UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2018~~September 30, 2019

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-32942

EVOLUTION PETROLEUM CORPORATION

(Exact name of registrant as specified in its charter)



Nevada		41-1781991
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1155 Dairy Ashford Road, Suite 425, Houston, Texas 77079

(Address of principal executive offices and zip code)

(713) 935-0122

(Registrant’s telephone number, including area code)

~~Not Applicable~~

(Former name, former address and former fiscal year if changed since last report)



Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
Common Stock, $0.001 par value	EPM	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: ý No: o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: ý No: o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o		Accelerated filer	x
	Non-accelerated filer	o		Smaller reporting company	ox
			Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.). Yes: o No: ý

APPLICABLE ONLY TO CORPORATE ISSUERS:

~~The~~Indicate the number of shares outstanding of each of the ~~registrant’s~~issuer’s classes of common stock, as of the latest practicable date.

32,935,424 shares outstanding of common stock, par value $0.001, as of ~~February~~November 4, ~~2019, was 33,186,665.~~2019.

EVOLUTION PETROLEUM CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS



Forward-Looking Statements			~~Page~~
		ii
~~PART~~Part I. ~~FINANCIAL INFORMATION~~Financial Information		21
Item 1.
~~ITEM 1.~~Financial Statements (Unaudited)	~~UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~1	2

	Unaudited Consolidated Condensed Balance Sheets as of ~~December 31, 2018~~September 30, 2019 and June 30, 2019	1
	Unaudited Consolidated Condensed Statements of Operations for the three months ended September 30, 2019 and 2018	2
	Unaudited Consolidated Condensed Statements of ~~Operations~~Cash Flows for the three ~~and six~~ months ended ~~December 31,~~September 30, 2019 and 2018 ~~and 2017~~	3
	Unaudited Consolidated Condensed Statements of ~~Cash Flows for the six months ended December 31, 2018 and 2017~~	4
	~~Unaudited Consolidated Condensed Statement of~~Changes in Stockholders’ Equity for the ~~six~~three months ended ~~December 31,~~September 30, 2019 and 2018	54
	Notes to Unaudited Consolidated Condensed Financial Statements	65
Item 2.
~~ITEM 2.~~Management's Discussion and Analysis of Financial Condition and Results of Operations	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~	1519

~~ITEM~~Item 3.	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~Quantitative and Qualitative Disclosures about Market Risk	24

~~ITEM~~Item 4.	~~CONTROLS AND PROCEDURES~~	24

~~PART II. OTHER INFORMATION~~Controls and Procedures		25

~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~	25

~~ITEM 1A.~~	~~RISK FACTORS~~	25

~~ITEM 2.~~	~~UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS~~	25

~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~	25

~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~	25

~~ITEM 5.~~	~~OTHER INFORMATION~~	25

~~ITEM 6.~~	~~EXHIBITS~~Part II. Other Information	26
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
~~SIGNATURES~~Signatures		2628

We use the terms, "EPM," "Company," "we," "us" and "our" to refer to Evolution Petroleum Corporation, and unless the context otherwise requires, its wholly-owned subsidiaries.

Table of Contents

FORWARD-LOOKING STATEMENTS

This Form 10-Q and the information referenced herein contains forward-looking statements within the meaning of the Private Securities Litigations Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “plan,” “expect,” “project,” “estimate,” “assume,” “believe,” “anticipate,” “intend,” “budget,” “forecast,” “predict” and other similar expressions are intended to identify forward-looking statements. These statements appear in a number of places and include statements regarding our plans, beliefs or current expectations, including the plans, beliefs and expectations of our officers and directors. When considering any forward-looking statement, you should keep in mind the risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include the timing and extent of changes in commodity prices for oil and natural gas, operating risks and other risk factors as described in Part II, Item 1A, "Risk Factors" and elsewhere in this report and as also may be described from time to time in our future reports we file with the Securities and Exchange Commission. You should read such information in conjunction with our consolidated condensed financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. There also may be other factors that we cannot anticipate or that are not described in this report, generally because we do not currently perceive them to be material. Such factors could cause results to differ materially from our expectations.

Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the Securities and Exchange Commission.

