated by DeGolyer & MacNaughton, W.D Von Gonten & Co. (“Von Gonten”), and Lee
Keeling and Associates, Inc. (“Keeling”), independent petroleum engineering firms. In this presentation,
we make reference to probable reserves. These estimates are by their nature more speculative than
estimates of proved reserves and are subject to greater uncertainties, and accordingly the likelihood of
recovering those reserves is subject to substantially greater risk.
2
Quick Facts about EPM

Ticker Symbol
EPM (NYSE AMEX)

Fiscal Year-End
June 30

Market Cap*
~$208 million as of 2/25/2011 ($7.58/shr)

Enterprise Value
~$205 MM

Shares
27.5 MM shares outstanding
“
(based on 12/31/10 FS)
33.1 MM shares fully diluted ($1.83 avg. exercise)
~42 % owned by institutions

Financial Strength
~$3.2 MM in WC & no debt as of 12/31/10

Team Record
7 year track record in creating and implementing
major projects
* Excluding net value of options and warrants
3
Our Business
EPM generates and implements domestic, onshore oil & gas
development projects utilizing our expertise and modern
technology.
Our business model is focused on building share value by:
 Generating development ideas
 Capturing project value without overpaying
 Initiating development to reduce risk
 Utilizing third parties to finance widespread development without crosscollateralization risk or dilution of share value

Our projects are:
 Lower risk development
 Engineering-based
 Within existing fields
4
Oil & Gas Core Assets
(Net Reserves at 6/30/2010)
Delhi Field-producing
CO2 EOR - 100% oil
9.4 MMBO Proved
5.7 MMBO Probable
East OK Woodford Shale – testing
~15,000 net acres targeting shallow Woodford
Giddings Field – producing
Horizontal wells – naturally fractured
Austin Chalk, Georgetown, Buda plus
EagleBine potential
27% oil, 32% NGL, 41% gas
3.0 MMBOE Proved, 1.0 MMBOE Probable
5
EPM Metrics

Substantial oil and gas reserves
12.4 MMBOE Proved
7.2 MMBOE Probable
Each fully diluted common share owns
60% of 1 BOE of net reserves

Oily – Proved reserves are 83% black oil and 8% NGL

Valuation Metrics at fiscal year-end (6/30/2010):
(@SEC NYMEX pricing of $76.21/BO, $4.10/MMBTU)
Proved PV10
$8.03 / FD Share
Probable PV10
$1.93 / FD Share
2P PV10
$9.96 / FD Share
2P PV10 Futures
$11.68 / FD Share
6
Why own EPM?

Proved reserves PV10 at current oil price >> current market valuation

Growing value in Delhi CO2 EOR project:

Currently producing with expected steadily increasing cash flows

PV10 grows 40+% over next 5 years without significant EPM capex

+ EPM expects ~$140+ MM of pretax cash flows over same 5 years ($76 oil)

Long life oil reserves with premium pricing and upside potential

Proved reserves require no capital expenditures and incur limited operating
expenses (our “prepaid PUD annuity”)
7
Why own EPM?

Upside potential in other projects underway:


15 remaining development drilling locations (13 PUD) in Giddings,
of which up to 2 may be included in current joint venture

Exposure to new Eagle Ford / Woodbine play

Proprietary artificial lift technology

Low cost unconventional gas in Eastern Oklahoma
No debt
Employees fully aligned with shareholders by beneficially owning 20%
of fully diluted shares and focused on building value per share

8
Successful Team Track Record
Using $8.3 MM of paid-in equity,
we invested
We generated, as of 6/30/10
Delhi EOR
$6.8 MM
$50 MM cash pretax +
Proved PV10 =
$224 million
2P PV10 =
$276 million
Giddings
$26.7 MM
$9.7 MM cash from field +
Proved PV10* =
$41 million
2P PV10* =
$53 million
Artificial Lift
Technology
$0.2 MM
First field tests successful, JVs pending
OK Shale
$6.2 MM
~15K net acres of Woodford potential;
first reserves assigned - testing
* Before Giddings drilling JV
9
EPM Reserves Growth (MMBOE)
• Reserves as at fiscal year end of June 30
• Does not include other resource or technology potential
• 2009 downward revisions primarily due to commodity prices
10
EPM Assets: Delhi CO2 – EOR Project
Milestones Achieved –

