Good day, and welcome to the Evolution Petroleum Corporation Second Quarter Fiscal 2015 Earnings Release Conference Call and Webcast [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to David Joe, Vice President and Controller. Please go ahead, sir.

Good morning, and thank you for listening to Evolution Petroleum's conference call to discuss operating and financial results for its second fiscal quarter ended December 31, 2014. I am David Joe, Vice President and Controller for Evolution. On the call today is Bob Herlin, our Chairman and CEO; and Randy Keys, our President and CFO. Before we begin, let's cover the basics. If you would like to be on the company's e-mail distribution list to receive future news releases, please contact the company. Information is on our news release or on 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 February 13, 2015. The necessary information can be found in the earnings release. 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 also may 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 detailed numbers are readily available to everyone in yesterdays news release, this call will focus on key overall results, operations and capital plans for fiscal '15 and '16. We're pleased to be reporting for the first time financial and operating results that are inclusive of our…

Thank you, David. In the Delhi Field, we began paying our 23.9% share of operating and capital cost effective November 1 post reversion. We incurred approximately $1.5 million of net capital cost during the past 2 months, as the operator resumes spending after deferring most capital expenditures in the field for the past 18 months, prior to reversion. And the spending covered a number of projects in the field ranging from drilling a replacement well to recompletions and flow line replacement to remedial plugging and abandonment operations, most of which were directed toward expansion of the field to the eastern half into test site 5. However, last November, the operator announced a 50% reduction in their 2015 capital spending plans from an original budget of $1.1 billion to approximately $550 million. Included in this change was a delay in expanding the flood in the Delhi Field to the remaining 2 test sites on the eastern half of the field. These projects have been deferred until at least 2016, based on the operator's current plans. Fortunately, the recycle gas plant remains in the operator's budget, and we expect to complete our detailed review of the project and the authorization for expenditures in the next few weeks. The scope of this project has been expanded to use the methane produced by the plant to generate electricity for the operation of the field. This is expected to significantly reduce purchased energy cost in the field, which is one of the largest components of lifting cost after CO2 purchases. Additionally, the current plans include a higher initial capital investment by the working interest owners, offset by a substantial reduction in operating costs going forward. We now expect the plant to have a total cost of approximately $100 million, with our share totaling approximately $24…

Thanks, Randy. We are living in interesting times as the old curse goes. Fortunately, we reverted into our 24% working interest at Delhi in November, and more than tripled our net production, and that didn't cost us any capital, but the drop in oil prices is still a major consideration in our strategic thinking. At the end of 2013, we changed our strategy and began returning a portion of our free cash flow to shareholders, in large part due to high oil prices that made then available investment opportunities appear inordinately risky. More than a year later, those circumstances have changed. Low oil and gas prices that may well stay with us through this year and into next year could generate attractive opportunities for us to add developed preserves, value to current commodity prices, added substantial upside potential, assuming a modest increase in commodity prices and diversify our sources of revenue. We want to be in a position to consider these kinds of opportunities as they may arise, which means maintaining good liquidity and a clean balance sheet. We also believe that these are likely to be niche opportunities, primarily to negotiate corporate acquisitions and not property auctions. Any transaction within this kind of a strategy, however, will have to result in a material improvement in the value of our shares. In addition, this drop in oil price further than we expected has reduced our free cash flow, as has Denbury's unjustified suspension of a portion of our override royalty revenue. Given these factors, likely continued volatility in oil price and the absolute need to meet our share of growth capital expenditure to Delhi, they are projected to substantially increase production cash flow in 2016 with further growth through the end of this decade. The board believe that -- or believes that it's only prudent to reduce the cash dividend paid to common shares at this time. As the largest noninstitutional shareholder, I share the pain of any cut dividend, and we didn't do this lightly. But I am also excited by the opportunities that may come our way in 2015 as well as projected growth at Delhi over the coming years and the progress in our artificial lift business. So with that, operator, we're now open to take questions.

[Operator Instructions] We have a question from Bruce Brown, Brown Capital Management.

The question I have is, what's the status at this point of the reversionary working interest litigation or surrounding the data of the -- the estimated date of the reversion of that particular litigation?

Well, again, the reversion date's already occurred. So we already have the working interest in our hands. The litigation is ongoing, it's obviously something that we really can't talk about. It is schedule for trial this year. We're in discovery phase, or we're trying to get to discovery phase. That's really about all we can talk about. This is again, a case we filed against Denbury about a year ago for breach of contract. And that's really about all I can say at this time.

Do you anticipate the trial occurring sometime in the second half of the year, if it happens?

It's currently scheduled for the summer.

[Operator Instructions] Our next question is from Joel Musante, Euro Pacific Capital.

Do guys have any information on potential insurance payment and payout for that remediation effort that was done at Delhi?