Table of Contents

PART I — FINANCIAL INFORMATION

~~ITEM~~Item 1. ~~CONSOLIDATEDCONDENSEDFINANCIAL STATEMENTS~~Financial Statements (Unaudited)

Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Balance Sheets

(Unaudited)


	December 31, 2018		June 30, 2018		September 30, 2019		June 30, 2019
Assets
Current assets
Cash and cash equivalents	$	30,000,801	$	24,929,844	$	31,404,803	$	31,552,533
Restricted cash	—		2,751,289
Receivables	3,434,227		3,941,916		2,969,052		3,168,116
Prepaid expenses and other current assets	594,555		524,507
Prepaid expenses					363,059		458,278
Total current assets	34,029,583		32,147,556		34,736,914		35,178,927
Oil and natural gas property and equipment, net (full-cost method of accounting)	62,137,689		61,239,746
Oil and natural gas properties, net (full-cost method of accounting)					59,554,106		60,346,466
Other property and equipment, net	24,187		30,407		24,096		26,418
Total property and equipment	62,161,876		61,270,153		59,578,202		60,372,884
Other assets	228,405		244,835		351,380		210,033
Total assets	$	96,419,864	$	93,662,544	$	94,666,496	$	95,761,844
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	2,705,359	$	3,432,568	$	2,014,031	$	2,084,140
Accrued liabilities and other	363,208		874,886		471,012		537,755
State and federal income taxes payable	136,124		122,760		592,865		130,799
Total current liabilities	3,204,691		4,430,214		3,077,908		2,752,694
Long term liabilities
Senior secured credit facility (Note 13)	—		—
Deferred income taxes	11,061,732		10,555,435		11,293,608		11,322,691
Asset retirement obligations	1,467,646		1,387,416		1,586,888		1,560,601
Operating lease liability					126,233		—
Total liabilities	15,734,069		16,373,065		16,084,637		15,635,986
Commitments and contingencies (Note 14)
Commitments and contingencies
Stockholders’ equity
Common stock; par value $0.001; 100,000,000 shares authorized; 33,186,665 and 33,080,543 shares issued and outstanding as of December 31, 2018 and June 30, 2018, respectively	33,186		33,080
Common stock; par value $0.001; 100,000,000 shares authorized; 33,003,134 and 33,183,730 shares issued and outstanding, respectively					33,003		33,183
Additional paid-in capital	42,088,385		41,757,645		41,458,682		42,488,913
Retained earnings	38,564,224		35,498,754		37,090,174		37,603,762
Total stockholders’ equity	80,685,795		77,289,479		78,581,859		80,125,858
Total liabilities and stockholders’ equity	$	96,419,864	$	93,662,544	$	94,666,496	$	95,761,844

See accompanying notes to consolidated condensed financial statements.

Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Statements of Operations

(Unaudited)


	Three Months Ended December 31,						Six Months Ended December 31,						Three Months Ended September 30,
	2018			2017			2018			2017			2019			2018
Revenues
Crude oil	$	10,515,875		$	10,185,635		$	21,913,327		$	18,014,890		$	8,845,504		$	11,397,452
Natural gas liquids	532,243			740,585			1,441,870			1,313,297			305,944			909,627
Natural gas													767			—
Total revenues	11,048,118			10,926,220			23,355,197			19,328,187			9,152,215			12,307,079
Operating costs
Production costs	3,452,168			2,773,821			6,910,598			5,529,503			3,090,089			3,458,430
Depreciation, depletion and amortization	1,603,633			1,656,891			3,152,093			3,197,013			1,449,754			1,548,460
General and administrative expenses *	1,258,570			1,666,256			2,563,832			3,235,960			1,338,353			1,305,262
Total operating costs	6,314,371			6,096,968			12,626,523			11,962,476			5,878,196			6,312,152
Income from operations	4,733,747			4,829,252			10,728,674			7,365,711			3,274,019			5,994,927
Other
Enduro transaction breakup fee	—			—			1,100,000			—			—			1,100,000
Interest and other income	59,858			15,841			106,429			30,691			66,129			46,571
Interest expense	(29,345		)	(20,456		)	(58,690		)	(40,911		)	(29,345		)	(29,345		)
Income before income taxes	4,764,260			4,824,637			11,876,413			7,355,491			3,310,803			7,112,153
Income tax provision (benefit)	859,695			(5,052,211		)	2,176,047			(4,661,889		)
Income tax provision													517,983			1,316,352
Net income available to common stockholders	$	3,904,565		$	9,876,848		$	9,700,366		$	12,017,380		$	2,792,820		$	5,795,801
Earnings per common share
Basic	$	0.12		$	0.30		$	0.29		$	0.36		$	0.08		$	0.18
Diluted	$	0.12		$	0.30		$	0.29		$	0.36		$	0.08		$	0.17
Weighted average number of common shares
Basic	33,167,159			33,109,448			33,134,726			33,099,546			33,126,645			33,102,292
Diluted	33,176,503			33,140,278			33,147,775			33,140,257			33,134,372			33,119,057