Phase I CO2 injection began Nov 2009
Early first oil production response in
March 2010 from Phase I

Gross production > 1,000 bopd from
Phase I


Phase II CO2 injection began Dec 2010
78 mile Delta Pipeline to
transport CO2 to Delhi Field
Construction of first phase
of produced gas facility for
recycling CO2 at Delhi
11
EOR - Delhi Field CO2 Project
Delhi
Reserves*: Proved
9.4 MMBO
Probable 5.7 MMBO
2P
15.1 MMBO
Tinsley
$224 MM PV10
$ 51 MM PV10
$276 MM PV10
Jackson
Dome
(* At 6/30/10 SEC NYMEX price $76.21/BO)
Gross Historical Production
192 MMBO
Projected EOR Recovery
(% of OOIP)
13% Proved
4% Probable
Average depth
3,235’
Unit Size
13,636 acres
Reserves Basis
Earlier & stronger Phase I oil production - began March 2010
Dedicated CO2 reserves
Phase II first injection Dec 2010, installing Phase III during 2011
Upside Potential
More original-oil-in-place
Higher EOR recovery similar to other DNR projects
Utilization of lower cost WAG process under consideration
12
EPM’s Delhi Assets
We purchased Delhi Field in 2003 for $2.8 MM, expended $2.5 MM in field, later purchased
royalty interests for $1.5 MM, then farmed out our working interest for $50 MM cash +
commitment to install EOR project at operator’s sole cost with their proved CO2 reserves +
reversionary interest.
We own royalty interests equal to ~7.4% of gross production




EPM receives 7.4% of gross revenues from day one
EPM pays no capital expenditures and no operating costs
Project is exempt from state severance tax for next 6-8 years, subject to oil price & rates
Our 5 MMBO of 2P royalty reserves are 1/3rd of our total reserve volumes and ~1/2 of PV
We also own a separate reversionary ~24% working interest (~19% revenue interest)





EPM bears no capital expenditures until deemed payout
Payout occurs when project generates net field cumulative cash flow of $200 million
Net field cash flow = revenue – field operating expense (including CO2)
After Payout, EPM will bear its pro rata share of capital expenditures & expenses and will
own pro rata share of all field assets and reserves including injected CO2
Reversionary interests are in addition to above royalty interests
13
Delhi PV10 @ $76/Bbl Increases With Time
Residual 2P PV10 and Cumulative Cash
Flows per Fully Diluted Share
Residual PV10
Cumulative Pretax Cash Generated
$25
$20
$15
$10
$5
$2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Cash Flows from DeGolyer & MacNaughton 7/1/10 SEC Reserves Report @ $76.21/Bbl.
Residual PV10 is the PV10 of remaining cash flows from given year to project end.
14
Delhi Sensitivity Analysis
Delhi PV/Share Impact by
Levels of Recovery
$/ FD Share
Delhi PV/Share Impact by Oil Price
and Inflation
PV10* vs Initial Oil Price
PV10 Esc* vs Gross Oil Recovery
$ / FD Share
$14
$16
$13
$14
2P PV10 Esc @ 3%
2P PV10 Flat
$12
$12
$10
$11
$8
$6
$10
EPM stock &
Delhi oil price
at 2/25/2011
$4
$9
$2
$-
$8
40
50
60
70
Gross Recovery in MMBO
80
$-
$20
$40
$60
Initial Oil Price
$80
$100
* Varying 2P Reserves; prices & costs escalating
* Varying initial oil price with 2P Reserves,
@ 3% pa from $76.21/BO NYMEX price
oil pricing either flat or escalated as shown
15
Additional Delhi Analysis
EPM's Projected Annual Pretax Cashflows from Delhi
(2P Reserves @ $76 oil + 3% inflation)
Royalty Interest
Reversionary WI
$90,000,000
$80,000,000
$70,000,000
$60,000,000
$50,000,000
$40,000,000
$30,000,000
@ 2/28/11 LLS
Oil price
$20,000,000
$10,000,000
$0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
16
Giddings Field, Central Texas
Attractive Drilling Economics
Drilling locations
10 proved re-entries
3 proved grassroot &
2 probable grassroot

Ave. Gross Recovery
146 MBOE/well
305 MBOE/well
Ave. cost/well
$1.5 MM
$2.7 MM
Cost per net BOE
$12.40
$11.00
Naturally fractured Austin Chalk, Georgetown & Buda – no hydraulic fracs required

Wells typically produce at high initial rates with steep initial decline, then stabilize.
About half of estimated reserves are produced in first two years.

