Evolution Petroleum Announces Closing of the Barnett Shale Acquisition

Rhea-AI Summary

Evolution Petroleum has successfully closed an acquisition of non-operated oil and gas assets in the Barnett Shale for $18.2 million, enhancing its asset base and supporting long-term dividend strategies. The acquisition, effective January 1, 2021, includes approximately 21,000 net acres and adds 50 Bcf of natural gas and 5 MMBls of liquids proved reserves. This move diversifies Evolution's portfolio into gas, improving the sustainability of dividends and reducing volatility risk, as stated by CEO Jason Brown.

Positive

• Acquisition enhances asset diversification and production capacity.
• Transaction is expected to support the company's long-term dividend strategy.
• Addition of 50 Bcf of natural gas and 5 MMBls of liquids proved reserves increases overall production.
• Increased commodity mix to 35% natural gas liquids and 65% natural gas reduces volatility risk.

Negative

• A portion of the non-operated dry gas interests were excluded due to potential title defects.

Purchase of Minerals and Non-operated Working Interests in Long-Life, Liquids Rich Barnett Shale

Increases Scale and Further Diversifies Assets

Accretive Transaction Supports the Company's Long-Term Dividend Strategy

HOUSTON, TX / ACCESSWIRE / May 10, 2021 / Evolution Petroleum (NYSE American:EPM) ("Evolution" or the "Company") announced today the closing of the acquisition of non-operated oil and gas assets in the Barnett Shale (the "Transaction") from TG Barnett Resources, LP ("TGBR"), a wholly owned subsidiary of Tokyo Gas Americas, Ltd. ("Tokyo Gas") for $18.2 million, net of preliminary purchase price adjustments. The final purchase price before adjustments of the Transaction was $19.6 million in cash, with an effective date of January 1, 2021 and a closing date of May 7, 2021. The Company acquired substantially all of the assets, however a portion of the non-operated dry gas working interests were excluded as a result of potential title defects that the seller was unable to timely cure. Upon resolution of the potential title defects, Evolution may purchase those interests at a mutually agreed upon price.

Management Comments

"This transaction represents another substantive step in the Company's efforts to further diversify and grow its asset base through the acquisition of primarily long-life, developed oil and gas properties, which will be supportive of the Company's dividend." said Jason Brown, President and CEO. "We are pleased to be adding these assets to our portfolio and we want to thank the Tokyo Gas team for working diligently with our team to complete this transaction. As previously announced, this acquisition significantly adds to our overall production and reserves without adding material incremental G&A expenses. These assets are similar to our other properties with long-life characteristics in basins that have stable regulatory environments and access to a premium market. The acquisition is highly accretive and should generate a high return on the cash we accumulated over the last few years and utilized in the transaction. It further diversifies our asset portfolio into gas which reduces volatility risk and improves the sustainability of our dividend and exemplifies the type of properties we continue to consider for further acquisitions."

Asset Details

The asset footprint consists of approximately 21,000 net acres held by production across 9 counties in the Barnett Shale basin of North Texas. The acreage has an approximate average WI of 17% and average RI of 14%. The acquired properties consist of approximately 50 Bcf of natural gas and 5 MMBls of liquids proved developed producing reserves based on the seller's December 31, 2020 Netherland Sewell reserve report using weighted average prices of $51.41/Bbl for oil and $2.74/Mcf for natural gas. The asset has estimated current net production of approximately 17 MMcf/d of natural gas and 1.3 MBbls/d of liquids. After the removal of the excluded assets, which were all dry gas, the commodity mix has increased to approximately 35% natural gas liquids and 65% natural gas.

Transaction Consideration

The transaction was funded primarily with cash on hand, plus a small draw on the Company's existing bank facility that is expected to be repaid quickly from operating cash flow.

About Evolution Petroleum

Evolution Petroleum Corporation is an oil and gas company focused on delivering a sustainable dividend yield to its shareholders through the ownership, management, and development of producing oil and gas properties onshore in the United States. The Company's long-term goal is to build a diversified portfolio of oil and gas assets primarily through acquisition, while seeking opportunities to maintain and increase production through selective development, production enhancement and other exploitation efforts on its properties. Our primary assets are our royalty and working interests in a CO₂ enhanced oil recovery project in Louisiana's Delhi field, the newly acquired mineral and working interests in the Barnett Shale and our working interest in a secondary recovery project in Wyoming's Hamilton Dome field. 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 http://www.EvolutionPetroleum.com.

Cautionary Statement

All forward-looking statements contained in this press release regarding current expectations, potential results and future plans and objectives of the Company involve a wide range of risks and uncertainties. Statements herein using words such as "believe," "expect," "plans," "outlook," "should," "will," and words of similar meaning are forward-looking statements. Although our expectations are based on business, engineering, geological, financial, and operating assumptions that we believe to be reasonable, many factors could cause actual results to differ materially from our expectations and we can give no assurance that our goals will be achieved. These factors and others are detailed under the heading "Risk Factors" and elsewhere in our periodic documents filed with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statement.

Company Contacts:

Jason Brown, President & CEO
Ryan Stash, SVP & CFO
(713) 935-0122
JBrown@evolutionpetroleum.com
RStash@evolutionpetroleum.com

SOURCE: Evolution Petroleum Corporation

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FAQ

What are the details of Evolution Petroleum's acquisition in Barnett Shale?

Evolution Petroleum acquired non-operated oil and gas assets in the Barnett Shale for $18.2 million, effective January 1, 2021, closing on May 7, 2021.

How will the Barnett Shale acquisition impact EPM's dividends?

The acquisition is designed to support Evolution Petroleum's long-term dividend strategy by enhancing its production capacity and diversifying its asset base.

What are the expected reserves from the Barnett Shale acquisition?

The acquisition adds approximately 50 Bcf of natural gas and 5 MMBls of liquids proved developed producing reserves.

Why were some assets excluded from the Barnett Shale acquisition?

A portion of the non-operated dry gas working interests was excluded due to potential title defects that the seller was unable to cure in time.