June 2011 PresentationJune 2011 Presentation

(NYSE Amex: EPM)

© Evolution Petroleum Corporation 1

Forward Looking Statements and Cautionary NoteThe data contained in this presentation that are not historical facts are “forward-looking statements” withinthe meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act andSection 21E of the Exchange Act. Such statements may relate to capital expenditures, drilling andexploitation activities production efforts and sales volumes proved probable and possible reservesexploitation 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 equipmentand services. These forward-looking statements are generally accompanied by words such as“estimated”, “projected”, “potential”, “anticipated”, “forecasted” or other words that convey the uncertaintyof future events or outcomes. Although we believe the expectations and forecasts reflected in these andother forward-looking statements are reasonable, we can give no assurance they will prove to have beencorrect. These statements are based on our current plans and assumptions and are subject to a numberof risks and uncertainties as further outlined in our most recent 10-K and 10-Q. Therefore, the actualresults may differ materially from the expectations, estimates or assumptions expressed in or implied byresults may differ materially from the expectations, estimates or assumptions expressed in or implied byany 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 includedin filings with the SEC. The newly applicable rules allow oil and gas companies to disclose not onlyproved reserves, but also probable and possible reserves that meet the SEC’s definitions of such terms.We disclose pro ed probable and possible reser es in o r filings ith the SEC O r reser es as of J neWe disclose proved, probable and possible reserves in our filings with the SEC. Our reserves as of June30, 2010 were estimated by DeGolyer & MacNaughton, W.D Von Gonten & Co. (“Von Gonten”), and LeeKeeling 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 thanestimates of proved reserves and are subject to greater uncertainties, and accordingly the likelihood ofp j g g yrecovering those reserves is subject to substantially greater risk.

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Quick Facts about EPM

Ticker Symbol EPM (NYSE AMEX)y ( )

Fiscal Year-End June 30

Market Cap* ~$202 MM as of 6/10/2011 ($7.32/shr)

E t i V l $199 MM “ “ “ (b d 3/31/11 FS)Enterprise Value ~$199 MM “ “ “ (based on 3/31/11 FS)

Shares 27.5 MM shares outstanding

33.1 MM shares fully diluted ($1.83 avg. exercise)

~52% owned by institutions

Financial Strength ~$3.1 MM in WC & no debt as of 3/31/11

Team Record 7 year track record in creating and implementingTeam Record 7 year track record in creating and implementing

major projects

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* Excluding net value of options and warrants

Our Business

EPM generates and implements domestic, onshore oil & gas development projects utilizing our expertise and modern

t h ltechnology.

Our business model is focused on building share value by:Generating development ideasGenerating development ideasCapturing project value without overpayingInitiating development to reduce riskUtilizing third parties to finance widespread development without crossUtilizing third parties to finance widespread development without cross-collateralization risk or dilution of share value

Our projects are:Our projects are:Lower risk developmentEngineering-basedWithin existing fields

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t e st g e ds

Oil & Gas Core Assets(Net Reserves at 6/30/2010)

Eastern OK Unconventional Gas – testing~14,000 net acres targeting shallow Woodford

Delhi Field-producingCO2 EOR - 100% oil9.4 MMBO Proved5.7 MMBO Probable

Giddi Fi ld d iGiddings Field – producingHorizontal wells – naturally fracturedAustin Chalk, Georgetown, Buda plusEagleBine potential27% oil, 32% NGL, 41% gas

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% , % , % g3.0 MMBOE Proved, 1.0 MMBOE Probable

EPM Metrics

Substantial oil and gas reserves (as of 6/30/2010)

12.4 MMBOE Proved

7.2 MMBOE Probable

Oily Proved reserves are 83% black oil and 8% NGL

Each fully diluted common share owns60% of 1 BOE of net reserves

Oily – Proved reserves are 83% black oil and 8% NGLValuation Metrics at fiscal year-end (6/30/2010)*:

Proved PV10 $8 03 / FD ShareProved PV10 $8.03 / FD ShareProbable PV10 $1.93 / FD Share2P PV10 $9.96 / FD Share

2P PV10 Futures $11.68 / FD Share

*SEC NYMEX pricing of $76.21/BO, $4.10/MMBTU

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Why own EPM?

