Welcome to the Evolution Petroleum Corporation Fiscal First Quarter 2016 Earnings Release Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to David Joe, Vice President and Controller of Evolution Petroleum Corporation. Please go ahead.

Good morning and thank you for listening to Evolution Petroleum’s conference call to discuss operating and financial results for its fiscal first quarter ended September 30, 2015. I am David Joe, Vice President and Controller. On the call today is Bob Herlin, our Chairman and CEO; Randy Keys, our President and CFO; and Daryl Mazzanti, our Senior Vice President of Operations. Before we begin, let us cover the basics. If you would like to be on the Company’s email distribution list to receive future news releases, please see the contact information on our news release or in our website. If you wish to listen to a replay of today’s call, it will be available shortly by going to the Company’s website at www.evolutionpetroleum.com or via recorded telephone replay until November 12, 2015. The necessary information can be found in the earnings release last night. Please note that any statements and information provided today are time-sensitive and may not be accurate at a later date. Our discussion today may contain forward-looking statements that are based on management’s beliefs and assumptions that are based on currently available information. We can give no assurance that such forward-looking statements will prove to be correct as they are subject to risks and uncertainties that are listed and described in our filings with the SEC. Actual results may differ materially from those expected. Our discussion may also include discussions of other categories of reserves besides proved reserves, such as probable, possible or potential reserves or recovery. Such estimates of non-proved reserves are more speculative than proved reserves. Since the detailed numbers are readily available to everyone in yesterday’s news release, this call will focus on key overall results, operations, and update on our CapEx plans through the rest of the fiscal year. I am pleased to…

Thank you, David. As David discussed, we posted very strong results for the first fiscal quarter of 2016. Production in the Delhi field was up about 2% from last quarter, continuing a trend of increases from a level below 6,000 barrels a day in December of last year, the December quarter to its average rate this quarter of more than 6,400. In meetings with the operator earlier this year, they expressed confidence that production should exceed 6,000 barrels a day and would likely be at least 200 barrels a day above that. And we’ve now exceeded that level for the past two quarters. The Delhi field has a history of outperforming expectations and epitomizes the adage in the industry that big fields get bigger. We are fortunate that the Delhi field has significant remaining development upside with a rising production profile, and we do not expect to see peak production from the field until sometime in the next decade. In the meantime, until the NGL plant comes on line, mid-year next year, we expect to see consistent production in excess of 6,000 barrels a day with little or no natural decline in the near-term. On the cost side, we reported our best operating cost of the last four quarters at $16.37 per barrel of oil equivalent. The largest component of operating cost is new CO2 which we purchased at a price equal to 1% of the Delhi oil price per Mcf. This makes the largest part of our operating cost variable with lower oil prices. Also, after driving above 100 million cubic feet a day of new CO2 purchases last December, or the -- and this was for some short-term conformance testing and other work that Denbury was doing, we see purchased CO2 volumes well below 100 million a day…

Thanks, Randy. Unlike the majority of our peers, we remain in excellent financial condition with net income and earnings per share for the quarter above expectations and we ended the quarter free of debt. Our financial results were strong, even without the non-recurring benefits that David described earlier. In addition and unlike many of our peers, we have not had to write down our assets and we retain a substantial cushion of value above the costs. We believe our financial strength gives us a flexibility to take advantage of opportunities that could come our way in this environment, while maintaining our cash dividend to common shareholders. Looking to the future, we’re positive about the prospects for the Company including our ability to continue our growth plan, create long-term value, and return increasing amounts of cash to shareholders. With that, we’re ready to take questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jeff Grampp of Northland. Please go ahead.

Just had a question on the Delhi operating costs, things continue to look pretty impressive there and tracking down. Just wondering, how we should think about those costs moving forward. I know the purchase cost is tied to the price of oil, so that obviously is kind of predetermined. But in a flattish oil environment, how you guys are expecting the costs to be trending; and maybe if we get a little bit a life in oil, are some of those costs going to be given back as maybe Denbury and Jackson Dome [ph] CO2 or service guys cause some things back; I just wonder how you guys are seeing that play out?

Well, we think that there are obviously about -- probably more than half of our costs are sensitive to -- directly sensitive to oil prices. So may be 60% or better of our costs are going to be directly tied to oil prices. We see those being somewhere in the high teens -- in the upper teen range unless oil prices increase significantly from these levels. So, we do give some detail in our 10-Q as to the breakdown between CO2 costs and the other costs. And I direct you to that. Once the gas plant comes on line, it’s going to change significantly when we start using the methane to generate power for the field. So, we’re really just talking about the next three quarters, primarily.

I’d also like to point out that because of the two thirds of our production is hedged through March that even a drop in oil price or i.e., drop in oil price is going to lower that CO2 cost but really have much less impact on our revenues. And so that’s kind of a nice movement of leverage that we’ve got because of the hedges.

Then just wondered on these Delhi field insurance proceeds you guys got it, just thinking back to when this played out that the potential proceeds and then costs of the operator incurred or maybe expected to get were pretty substantial to them. And I know obviously there’s some noise with net interest and stuff. So, just wondering, should we expect anything else in terms of proceeds on the insurance front or -- I know you’ve got the litigation to you but just wondering how we should expect things to potentially flow to you in that regard?

