Evolution Petroleum (EPM)

[dan_s]

An updated forecast model for EPM has been posted to the EPG website. They reported solid fiscal Q2 results and their hedges in place for Q3 (ending 3-31-2016) should generate another profitable quarter. Note that they completed the spinoff of GARP in Q2 and reported approximately $1.3 million of related one time charges in Q2. Getting rid of GARP will reduce EPM's G&A by over $1 million per year.

EPM is DEBT FREE and it has very low overhead. Its only real asset is the non-operated interest in the Delhi EOR project that is operated by Denbury Resources (DNR). DNR has done a great job of lowering operating costs at Delhi, so it generates positive cash flows even at today's low oil prices.

An NGL Recovery Plant is being built at Delhi that will significantly increase production.

My valuation of EPM is now $5.75/share, compared to First Call's price target of $6.75.