* ~~General and administrative expenses for~~For the three months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017 included non-cash stock-based compensation of $254,111 and $484,326, respectively. For the six months ended December 31, 2018 and 2017,~~ non-cash stock-based compensation expenses were ~~$469,484~~$332,013 and ~~$971,810~~$215,373, respectively.

See accompanying notes to consolidated condensed financial statements.

Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed Statements of Cash Flows

(Unaudited)


	Six Months Ended December 31,						Three Months Ended September 30,
	2018			2017			2019			2018
Cash flows from operating activities
Net income attributable to the Company	$	9,700,366		$	12,017,380
Net income							$	2,792,820		$	5,795,801
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	3,159,671			3,225,147			1,449,754			1,548,460
Stock-based compensation	469,484			971,810			332,013			215,373
Deferred income tax expense (benefit)	506,297			(5,245,910		)	(29,083		)	275,380
Other							18,526			4,824
Changes in operating assets and liabilities:
Receivables	507,689			(1,351,451		)	199,064			(392,981		)
Prepaid expenses and other current assets	(70,048		)	(436,376		)
Accounts payable and accrued expenses	(142,568		)	(83,013		)
Prepaid expenses							95,219			(415,729		)
Accrued liabilities and other							(276,864		)	(428,148		)
Income taxes payable	13,364			—			462,066			1,053,032
Net cash provided by operating activities	14,144,255			9,097,587			5,043,515			7,656,012
Cash flows from investing activities
Capital expenditures for oil and natural gas properties	(5,048,987		)	(1,017,358		)	(522,413		)	(3,089,006		)
Capital expenditures for other property and equipment	(2,066		)	—
Net cash used in investing activities	(5,051,053		)	(1,017,358		)	(522,413		)	(3,089,006		)
Cash flows from financing activities
Cash dividends to common stockholders	(6,634,896		)	(4,969,335		)	(3,306,408		)	(3,315,785		)
Common share repurchases, including shares surrendered for tax withholding	(138,638		)	(395,550		)	(1,362,424		)	(89,992		)
Net cash used in financing activities	(6,773,534		)	(5,364,885		)	(4,668,832		)	(3,405,777		)
Net increase in cash, cash equivalents and restricted cash	2,319,668			2,715,344
Net change in cash, cash equivalents and restricted cash							(147,730		)	1,161,229
Cash, cash equivalents and restricted cash, beginning of period	27,681,133			23,028,153			31,552,533			27,681,133
Cash, cash equivalents and restricted cash, end of period	$	30,000,801		$	25,743,497
Cash and cash equivalents, end of period							$	31,404,803		$	28,842,362


Supplemental disclosures of cash flow information:	Six Months Ended December 31,						Three Months Ended September 30,
	2018			2017			2019		2018
Income taxes paid	$	1,862,919		$	1,136,754		$	85,000	$	462,395
Non-cash transactions:
Change in accounts payable used to acquire property and equipment	(1,094,249		)	424,365
Change in accounts payable used to acquire oil and natural gas properties							102,981		(405,645		)
Oil and natural gas property costs incurred through recognition of asset retirement obligations	31,268			(779		)	—		31,268

See accompanying notes to consolidated condensed financial statements.