Proved PV10 @ $76 oil >> current enterprise value

Growing value at Delhi:

Producing since 3/2010, now exceeds 2,000 bopd grossg , , p g

PV10 projected to grow 40+% in 5 years while generating ~$140 MM of

pretax cash (based on $76 oil)p ( )

Long life oil with premium pricing and upside potential

Proved reserves require no capital expenditures and incur limited operating q p p p g

expenses and severance tax (our “prepaid PUD annuity”)

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Why own EPM?

Upside potential in other projects underway:

14 remaining development drilling locations (12 PUD) in Giddings, of which 1 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

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Successful Team Track Record

Using $8.3 MM of paid-in equity,we invested We generated, as of 6/30/10

$6.8 MMDelhi EOR $50 MM cash pretax +Proved PV10 = $224 million

$26.7 MMGiddings

$2P PV10 = $276 million

$9.7 MM cash from field +$

$0.2 MMArtificial Lift

$Proved PV10* = $41 million2P PV10* = $53 million

First field tests successful, JV pending$

$6.2 MM

Technology

OK Shale

, p g

~14 K net acres of gas potential;first reserves assigned - testing

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g g* Before Giddings drilling JV

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 prices2009 downward revisions primarily due to commodity prices

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EPM Assets: Delhi CO2 – EOR Project

Milestones:Nov 2009: Phase I CO injection beginsNov 2009: Phase I CO2 injection begins

Mar 2010: Early first oil production from Phase I

Dec 2010: Phase II CO2 injection begins

Jan 2011:

Phase I production continues to increase

Phase III installation underway

March 2011: Early Phase II oil productionMarch 2011: Early Phase II oil production response, quarterly gross production reaches 2,003 bopd average

2011: Phase III CO2 injection expected

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2011: Phase III CO2 injection expected

EOR - Delhi Field CO2 ProjectDelhi

Reserves*: Proved 9.4 MMBO $224 MM PV10Probable 5.7 MMBO $ 51 MM PV102P 1 1 MMBO $2 6 MM PV10

JacksonDome

2P 15.1 MMBO $276 MM PV10

(* At 6/30/10 SEC NYMEX price $76.21/BO)

Gross Historical Production 192 MMBOGross Historical Production 192 MMBO

Projected EOR Recovery 13% Proved(% of OOIP) 4% Probable

Average depth 3 235’Average depth 3,235

Unit Size 13,636 acres

Reserves Basis Dedicated CO2 reserves Earlier & stronger oil response – Phase I & IIInstalling Phase III during 2011

Upside Potential More original-oil-in-placeHigher EOR recovery similar to other DNR projects

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Higher EOR recovery similar to other DNR projectsUtilization of lower cost WAG process under consideration

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 interestEOR 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 oneEPM pays no capital expenditures and no operating costsProject is exempt from state severance tax for next ~5 years, subject to oil price & ratesOur 5 MMBO of 2P royalty reserves are 1/3rd of our total reserve volumes and almost halfof our PV in project

We also own a separate reversionary ~24% working interest (~19% revenue interest)

EPM bears no capital expenditures until deemed payoutP t h j t t t fi ld l ti h fl f $200 illiPayout occurs when project generates net field cumulative cash flow of $200 millionNet field cash flow = revenue – field operating expense (including CO2)After Payout, EPM will bear its pro rata share of capital expenditures & expenses and willown pro rata share of all field assets and reserves including injected CO2Reversionary interests are in addition to above royalty interests

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Reversionary interests are in addition to above royalty interests

Delhi Present Value Increases Over Time

EPM's Delhi Residual PV10 by Year + Cumulative Pretax Cash(Proved + Probable per fully diluted share, at $76 oil)

$20

$25 Residual PV10 Cumulative Pretax Cash Generated without Reinvestment

Growing Cumulative Pretax Cash from Delhi

$15

luta

ble

Shar

e

$4.44

$5

$10

PV10

/ D

il

Growing NPV10 $11.74

Cash Flows from DeGolyer & MacNaughton 6/30/10 SEC Reserves Report @ $76.21/BO.

$-

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y g p @ $Residual PV10 is the PV10 of remaining cash flows from given year to project end.

