Welcome to the Evolution Petroleum Second Fiscal Quarter 2016 Earnings Release Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. David Joe, Chief Financial Officer. Please go ahead.

Good morning all and thank you for listening to Evolution Petroleum's conference call to discuss operating and financial results for its fiscal second quarter ended December 31, 2015. I am David Joe, Chief Financial Officer for Evolution. On the call with me today is Randy Keys, our President and CEO. If you wish to listen to a replay of today's call, it will be available shortly by going to the Company's website or via recorded replay until February 11, 2016. Please note that any statements and information provided today are time-sensitive and may not be accurate at a later date. Our discussion today will contain forward-looking statements on management's beliefs and assumptions based on currently available information. These forward-looking statements are subject to risk and uncertainties that are listed and described in our filings with the SEC. Actual results may differ materially from those expected. Since detailed numbers are readily available to everyone in yesterday's news release, this call will focus on key overall results, operations, and an update on our capital plans for fiscal 2016. I am now going to turn the call over to Randy Keys, President and CEO.

Thank you, David. We were very pleased to report net income for the quarter in this current low price environment. My guess is this will put us in a pretty lead [ph] group within the E&P sector for this quarter when oil prices averaged a little below $40 per barrel. In fact we may be alone within our peer group to report net income for this quarter. We had several noteworthy and positive events during the quarter. First, production from the Delhi field was up 6% from last quarter. This continues to trend of quarterly increases from the 5900 barrel per day level on a gross basis in the December quarter of last year to its average rate this quarter of more than 6800. This is a 16% increase year-over-year and is well above the expectations that we had heading into calendar 2015. And the most amazing part of that it is been accomplished with almost no capital investments directed to new wells. The majority of the increase has resulted from a process called Conformance which involves a geological and engineering study and analysis of the producing zones within the reservoir to gain a better understanding of how to increase the efficiency of the CO2 as it suites through the formation from the 45 injection wells in the field to the approximately a 100 currently producing wells in the field. As the CO2 is pumped through the formation at a pressure of approximately 2100 PSI, it adds energy to the reservoir and pushes the oil towards the production oils. But since this is a miserable flood, the CO2 also acts like a solvent to dissolve the oil which is adhering to rock surfaces and make it mobile. Conformance is the process of selectively determining where to inject the CO2, in…

Thanks Randy. I think it's worth noting again that we’ve posted net income to common of approximately $655,000 in the second fiscal quarter or $0.02 per share, marking our eight consecutive quarter of positive earnings and making us profitable for 19 of the past 20 quarters. Our profitability was driven by higher production volumes, lower lifting cost, and favorable hedging gains, partially offset by lower oil prices, higher litigation expenses and one-time non-recurring restructuring cost. Production from the Delhi field in net revolution in the second fiscal quarter was approximately 166,000 barrels of oil which was 6% higher than the sequential previous quarter and 52% higher in the year-ago quarter. Keep in mind that the large year-over-year increase in net production volumes was the result of an increase in both gross production volumes and the impact of the reversion of our 23.9% working interest in the Delhi field on November 1, 2014, which means we do not realize the full quarter production associated with our reversionary working interest in the second fiscal quarter of last year. Gross production volumes from Delhi in the current quarter was 6,810 barrels of oil per day as compared to 6,423 barrels of oil per day in the previous quarter and 5,892 barrels of oil per day in a year ago quarter representing increases of 6% and 16% respectively. Revenues for the second quarter was $6.6 million, 10% lower than in the sequential previous quarter as higher production volumes were partially offset by a 15% reduction in average realized oil price. Although the realized oil price in the second quarter was $39.59 per barrel that price does not reflect the impact of favorable commodity hedges, which added $7.84 per barrel and realized hedge gains. As previously disclosed, we have 1,100 barrels of oil per day…

[Operator Instructions] Our first question is from John White of Roth Capital. Please go ahead.

Good morning, everybody. And yes, I'll echo that on the earnings per share, positive earnings per share, you probably are one of the only E&Ps that will report a positive number. So congratulations on that. NGL plant, so you're about 38% to 40% of the way through the planned CapEx. You've hinted a lower completed cost. You want to talk in any more detail about how much lower or you're going to offer any other details?

We think it's a little bit premature and we got that from the operator as well. There is still some major threshold items of construction that remain ahead of us. So, we think we see some savings today, but we want to make sure that those savings are not offset by unexpected cost that might arise between now and the completion date. So we're just cautious. I think the savings are - they're probably in the 5% to 10% range. So we're not talking a huge savings, but it'd be meaningful for our company.

Thank you. And any wells planned at Delhi, new wells or workovers in the current quarter?

Not currently. Other than anything that might be required on a replacement or maintenance spaces. They have - we have discussed some primarily plans for a couple of additional projects in Test Site 1, which is the area for the spill occurred that might involve some water flood-type production. But frankly, that's dependent on the operators capital budget availability and so we can't really predict the timing on that. We think the projects make sense. We think they're intriguing, but we don't really know what - how the year is going to unfold as far as CapEx goes for the fields, for the operator.

Understood. Last one, it's a tough question given the current environment, but I'd like to pose it anyway. What's the current thinking on adding some hedges for the remainder of the year?