Evolution Petroleum Corporation and Subsidiaries

Consolidated Condensed ~~Statement~~Statements of Changes in Stockholders' Equity

~~For the Six Months Ended December 31, 2018~~

(Unaudited)


	Common Stock																	Common Stock					Additional Paid-in Capital			Retained Earnings			Treasury Stock			Total Stockholders' Equity
	Common Stock					Additional Paid-in Capital			Retained Earnings			Treasury Stock			Total Stockholders' Equity			Shares		Par Value			Additional Paid-in Capital			Retained Earnings			Treasury Stock			Total Stockholders' Equity
	Shares		Par Value			Additional Paid-in Capital			Retained Earnings			Treasury Stock			Total Stockholders' Equity
For the Three Months Ended September 30, 2019:
Balance at June 30, 2019																		33,183,730		$	33,183		$	42,488,913		$	37,603,762		$	—		$	80,125,858
Issuance of restricted common stock																		59,028		59			(59		)	—			—			—
Forfeitures of restricted stock																		(8,248	)	(8		)	8			—			—			—
Common share repurchases, including shares surrendered for tax withholding																		—		—			—			—			(1,362,424		)	(1,362,424		)
Retirements of treasury stock																		(231,376	)	(231		)	(1,362,193		)	—			1,362,424			—
Stock-based compensation																		—		—			332,013			—			—			332,013
Net income																		—		—			—			2,792,820			—			2,792,820
Common stock cash dividends, $0.10 per share																		—		—			—			(3,306,408		)	—			(3,306,408		)
Balance at September 30, 2019																		33,003,134		$	33,003		$	41,458,682		$	37,090,174		$	—		$	78,581,859


For the Three Months Ended September 30, 2018:
Balance at June 30, 2018	33,080,543		$	33,080		$	41,757,645		$	35,498,754		$	—		$	77,289,479		33,080,543		$	33,080		$	41,757,645		$	35,498,754		$	—		$	77,289,479
Issuance of restricted common stock	121,611		122			(122		)	—			—			—			86,396		86			(86		)	—			—			—
Common share repurchases, including shares surrendered for tax withholding	(15,489	)	—			—			—			(138,638		)	(138,638		)	—		—			—			—			(89,992		)	(89,992		)
Retirements of treasury stock	—		(16		)	(138,622		)	—			138,638			—			(9,087	)	(9		)	(89,983		)	—			89,992			—
Stock-based compensation	—		—			469,484			—			—			469,484			—		—			215,373			—			—			215,373
Net income attributable to the Company	—		—			—			9,700,366			—			9,700,366
Net income																		—		—			—			5,795,801			—			5,795,801
Common stock cash dividends, $0.10 per share	—		—			—			(6,634,896		)	—			(6,634,896		)	—		—			—			(3,315,785		)	—			(3,315,785		)
Balance at December 31, 2018	33,186,665		$	33,186		$	42,088,385		$	38,564,224		$	—		$	80,685,795
Balance at September 30, 2018																		33,157,852		$	33,157		$	41,882,949		$	37,978,770		$	—		$	79,894,876

See accompanying notes to consolidated condensed financial statements.

Table of Contents

Evolution Petroleum Corporation ~~And~~and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

Note 1 — Organization and Basis of Preparation

Nature of Operations. Evolution Petroleum Corporation ~~("EPM")~~ is an oil and gas company focused on delivering a sustainable dividend yield to its stockholders through the ownership, management and development of ~~producing~~ oil and gas properties. The Company's long-term goal is to build a diversified portfolio of oil and gas assets primarily through ~~acquisition,~~acquisitions, while seeking opportunities to maintain and increase production through selective development, production enhancement and other exploitation efforts on its properties. ~~Our largest active investment is our interest in a CO~~₂ ~~enhanced oil recovery project in Louisiana's Delhi field.~~

Interim Financial Statements. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the appropriate rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with ~~accounting principles generally accepted in the United States~~GAAP have been condensed or omitted pursuant to such rules and regulations. All adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods presented have been included. The interim financial information and notes hereto should be read in conjunction with the Company’s ~~2018~~2019 Annual Report on Form 10-K for the fiscal year ended June 30, ~~2018,~~2019, as filed with the SEC. The results of operations for interim periods are not necessarily indicative of results to be expected for a full fiscal year.