Delhi Sensitivity Analysis

Delhi PV/Share Impact by Oil Priceand Inflation

Delhi PV/Share Impact by Levels of Recovery

PV10* vs 2011 Oil Price

$20$ / FD Share

PV10 Esc* vs Gross Oil Recovery

$14$/ FD Share

$10$12$14$16$18$20

2P PV10 Esc @ 3%2P PV10 Flat

$11

$12

$13

$14

$$2$4$6$8

$10

EPM stock & Delhi oil price at 6/10/2011

$

$9

$10

$11

$-$- $20 $40 $60 $80 $100

2011 Oil Price

* Varying 2P Reserves; prices & costs escalating * Varying initial oil price with 2P Reserves

$840 50 60 70 80

Gross Recovery in MMBO

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Varying 2P Reserves; prices & costs escalating @ 3% pa from $76.21/BO NYMEX price

Varying initial oil price with 2P Reserves, oil pricing either flat or escalated as shown

Additional Delhi Analysis

Projected EPM Annual Pretax Cashflows from Delhi(2P Reserves @ $76 oil + 3% inflation)

$80,000,000

$90,000,000Royalty Interest Reversionary WI

$40 000 000

$50,000,000

$60,000,000

$70,000,000

Reversionary 24% WI

$10 000 000

$20,000,000

$30,000,000

$40,000,000

C$0

$10,000,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Royalty CF - bears no costs

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Increasing 2011 oil price from $76 to $100 increases cash flows by ~40%

Giddings Field, Central TexasAttractive Drilling Economics

Drilling locations Ave. Gross 2P Recovery Ave. cost/well Cost per net BOE

9 proved re-entries 146 MBOE/well $1.5 MM $12.403 proved grassroot & 305 MBOE/well $2.7 MM $11.002 probable grassroot

Naturally fractured Austin Chalk Georgetown & Buda no hydraulic fracs requiredNaturally 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 gasReserves estimated to be 27% oil, 32% gas liquids and 41% natural gas

Industry joint venture may be expanded by one more location. Most recent well completion put on production at initial rate of 2.8 MMCFE per day rate (14/64” choke)

100% WI ( 80% NRI) i 10 d d 14 d illi l i100% WI (~80% NRI) in 10 producers and 14 drilling locations

20% WI-BPO & 38% WI-APO (16-30% NRI) in 2 producing and 1 nonproducing JV wells

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Gas Shales in Eastern Oklahoma

WoodfordCompletions

EPM owns ~14,000 net acres in Haskell and Wagoner Counties, OK

EPM Acreage

Tulsa

Haskell – Woodford between 4,000’ & 6,000’ in depth

Wagoner – Woodford between 1,200’ & 1,800’ in depth

EPM vertical reEPM vertical re-entry

Main W df d

6,422’ TVD Woodford HzTest @ 7 1 MMCFE/D

OklahomaWoodford

TrendTest @ 7.1 MMCFE/D

6,000’ TVD Woodford HzWell – ultimate recovery~1+ BCF from 2000’ lateral

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Our OK Unconvential Gas: Shallow Low Cost

EPM is targeting a development cost of approximately $1.25 per MCFeShallow depth = small rig and light acid fracs = low day rates

Haskell targets at 4,000-6,000’ depth – vertical wells targeting 500+ mmcf at $550K cost; vertical wells in Wagoner targeting ~200+ mmcf at $200K at <1800’ depth

Numerous comparable wells in Haskell with ~1 bcf historical average recoveryp g y

Dewatering process to liberate natural gas

EPM testing program underwayEPM testing program underwayEPM first vertical test (re-entry) in Haskell frac’d in early June, dewatering and already selling natural gasEPM test in Wagoner western block tested 93 mcfd, eastern block test incomplete, southern block marginal

Substantial additional acreage is typically obtainable through forced pooling –EPM has substantial footprint in 30 sections in Haskell County

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Proprietary Artificial Lift TechnologyConventional 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• This can leave substantial volumes of oil and gas unrecovered

Original fluid levelunrecovered.

Our technology• Mobilizes remaining fluid to the pump• Cost $50K - $150K per applicationFl id l l t Cost $50K - $150K per application• Successfully applied in own wells in Giddings Field

Fluid level at conventional abandonment

ReservoirRemaining gpotential

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Operating Plan for FY 2011*

A $4 million base case capital expenditure program to: Drill 3 horizontal wells in Giddings joint venture (completed)

Re-enter and frac Woodford Shale in two mid-depth vertical wells in Haskell (1 to date, unitizing second) and continue Wagoner production testing

Commercialize artificial lift technology through joint venture demonstrations on third party wells

Liquidity Plan:q yUse 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/orUtilize joint ventures, project financing, noncore asset monetization and/or small, opportunistic equity placement to accelerate development as warrantedMaintain liquidity through FY2012 as Delhi cash flows increase

