Energy Prospectus

due to dnr delhi production decrease due to remedial actions due to a leak of fluids----

"Denbury's tertiary oil production at Delhi Field started declining late in the second quarter of 2013 due to the various remediation measures taken related to the release, which included ceasing injection of CO2 into the impacted area of the field in order to reduce that area's field operating pressure. Based on Denbury's current understanding of the cause of the release and current expectations relative to remediation, the Company anticipates resuming CO2 injections into the impacted area in the fourth quarter of 2013. Once CO2 injections resume, the field's oil production is anticipated to gradually recover. Costs incurred as a result of the release, coupled with lower production levels, are currently expected to defer the effective date of a third party's reversionary interest in the Delhi Field, and a corresponding reduction in Denbury's share of the field's production, into 2014 from a date previously estimated to be late in the third quarter of 2013."

yeah, the leak was announced last week in the press, figured as much

bottom line the oil is in the ground, and is recoverable

Delhi Field Update from Denbury (see last sentence)

In June 2013, a release of well fluids, consisting of a mixture of carbon dioxide, saltwater, natural gas and a small percentage of oil, was discovered and reported within the Denbury-operated Delhi Field located in northern Louisiana. Denbury immediately took remedial action to stop the release and contain and recover well fluids in the affected area. The Company continues to actively work with government and local officials and agencies to determine the best course of remediation. Currently, Denbury believes the origin of the release to be one or more wells in the affected area of the field that had been previously plugged and abandoned. Denbury has recorded $70 million of lease operating expenses related to the release in its second quarter 2013 financial results. Since the area is still in the process of being remediated and final restoration plans have not yet been agreed upon with regulatory agencies, this amount represents Denbury's current minimum estimate of remediation expenses and therefore may not be precise and may be adjusted in future financial statements as more information becomes available.

Denbury maintains insurance coverage which the Company believes covers certain of the costs and damages related to the release. The Company currently estimates that one-third to two-thirds of its minimum estimate may be recoverable under its insurance policies. However, Denbury has not reached any agreement with its insurance carriers as to recoverable amounts and given the uncertainties concerning its ultimate insurance recoveries, the Company has not recognized any such recoveries in its financial statements as of June 30, 2013. Insurance recoveries will be recognized in Denbury's financial statements during the period received or at the time receipt is determined to be virtually certain.

Denbury's tertiary oil production at Delhi Field started declining late in the second quarter of 2013 due to the various remediation measures taken related to the release, which included ceasing injection of CO2 into the impacted area of the field in order to reduce that area's field operating pressure. Based on Denbury's current understanding of the cause of the release and current expectations relative to remediation, the Company anticipates resuming CO2 injections into the impacted area in the fourth quarter of 2013. Once CO2 injections resume, the field's oil production is anticipated to gradually recover. Costs incurred as a result of the release, coupled with lower production levels, are currently expected to defer the effective date of a third party's reversionary interest in the Delhi Field, and a corresponding reduction in Denbury's share of the field's production, into 2014 from a date previously estimated to be late in the third quarter of 2013.

Assuming this pushes back Payout for six months, my take is that it reduces EPM's Fair Value buy approximately $1/share.

I will take a hard look at EPM after I finish updating all of the Sweet 16 forecast models this week.

Remember:
1. The oil is still in the ground
2. Delhi Field will eventually reach Payout

18:14 EDT Evolution Petroleum comments on Delhi Field remediation - The company said, "At this time, we are not working interest owners in the Holt Bryant Unit of the Delhi Field and therefore are not bearing any cash costs of the remediation, the amount of which the operator has recently estimated to be a minimum of $70M. However, revenues to our royalty interest are being temporarily impacted by the reduction in oil production in the affected area. We are evaluating the impact of the remediation on our interests in relation to our existing agreements with the operator. The reduced oil production level and remediation costs, to the extent not covered by the operator's indemnity and contractually assumed obligations and net of any associated insurance reimbursements, are currently expected to delay the date that our reversionary working interest becomes effective. The extent of the delay is uncertain and also depends upon other variables including the temporary reduction in purchased CO2 volumes and oil prices. The operator has projected that CO2 injection will resume in the affected area by 4Q13, and further stated that CO2 injection and oil production in the larger portion of the field are continuing. We have no current expectation that ultimate field recoveries and reserves at Delhi will be materially impacted from those reported as of July 1, 2012, adjusted for production, and we are continuing to monitor the field operations in our limited role as a non-working interest royalty owner."|

EnerCom presentation today:

http://www.investorcalendar.com/IC/CEPa ... 71271&CID=

Takeaway from EnerCom presentation is that operational problems will have very little long term impact on EPM. 'Worst case' reversion in early 2014. Most of remediation already done by DNR.

Lots of upside, dramatic I think was his words, for Delhi field.

EPM reserve report should be a shocker to the upside, potentially, from the comments.