Principles of Consolidation and Reporting. Our consolidated financial statements include the accounts of EPM and its wholly-owned subsidiaries (the "Company"). All significant intercompany transactions have been eliminated in consolidation. The consolidated financial statements for the previous year may include certain reclassifications to conform to the current presentation. Any such reclassifications have no impact on previously reported net income or stockholders' equity.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include (a) reserve quantities and estimated future cash flows associated with proved reserves, which may significantly impact depletion expense and potential impairments of oil and natural gas properties, (b) asset retirement obligations, (c) stock-based compensation, (d) ~~fair values of derivative assets and liabilities, (e)~~ income taxes and the valuation of deferred tax assets and ~~(f)~~(e) commitments and contingencies. We analyze our estimates based on historical experience and various other assumptions that we believe to be reasonable. While we believe that our estimates and assumptions used in preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.

~~Note 2 — Summary of Significant Accounting Policies~~

~~Revenue Recognition~~

Effective July 1, 2018, the Company adopted ASU No. 2014-09, Revenue From Contracts With Customers (Topic 606) (“ASC 606”) using the full retrospective method and has applied the standard to all existing contracts. ASC 606 supersedes previous revenue recognition requirements in ASC 605 - Revenue Recognition (“ASC 605”) and includes a five-step revenue recognition model to depict the transfer of goods or services to customers in an amount that reflects the consideration in exchange for those goods or services. As a result of adopting ASC 606, the Company did not have a cumulative-effect adjustment in retained earnings. The comparative information presented therein for the three and six months ended December 31, 2017 reflects the reclassification on our consolidated statement of operations of $140,691 and $276,595, respectively, from “Production Costs” to “Revenue - Natural Gas Liquids” in conformance with ASC 606. These changes to revenue and production costs resulted from the conclusion that the Company did not control the product throughout processing before transferring to the customer. Therefore, costs incurred after the transfer of control are treated as reductions of revenue. Additionally, adoption of ASC 606 did not impact net income attributable to common stockholders, current assets, total assets, current liabilities, total liabilities or stockholders’ equity and the Company does not expect that it will do so in future periods.

Our revenues are comprised solely of revenues from customers from the sale of crude oil and NGLs. The Company believes that the disaggregation of revenue on its consolidated statements of operations into these two major product types appropriately depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors based on our single geographic location. Crude oil and NGL revenues are recognized at a point in time when production is sold to a purchaser at an index-based, determinable price, delivery has occurred, control has transferred and collectibility of

Table of Contents

Evolution Petroleum Corporation ~~And~~and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

~~the revenue is probable.~~ Note 2 — Summary of Significant Accounting Policies

The ~~transaction price used to recognize revenue is a function of the contract billing terms which reference index price sources used~~significant accounting policies followed by the ~~industry. Revenue is invoiced~~Company are set forth in Note 2 - Summary of Significant Accounting Policies in the 2019 Form 10-K and are supplemented by ~~calendar month based on volumes at contractually based rates~~the notes to the unaudited condensed consolidated financial statements included in this report. These unaudited condensed consolidated financial statements should be read in conjunction with ~~payment typically required within 30 days for crude oil and 60 days for NGLs after~~ the end of the production month. At the end of each month when the performance obligations have been satisfied, the consideration can be reasonably estimated and amounts due from customers are accrued in “Receivables” in our consolidated balance sheets. As of December 31, 2018 and June 30, 2018, receivables from contracts with customers were $3.4 million and $3.9 million, respectively.2019 Form 10-K.

~~Other~~ Recently Adopted Accounting ~~Pronouncements~~

~~In January 2016, the FASB issued ASU 2016-01, Financial Instruments~~Pronouncement - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). The pronouncement requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investees) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. Effective July 1, 2018, the Company prospectively adopted ASU 2016-01 without impact to its consolidated financial position or results of operations. Because its investment in Well Lift Inc. does not have a readily determinable fair value, the Company elected to measure this investment at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, if they were to occur.

Effective July 1, 2018, the Company retrospectively adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The guidance addresses eight specific cash flow issues for which current GAAP is either unclear or does not include specific guidance. Adoption had no effect on our current period and comparative consolidated statements of cash flows.

Effective July 1, 2018, the Company prospectively adopted ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company will apply the clarified definition of business to future acquistions and divestitures.