That really is part of the ongoing litigation, so again, it's not something that we can really talk about at this time. So I guess, I just don't -- I don't know anything, let's put it that way.

All right. On the overriding royalty interest, I know that's part of the litigation, but just remind me, when you bought that, that was a separate transaction. That wasn't related to Denbury at all, was it?

Correct. The overrides that we own, overrides and [indiscernible]royalties that we own were all purchased from third parties, had nothing to do with Denbury. Those interests were explicitly excluded from the transaction, and we've been paid revenues on those royalty interest since 2006.

Okay, all right. And just, I guess, could you give me a little more -- around your efforts for GARP at this point, do you have anything in the works, any discussions with potential companies, or is that -- or is the industry just kind of looking in a different direction at this point given where prices are?

No, Joel. I'll take that. This is Randy. We actually have 2 -- we have 2 contracts that are at the MSA stage, so the Master Service Agreement stage, and we have a 3rd that is progressing toward that. It is a long cycle process to convince people to put these in their wells, but we are well along with 2 new customers. And we still see some opportunities with the customer that we did the first 5 well program for. So no, we have seen a slowdown, we saw it kind of a natural slowdown in marketing between Thanksgiving and Christmas, just that time of year is generally a slow time. But we do see interest. I think that many of our customers are in a state of shock based on this rapid decline in oil prices. They do -- oil and gas companies do tend to freeze and react very quickly with capital budget cuts, and -- but we think that will turn around and certainly, there is going to be more focus on maintaining production and cash flow, and we can help with that process with our technology. So I think on balance, we probably see some short-term slowdowns and perhaps a better environment going into the spring.

Okay. And you made a comment -- I just wanted -- maybe you can clarify on the opening comments that you were going to focus on more -- I'm not -- I can't remember the term exactly, but more productive wells or...

Yes. And actually what we're -- the unfortunate thing is that we had focused -- or one of the applications of GARP from marginal wells taking them from a single digit production rate into 10 or 12 -- 8, 10, 12 barrels a day. In today's current price environment, those wells cannot support the incremental cost of GARP. So an 8, 10, 12 barrel a day well is probably marginally or uneconomic, either marginally economic or uneconomic, depending on what price you use. If you -- certainly if you use $40 or $50 a barrel. So we're looking at wells where we can add 10 or 20 barrels a day of production to a well that's already producing -- maybe already producing 20 or 30 barrels a day or more. And the cost is certainly much easier to spread, if you got a higher base of production. And we do see opportunities in those wells. And frankly, that's where we're focusing more of our activity because we do see very marginal economics on the low end of the production range, the classic stripper wells.

Our next question is Chris McCampbell, Alpha Securities (sic) [Southwest Securities].

Could you all give me a little bit more color on maybe where you are in appraising different opportunities out there and just kind of a broad answer on what it is you're looking for, I mean the types of properties?

It's -- we're not going to be participating with everybody in property auctions, that's just not what we do. What we're doing is we're more interested, and -- we don't have anything ongoing -- let me just put that way. We're just saying that we think that the opportunities are going to present themselves during the course of 2015. Probably not right now, but as we get into the year, we're going to see some opportunities. But more than likely they're going to be more along those lines of the corporate type of a purchase, either public or private. Companies that are too small, that they've lost market interest and the prospects for growth are limited because of inability to access the capital Markets. And so someone like us that does have some liquidity in the market, does have liquidity financially and a clean balance sheet and excellent collateral base, would be in a position to bring to the table a lot of value to that situation. And to our benefit, we would add diversity to our asset to revenue stream, as well as add considerable upside as prices recover as we expect it. So other than that, it's hard to really -- to say specifically, other than to say that we don't have anything in the hopper, so to speak.

Well, you've got lot of capital outlays that you're trying to plan around. And it’s got to be hard, but the operator -- I don't know what operator is doing, but can you quantify maybe the size of the deals that you're thinking you might be able to do.

It would be something that would be meaningful, material to the company, but not so big, to just dwarf what we have. It's just -- it's really hard to describe because the situations are going to be -- each one is going to be different and will have its own arguments for and against. And the one thing I can be very sure about, since I am one of the largest shareholders, is that nothing we do is going to dilute the value this year. We're only looking at ways to significantly increase the value of our shares that make sense strategically.

Having no further questions, this concludes our question-and-answer session. I would like to turn the conference back to Bob Herlin for any closing remarks.

Okay. I appreciate you guys listening in. If you have any further questions, feel free to call us for any explanations of the comments that we made today. Clearly, we had some great -- good news happen to us this quarter with reversion. Obviously, the bad news is oil prices are obviously affecting all of us. Fortunately, our conservative financial approach has left us in a very good and very strong financial position going forward, and we're excited about the opportunities that are out there, and we're confident in our ability to weather this volatile times, as well as or better than everyone else in our peer group. So thanks, again and we'll talk again next quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.