That's a good question. We sort of set a mental floor in the $50 range. I think we are probably perhaps a little below that in terms of what we would be willing to trade our upside in change for some product protection. But frankly, we're just - we are pretty substantially below the levels that we would consider hedging for the second quarter of '16. And I'd say it's unlikely unless we get a fairly sustain move to the upside that we would layer in more hedges at this point.

Okay. Thanks so much.

The next question is from Joel Musante of Euro Pacific Capital. Please go ahead.

Good job on the increase in production and lower LOE. Nice to see that, pleasant surprise. And I just had a follow up on the LOE. Now that prices have fallen oil further since last quarter. Do you expect LOE to be - you came in at - for Delhi at $13.44 last quarter. I'm just thinking it might go a little bit lower given that there is a linkage to oil prices? So can you give us a little -

That is correct. In fact our December rate was a little lower than the average for the quarter. It's in the - right now our CO2 cost are roughly half of our - give or take, they are about 50% of our total operating cost. So of that $13.44, about half of that represents CO2 and we might see 10% or 15% reduction in that component. The rest of it looks like they've running out a lot of the cost saving opportunities so far, so we're not expecting to see significant cost reductions on the other portions of our LOE cost. But yes, I think we’ve got a dollar or two potential gain - reduction in this lower oil price environment for the first quarter.

And then just going forward, can you give us a sense for what - I know a lot of the litigation expenses are behind you now. So what’s a good run rate to use? Quarterly run rate per cash G&A?

Well we actually put that number in the press release. We think about $900,000 a quarter or 3.6 million a year is a reasonably good estimate. I probably should widen that range a little bit but that’s a good middle of the road target. Now that's cash G&A, does not include non-cash compensation cost which have been running in the $200,000 a quarter range. And we will see some continuing cost on litigation for the next quarter or two. But we do expect those to taper off significantly after that. So, hopefully that answers your question as far as - and we are doing everything we can to drive those cost down. And I think the GARP separation was a big step in that direction. We are very sensitive to our G&A cost and trying to be as efficient as we possibly can.

Okay. And just anything on the acquisition front. I know you guys were screening some deals, some properties. I was wondering if anything advanced on that front.

There’s really no development. We and the industry have been in a extended period of price discovery and resetting our price expectations. When we started this process over a year ago, sellers expectations were that prices would recover fairly quickly back to the $70 to $80 range., seller expectations, buyers were much more conservative. Both of those groups have ratcheted down their expectations but there has remained a gap throughout most of this year between the bid and ask spread that we’ve seen. We still see that bid and ask spread, that’s why you still have not seen that higher level of M&A activity. We remained very interested. We are continuing to screen and look at things but we have not seen the, kind of, values that we think would be required in this price environment so far.

Okay. Thanks a lot. I appreciate it and a good quarter.

[Operator Instructions] The next question is from Jeff Grampp of Northland Capital Market. Please go ahead.

Wanted to go back and Randy, I appreciate all the color on this conformance project going on. I know it’s still early days and I know its bit tough to handicap but what kind of data point should we or yourself are there be looking for over the next 3, 6, 9 months or what not in terms of determining whether or not this is an acceleration of reserves if you guys truly are adding to the recovery here.

Well, the acceleration question is going to take a longer than that to answer, frankly. I mean, it’s a long term process because it involves projections over a 30 to 40 year life. And you can’t accurately make those predictions with a couple of points. I’ll back up and say, if you told me a year ago that we were going to end this year between to 2015 at 1,000 barrels a day higher, with lower purchased CO2 and no new wells, I’d have thought you are crazy. So this is then really an amazing gain in the field. And we’ve known this is a great field. So we are not fundamentally surprised but the results have been very good and beyond our expectations. So I think we have some expectation that rates stabilize and we continue to see nice production levels over the next few quarters. But the longer term question is one that’s going to take some time to answer. The good news is we got great production in the meantime.

No, that’s fair and I totally agree on those points. I guess maybe more simplistically, would it be fair to say that you guys would expect maybe some sort of credit on this uplift whether it’s acceleration or new reserves in probable or possible. But some, sort of, credit on your upcoming reserve report here at mid-year -

I’m not sure about that. We haven't even started that dialog and I think it’s just completely premature at this point. Unfortunately, I just think it’s premature.

Okay. That’s fair. And then the only other one I had was on the legal front, much anticipated trial, hearing in a couple months. Can you just talk about projected timeline for when we could hear something on that front whether that’s any definitive outcome or just how things are progressing, is that kind of, a later this calendar year. Is that a couple of months or can you handicap how that plays out at this point?

The main reason we make that disclosure was to explain the increase in G&A. I've probably said more about litigation in the press release then my attorneys would advise me to say. So really I think we’ve given you all the information that I can comfortably give you at this time and there’s really nothing further I can add to that unfortunately.

I understood. That’s fine. Great quarter, Randy.

There are no more questions at this time. I’d like to turn the conference back over to Mr. Randy Keys for closing remarks. Please go ahead.

Thank you very much for listening to the earnings call and we were pleased with the quarter. We are in a difficult price environment but this company is positioned to prosper and survive in this environment. So we'll look forward to talking to you next quarter. Thank you.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.