~~Recently Issued Accounting Pronouncements~~Leases

In February 2016, the FASB issued ASU 2016-02, Leases ~~(Topic 842) (“ASU 2016-02”~~("ASC 842"), which relates to the accounting for leasing transactions. This standard requires an entity to recognize a ~~lessee~~right-of-use (“ROU”) asset and lease liability for leases. Classification of leases as either a finance or operating lease determines the recognition, measurement and presentation of expenses. This accounting standards update also requires certain quantitative and qualitative disclosures about leasing arrangements. Leases acquired to ~~record~~explore for or use minerals, oil or natural gas resources, including the right to explore for those natural resources and rights to use the land in which those natural resources are contained, are not within the scope of the standards update.

Effective July 1, 2019, the Company adopted the new standard using a modified retrospective approach and elected to use the optional transition methodology whereby reporting periods prior to adoption continue to be presented in accordance with legacy accounting guidance, Accounting Standard Codification 840 - Leases. Upon transition, we recognized a ROU asset (or operating lease right-of-use asset) and an operating lease liability with no retained earnings impact. We applied the following practical expedients as provided in the standards update which provide elections to not reassess:

Whether an expired or existing pre-adoption date contracts contained leases.

Lease classification of any expired or existing leases.

Initial direct costs for any expired or existing leases.

We determine if an arrangement is a lease at inception of the arrangement. To the extent that we determine an arrangement represents a lease, we classify that lease as an operating lease or a finance lease. We capitalize our operating leases on ~~the~~our consolidated balance sheet through a ROU asset and a corresponding lease liability. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Short-term leases that have an initial term greater than one month but less than one year are not capitalized in the above manner but related costs each period must be disclosed.

As a non-operator in recent years and having adequate liquidity, the Company has generally not entered into lease transactions. Presently, our only lease is an operating lease for our corporate office space in Houston, Texas, effective May 1, 2019, which expires November 30, 2022. We have no finance leases and no short-term leases.

Adoption of the new standard did not impact our unaudited condensed consolidated statements of operations, cash flows or stockholders’ equity. At adoption we recorded our operating lease as follows:



Asset (Liability)	Balance June 30, 2019			Adjustment at Adoption July 1, 2019
Operating lease right-of-use asset	$	—		$	161,125
Accrued liabilities and other:
Deferred rent	$	(4,338	)	$	4,338
Operating lease liability	$	—		$	(26,194	)
Operating lease liabilities - long-term	$	—		$	(139,269	)

In addition to the transitional elections, we have also elected a practical expedient to not separate lease components from non-lease components, such as services provided by the lessor under the contract. Accordingly, we account for the lease and non-lease components in an arrangement as a single lease component. We elected this expedient for our existing asset classes.

Although we presently have no short-term leases, we have made an accounting policy election not to apply the lease recognition requirements to any future short-term leases, which the guidance defines as having a lease term of 12 months or less and not having an option to purchase the underlying asset that we would be reasonably certain to exercise. Such lease

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Evolution Petroleum Corporation and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

payments would be recognized in our statement of operations on a straight-line basis over the lease term as would have been done under the previous guidance.

Variable lease payments, which are neither fixed by the contract nor dependent on an index or rate, are not included in the lease liability or ROU assets. We recognize such payments in our statement of operations in the period in which the obligation for those payments is incurred.

Recently Issued Accounting Pronouncement

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and ~~liabilities~~certain other instruments, including trade and other receivables, and requires the use of a new forward-looking expected loss model that will result in the earlier recognition of allowances for ~~the rights and obligations created by leases with lease terms of more than twelve months. In addition,~~losses. The amendments in this ~~standard requires both lessees and lessors to disclose certain key information about lease transactions. This standard will be~~ASU are effective for fiscal years beginning after December 15, ~~2018, including~~2019, and interim periods within those fiscal ~~years. We are evaluating~~years, and early adoption is permitted. Entities must adopt the ~~impact~~amendment using a modified retrospective approach to the first reporting period in which the guidance is effective. The adoption of ASU ~~2016-02 will~~2016-13 is currently not expected to have a material effect on our consolidated financial statements.