Well, in total, amount of gross insurance proceeds that Denbury has received to-date is 29 million I believe, 25 million of that was before we reverted and then approximately 4 million after. We participate in the proceeds on -- those receipts after the reversion date because obviously the cost of the insurance was applied to our payout charges. That 29 million is less than a quarter of the total costs that Denbury spent. They have historically stated that they thought that total proceeds were going to be somewhere between one-third and two-thirds of the costs. So, on that basis, there is some reason to believe there maybe some future proceeds. But we’re not in control of that; we’re not in that loop, so we couldn’t begin to tell you how much or how likely a win on any of that. So, we’re not -- we don’t build that into anything that we -- in our plan, we don’t have any expectations of additional proceeds. Where they come, there will be again one-time events that would be nice benefits to us but certainly nothing that we’re counting on whatsoever.

[Operator Instructions] The next question comes from John White of ROTH Capital. Please go ahead.

So, I noticed the volume of CO2 was lower during the quarter but you had an increase in oil production. Could you elaborate on that?

Denbury has stated all along across the board and on their CO2 projects is they are looking at how to reduce amount of CO2 they use. And keep in mind that in a CO2 flood, the CO2 does two things: One, an invincible flood like in ours, you’re actually using the CO2 to change the fluid characteristics of the oil self to make it more easy to flow into help take it away from the rock. The second benefit of CO2 is just providing additional energy into the reservoir. Well, you can substitute water for CO2 to some degree, in terms of providing that additional energy. And in fact, if you look at any CO2 flood out in West Texas to the Rockies or up in the Williston, what you see is that operators use a WAG type process, which is the alternate water in CO2 in different slugs, the idea being put in CO2 that gets us some amount of oil and then use water to provide the energy to move that newly movable oil. So, what Denbury is doing is saying, okay, we’re going to use some varying of that in our East, Gulf Coast sandstone type CO2 floods. And that has a benefit of reducing amount of CO2 required while still accomplishing the same target objectives. You’re still getting CO2 on the ground to mix with the oil. We’re now using a cheaper water or formation water to provide that energy instead of expensive CO2. So, that’s one of the reasons why you’re not seeing any significant impact on production while reducing CO2 amount of purchases. And keep in mind that the purchased CO2 is only one component of the CO2 injection. We have a very high recycle stream at this point. And that actually is a greater portion of the total volume CO2 going to ground.

And I would one thing to that. Also in our meetings with the operator, earlier this year, and they have been engaged in a pretty extensive conformance program where they are trying to maximize the efficiency of the suite and make sure that the CO2 is directed at areas where there is significant amount of remaining trapped oil. So, they’ve also been looking at ways to maximize the effectiveness of the flood. And I think part of this may be some of the benefits of that as well, in addition to the things that Bob mentioned.

I appreciate all that detail. That’s very nice. Are there any other nuts and bolts? You said Denbury had had a concentrated effort to lower LOE overall. Is there any other items that caught your attention?

Not really. We’ve got an operators’ meeting coming up in the not too distant future. It’s not actually scheduled right now but there will be, and budget out as the year-end approaches. But no, those are the key things, really just the costs controls; the conformance; they have done some near wellbore monitoring with seismic to try to maximize the efficiency and make sure they can determine exactly where the CO2 is going. So, I think overall, we would just say, we see improvements in their effectiveness in both cost controls and in production enhancement.

I would also point out that we haven’t had our budget meeting with them which should be in the near-term but we still have two phases of field development to be rolled out which is most of the eastern half of the field. At this point in time our expectation is that those grow-outs, the expansion of the flood probably is going to be delayed a little bit, probably a year or so. And that’s how we’ve got our reserve report reflecting, simply on the basins that it doesn’t make a lot of sense to spend a lot of capital right now to increase production at current oil price. But we do expect that to be a temporary factor and we should see expansion resume, probably in calendar 2017 is our current expectation. But, like I said, we haven’t had our meeting yet, our budget meeting with Denbury to review what they’d like to do and get our concurrence on that. So, I think Denbury and Evolution are on the same page in terms of when we want to do it, to that expansion?

And I caught that there is $18 million CapEx for the NGL plant is still remaining, I missed the amount that’s been spent so far.

It’s $6.6 million out of the total commitment of $24.6. And we did get an update that they might see some benefit from lower service costs as the plant gets installed next year. But it’s a little soon to quantify those costs. This is a pretty much a standard construction project, E&C project. So, it’s not subject to the dramatic reductions in costs that we’re seeing in the drilling and fracing areas. But still all service costs are getting a little cheaper. So, we may see a small benefit there. At this point, we feel like that initial estimate is still a good estimate for the total costs for the project.

There are no more questions at this time. I’ll now hand the call back over to Randy Keys for closing remarks.

Thanks again for participating on the call. We are very pleased with the quarter and our near-term outlook. And we’re very excited about the opportunities that we see starting next summer when the NGL plant comes on line. So, thank you for your support as shareholders. And everyone have a good day. Thanks.

This concludes today’s conference call. You may now disconnect your lines. Thanks for participating. Have a pleasant day.