Reserves estimated to be 27% oil, 32% gas liquids and 41% natural gas

Industry joint venture may be expanded by two more locations. First three JV wells
combined initial test rate as good or better than expected.

100% WI (~80% NRI) in 10 producers; 20% WI-BPO & 38% WI-APO (16-30% NRI)
in 3 completed JV wells with expected aggregate results
17
Gas Shales in Eastern Oklahoma
EPM owns ~15,000 net acres in Haskell
and Wagoner Counties, OK
Woodford
Completions
EPM
Acreage
Haskell – Woodford between 4,000’ &
6,000’ in depth
Tulsa
Wagoner – Woodford between 1,200’ &
1,800’ in depth
EPM vertical reentry
Main
Woodford
Trend
Oklahoma
18
6,422’ TVD Woodford Hz
Test @ 7.1 MMCFE/D
6,000’ TVD Woodford Hz
Well – ultimate recovery
~1+ BCF from 2000’ lateral
Our OK Gas Shales: Shallow

EPM is targeting a development cost of $1 per MCFe or less



Shallow depth = small rig and light acid fracs = low day rates
Haskell Woodford at 4,000-6,000’ depth – vertical wells targeting 500-1000 mmcf at $500K cost;
vertical wells in Wagoner targeting 200+ mmcf at $180K at <1800’ depth

Numerous comparable wells in Haskell with ~1 bcf historical average recovery

Dewatering process to liberate natural gas
EPM testing program underway



Low Cost
EPM first vertical test (re-entry) in Haskell briefly tested strong gas rate and pressure before
shut-in for pipeline connection – first sales ~3/1/11.
EPM test in Wagoner western block tested 93 mcfd, eastern block test still dewatering, southern
block marginal
Substantial additional acreage is typically obtainable through forced pooling – EPM has
substantial footprint in 30 sections in Haskell County
19
Proprietary Artificial Lift Technology
Conventional artificial lift
• Either fluid level eventually drops to a level where rod
pump or gas lift are no longer effective, or
• Low level of fluid production in gas well builds and
eventually shuts off gas production
Original fluid level
• This can leave substantial volumes of oil and gas
unrecovered.
Our technology
• Mobilizes remaining fluid to the pump
Fluid level at
conventional
abandonment
• Cost $50K - $150K per application
• Successfully applied in 3 wells in Giddings Field
Remaining
potential
Reservoir
Our Plan for 2011
• Complete first joint venture to install (2 JVs negotiating)
• Expand outside of Giddings Field
20
Operating Plan for FY 2011
A $4 million base case capital expenditure program to:

Drill up to 5 horizontal wells in Giddings joint venture (3 completed to date)

Re-enter and frac Woodford Shale in two mid-depth vertical wells in Haskell (1
to date) and continue Wagoner production testing

Commercialize artificial lift technology through one or more joint ventures
through demonstrations on third party wells
Liquidity Plan:

Use Giddings cash flow to cover overhead, and Delhi cash flow to drill

Avoid high cost, high risk capital

Utilize joint ventures, project financing, noncore asset monetization and/or
small, opportunistic equity placement to accelerate development as warranted

Maintain liquidity through FY2012 as Delhi cash flows increase
21
Catalysts for growth in FY2011
 Continued production growth at Delhi at premium LLS oil
price
 Drilling success in Giddings
 Positive tests in Woodford Shale