~~Note 3 — Receivables~~

~~As of December 31, 2018 and June 30, 2018, our receivables consisted of the following:~~

December 31,
2018 June 30,
2018
Receivables from oil and NGL sales $ 3,434,227
$ 3,940,998
Other —
918
Total receivables $ 3,434,227
$ 3,941,916

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Evolution Petroleum Corporation ~~And~~and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

Note 3 — Revenue from Contracts with Customers

All of our revenue is generated from our interests in the Delhi field in Northeast Louisiana except $16 thousand of revenue from an overriding royalty interest retained in a past divestiture included below in fiscal 2020:



	Three Months Ended September 30,
	2019		2018
Revenues
Crude oil	$	8,845,504	$	11,397,452
Natural gas liquids	305,944		909,627
Natural gas	767		—
Total revenues	$	9,152,215	$	12,307,079

The Company recognizes oil, gas, and NGL production revenue at the point in time when custody and title (“control”) of the product transfers to the customer, which differs depending on the contractual terms of each of the Company’s arrangements. Transfer of control drives the presentation of post-production expenses such as transportation, gathering and processing deductions within the accompanying statements of operations. Fees and other deductions incurred prior to control transfer are recorded within the production costs line item on the accompanying unaudited condensed statements of operations, while fees and other deductions incurred subsequent to control transfer are embedded in the price and effectively recorded as a reduction of oil, gas, and NGL production revenue.

Judgments made in applying the guidance in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers relate primarily to determining the point in time when control of product transfers to the customer. The Company does not believe that significant judgments are required with respect to the determination of the transaction price, including amounts that represent variable consideration, as volume and price carry a low level of estimation uncertainty given the precision of volumetric measurements and the use of index pricing with predictable differentials. Accordingly, the Company does not consider estimates of variable consideration to be constrained.

The Company’s contractual performance obligations arise upon the production of hydrocarbons from wells in which the Company has an ownership interest. The performance obligations are considered satisfied at a point in time upon control transferring to a customer at a specified delivery point. Consideration is allocated to satisfied performance obligations at the end of an accounting period.

Revenue is recorded in the month when contractual performance obligations are satisfied. However, settlement statements from the purchasers of hydrocarbons and the related cash consideration are received one to two months after production has occurred, which is typical in the industry. As a result, the Company must estimate the amount of production delivered to the customer and the consideration that will ultimately be received for sale of the product. Estimated revenue due to the Company is recorded within the receivables line item on the accompanying unaudited condensed consolidated balance sheets (“accompanying balance sheets”) until payment is received. The accounts receivable balances from contracts with customers within the accompanying balance sheets as of September 30, 2019 and June 30, 2019 were $3.0 million and $3.2 million, respectively. To estimate accounts receivable from operator contracts with customers, the Company uses knowledge of its properties, historical performance, contractual arrangements, index pricing, quality and transportation differentials, and other factors as the basis for these estimates. Differences between estimates and actual amounts received for product sales are recorded in the month that payment is received from the purchaser. Revenue recognized during the three months ended September 30, 2019, that related to performance obligations satisfied in prior reporting periods, was immaterial.

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Evolution Petroleum Corporation and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

Note 4 — ~~Prepaid Expenses~~Enduro Purchase and ~~Other Current Assets~~Sale Agreement and "Stalking Horse" Bid

During the first quarter of fiscal 2019, the Company recorded a $1.1 million break-up fee upon the closing of a higher bidder's purchase transaction. During May 2018, the Company had entered into a Purchase and Sale Agreement ("PSA"), to acquire, as the "stalking horse" bidder, certain oil and gas assets from an affiliate of Enduro Resource Partners LLC ("Enduro") for a purchase price of $27.5 million, subject to the outcome of Enduro's Chapter 11 process. Contemporaneous with executing the PSA, the Company made a $2.75 million deposit to an acquisition escrow account which, together with interest earned, comprised the restricted cash balance on the Company's June 30, 2018 consolidated statement of financial position. Earlier in the first quarter of 2019, the Company was repaid its deposit together with related earned interest when a higher bidder first emerged in the bidding process.

The Company's initial and subsequent bids represented offers under Section 363 of the U.S. Bankruptcy Code in Enduro's Chapter 11 proceeding. Such offers are commonly referred to as “stalking horse” bids and are subject to higher bids, in accordance with the bidding procedures approved by the Bankruptcy Court. In connection with the PSA, the Company had incurred third party due diligence expenses, which have been reflected in the Company's consolidated statement of operations for the year ended June 30, 2018.