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* Fiscal year end June 30

Catalysts for growth in FY2011

Continued production growth at Delhi at premium oil priceContinued production growth at Delhi at premium oil price

Drilling success in Giddings

Positive tests in Woodford ShalePositive tests in Woodford Shale

Joint venture to demonstrate artificial lift technology

Additional development joint venture(s) – Giddings & OK

Maintain conservative financial approach while increasing

NAV/share – no debt & 83% oil (91% total liquids) proved

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Exhibits

Definitions

Annual Revenues

Abbreviated Balance Sheet

Management team

Board of Directors

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Definitions

EOR Enhanced oil recoveryWAG Water alternating gas – type of CO2 EORBOE Barrel of oil equivalentBOE Barrel of oil equivalentCF Cubic feet of natural gas at standard conditionsM ThousandsMM MillionsNGL Natural gas liquidsPUD Proved undeveloped2P Proved + Probable Unrisked ReservesPV10 Future unescalated pretax net cash flows discounted at 10% per

annum based on SEC pricing (trailing twelve months realized prices)SEC Reserves Reserves based on unescalated trailing twelve month realized pricesSEC Reserves Reserves based on unescalated trailing twelve month realized pricesFutures Reserves Reserves based on five year forward futures commodity prices with

subsequent years held constant at the fifth year pricesPV10 Futures PV10 adjusted for Futures ReservesPV10 Flat PV10 adjusted to given commodity prices without escalationPV10 E PV10 dj t d t i dit i ith i & t l tiPV10 Esc PV10 adjusted to given commodity prices with price & cost escalationFD Share 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 markety y y qvalue. All Reserves are unrisked, and SEC Reserves unless otherwise noted.

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EPM Revenues

• Revenues in thousands• 2007 revenues decreased by farm-out to DNR2007 revenues decreased by farm out to DNR• June 30 fiscal year-end

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EPM Liquidity

3/31/2011

AssetsCurrent Assets $ 5,148,795

Properties & Equipment, net 33,227,523

Other Assets 54 117Other Assets 54,117

Total Assets $38,430,435

Long Term Liabilities & EquityLong Term Liabilities & EquityLong Term Debt $ 0

Current Liabilities 2,093,837

Other Liabilities (primarily deferred income tax) 3,799,325

Total Liabilities 5,893,162

Equity $32 537 273

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Equity $32,537,273

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 forFormer 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)

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Our Management Team

Daryl Mazzanti, VP-Operations• Joined team in mid-2005; 25 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

tifi i l liftartificial lift • B.S. in Petroleum Engineering (University of Oklahoma)

Edward Schell, General Manager for Drilling and UnconventionalEdward Schell, General Manager for Drilling and Unconventional Development

• Joined team in late 2006; 28 years of experience in oil and gas industry• Various management positions in drilling, operations and business development

at Anadarko Petroleumat 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)• B.S. in Petroleum Engineering (University of Texas)

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Our Board of Directors

Robert Herlin, CEO, Chairman & Co-founderLaird Cagan, Director & Co-founderM i Di t C M Af C it l P tManaging Director – Cagan McAfee Capital PartnersFormerly with Goldman Sachs and Drexel Burnham Lambert

E.J. DiPaolo, DirectorEnergy Partner with Growth Capital Partners, L.P.

G S f GFormer Halliburton Group Senior Vice President of Global Business Development

Gene Stoever, DirectorRetired Partner with KPMG Peat MarwickFormer SEC Reviewing Partner for KPMGCPA in the State of Texas and member of the AICPA

Bill Dozier, DirectorFormer SVP-Business Development for Vintage Petroleum Former SVP-Operations for Vintage PetroleumFormerly in operations for Santa Fe Minerals and Amoco

Kelly W. Loyd, DirectorDirector with JVL Advisors, LLC, a private energy investment companyFormerly Associate with RBC Capital marketsy pFormerly Founder of L.A.B. sports and Entertainment and Managing Partner of Tigre Leasing, LLP

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(NYSE AMEX: EPM)

Company Contact: St li M D ld VP & CFO

IR Contact:Li Elli tt / l lli tt@dSterling McDonald, VP & CFO

(713) 935-0122smcdonald@evolutionpetroleum.com

Lisa Elliott / lelliott@drg-e.com Jack Lascar / jlascar@drg-e.comDRG&E / 713-529-6600

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