New joint venture(s) to apply artificial lift technology

Additional development joint venture(s) – Giddings & OK
 Maintain conservative financial approach while increasing
NAV/share – no debt & 84% oil (90% total liquids)
22
Exhibits
Definitions
EPM Annual Revenues
Management team
Board of Directors
23
Definitions
EOR
WAG
BOE
CF
M
MM
NGL
PUD
2P
PV10
SEC Reserves
Futures Reserves
PV10 Futures
PV10 Flat
PV10 Esc
FD Share
Enhanced oil recovery
Water alternating gas – type of CO2 EOR
Barrel of oil equivalent
Cubic feet of natural gas at standard conditions
Thousands
Millions
Natural gas liquids
Proved undeveloped
Proved + Probable Unrisked Reserves
Future unescalated pretax net cash flows discounted at 10% per
annum based on SEC pricing (trailing twelve months realized prices)
Reserves based on unescalated trailing twelve month realized prices
Reserves based on five year forward futures commodity prices with
subsequent years held constant at the fifth year prices
PV10 adjusted for Futures Reserves
PV10 adjusted to given commodity prices without escalation
PV10 adjusted to given commodity prices with price & cost escalation
Fully Diluted Shares includes outstanding shares + unvested options &
warrants, without considering the weighted average exercise price of $1.83
Cautionary Note: PV-10 is a commonly used financial metric and does not necessarily equal market
value. All Reserves are unrisked, and SEC Reserves unless otherwise noted.
24
EPM Revenues
• Revenues in thousands
• 2007 revenues decreased by farm-out to DNR
• June 30 fiscal year-end
25
EPM Liquidity
12/31/2010
Assets
Current Assets
$ 7,437,525
Properties & Equipment, net
32,707,583
Other Assets
45,308
Total Assets
$40,190,416
Long Term Liabilities & Equity
Long Term Debt
$
0
Current Liabilities
4,241,714
Other Liabilities (primarily deferred income tax)
4,064,388
Total Liabilities
8,306,102
Equity
$31,884,314
26
Our Management Team
Robert Herlin, CEO & Chairman
•
•
•
•
•
•
Co-founded EPM in 2003 and built company using $8.3 million of equity capital
28 years of leadership experience in M&A, development, operations and finance
in public and private sectors
$800 million in transactions completed
Originated and led horizontal drilling team in early years of horizontal drilling
adoption by industry
Member of Board of Directors – Boots & Coots
B.S. and M.E. in chemical engineering (Rice University) and MBA (Harvard)
Sterling McDonald, CFO
•
•
•
•
CFO since 2003
Former CFO for PetroAmerican Services, PetroStar Energy and Treasurer for
Reading & Bates Corporation
Responsible for raising ~$4 billion in capital
B.S. and MBA (University of Tulsa)
27
Our Management Team
Daryl Mazzanti, VP-Operations
•
•
•
•
•
Joined team in mid-2005; 22 years of experience in oil & gas industry
Former Manager of US Business Development for Anadarko
Former Production Manager, Austin Chalk for Anadarko/UPRC responsible for
1200 wells, staff of 65 and 25,000 BOEPD of production
Responsible for numerous innovations in horizontal drilling, completions and
artificial lift
B.S. in Petroleum Engineering (University of Oklahoma)
Edward Schell, General Manager for Drilling and Unconventional
Development
•
•
•
•
•
Joined team in late 2006; 26 years of experience in oil and gas industry
Various management positions in drilling, operations and business development
at Anadarko Petroleum
Particular expertise in horizontal drilling and tight gas reservoirs
Drilled ~800 wells, 200 being horizontal and 2/3rds being in unconventional
reservoirs
B.S. in Petroleum Engineering (University of Texas)
28
Our Board of Directors
Robert Herlin, CEO, Chairman & Co-founder
Laird Cagan, Director & Co-founder
Managing Director – Cagan McAfee Capital Partners
Formerly with Goldman Sachs and Drexel Burnham Lambert
E.J. DiPaolo, Director
Energy Partner with Growth Capital Partners, L.P.
Former Halliburton Group Senior Vice President of Global Business Development
Gene Stoever, Director
Retired Partner with KPMG Peat Marwick
Former SEC Reviewing Partner for KPMG
CPA in the State of Texas and member of the AICPA
Bill Dozier, Director
Former SVP-Business Development for Vintage Petroleum
Former SVP-Operations for Vintage Petroleum
Formerly in operations for Santa Fe Minerals and Amoco
Kelly W. Loyd, Director
Director with JVL Advisors, LLC, a private energy investment company
Formerly Associate with RBC Capital markets
Formerly Founder of L.A.B. sports and Entertainment and Managing Partner of Tigre Leasing, LLP
29
(NYSE AMEX: EPM)
Company Contact:
Sterling McDonald, VP & CFO
(713) 935-0122
smcdonald@evolutionpetroleum.com
IR Contact:
Lisa Elliott / lelliott@drg-e.com
Jack Lascar / jlascar@drg-e.com
DRG&E / 713-529-6600
30