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Evolution Petroleum Corporation and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

Note 5 — Receivables

As of ~~December 31, 2018~~September 30, 2019 and June 30, ~~2018,~~2019, our receivables consisted of the following:



	September 30, 2019		June 30, 2019
Receivables from oil and NGL sales	$	2,967,064	$	3,168,116
Other	1,988		—
Total receivables	$	2,969,052	$	3,168,116

Note 6 — Prepaid Expenses

As of September 30, 2019 and June 30, 2019, our prepaid expenses ~~and other current assets~~ consisted of the following:

December 31,
2018 June 30,
2018
Prepaid insurance $ 87,234
$ 198,558
Retainers and deposits 6,089
11,089
Prepaid federal and state income taxes 438,453
231,920
Other prepaid expenses 62,779
82,940
Prepaid expenses and other current assets $ 594,555
$ 524,507



	September 30, 2019		June 30, 2019
Prepaid insurance	$	148,351	$	206,198
Prepaid subscription and licenses	67,211		55,435
Prepaid federal and state income taxes	121,679		121,679
Prepaid investor relations and other	25,818		74,966
Total prepaid expenses	$	363,059	$	458,278

Note 57 — Property and Equipment

As of ~~December 31, 2018~~September 30, 2019 and June 30, ~~2018,~~2019, our oil and natural gas properties and other property and equipment consisted of the following:


	December 31, 2018			June 30, 2018			September 30, 2019			June 30, 2019
Oil and natural gas properties
Property costs subject to amortization	$	94,378,924		$	90,392,918		$	96,247,547		$	95,622,153
Less: Accumulated depreciation, depletion, and amortization	(32,241,235		)	(29,153,172		)	(36,693,441		)	(35,275,687		)
Unproved properties not subject to amortization	—			—			—			—
Oil and natural gas properties, net	$	62,137,689		$	61,239,746		$	59,554,106		$	60,346,466
Other property and equipment
Furniture, fixtures, office equipment and other, at cost	$	145,289		$	143,223		$	154,731		$	154,731
Less: Accumulated depreciation	(121,102		)	(112,816		)	(130,635		)	(128,313		)
Other property and equipment, net	$	24,187		$	30,407		$	24,096		$	26,418

During the ~~six~~three months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017,~~ the Company incurred capital expenditures of ~~$4.0~~$0.6 million and ~~$1.4~~$2.7 million, respectively, in the Delhi field.

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Evolution Petroleum Corporation and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

Note 8 — Leases

Operating leases are reflected as an operating lease ROU asset included in other assets, in accrued and other liabilities-current and as an operating lease liability on our unaudited condensed consolidated balance sheet. Operating lease ROU assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. In addition to the present value of lease payments, the operating lease ROU asset would also include any lease payments made to the lessor prior to lease commencement less any lease incentives and initial direct costs incurred, if any. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

As an non-operator in recent years and having adequate liquidity, the Company has generally not entered into lease transactions. Presently, our only operating lease is for corporate office space in Houston, Texas, effective May 1, 2019 and which expires November 30, 2022. Presently we have one operating lease for office space, no finance leases and no short-term leases.

Certain assumptions and judgments made by the Company when evaluating a contract that meets the definition of a lease under Topic 842 include:

Discount Rate - Our lease does not provide an implicit rate. Accordingly, we are required to use our incremental borrowing rate in determining the present value of lease payments based on the information available at commencement date. Our incremental borrowing rate reflects the estimated rate of interest that we would pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. At adoption, July 1, 2019,we used our prime-rate-based borrowing rate under our senior secured credit facility as our incremental borrowing as the term facility was based on a similar term and is appropriately risk-adjusted.

Lease Term - At inception the Company evaluates the contract containing a lease arrangement to determine the length of the lease term when recognizing a ROU asset and corresponding lease liability. When determining the lease term, an option available to extend or to early terminate the arrangement is evaluated and included when it is reasonably certain an option will be exercised. Because of the Company’s intent to maintain operational flexibility, there is no available option to extend that the Company is reasonably certain it will exercise. We have no expectation to use the early termination option that we are reasonably certain to exercise.

For the three months ended September 30, 2019, the components of our total lease expense, included in general and administrative expense, are as follows:



	Three Months Ended September 30, 2019
Operating lease cost	$	13,015
Variable lease expense (1)	990
Total lease expense	$	14,005

(1) Variable lease payments that are not dependent on an index or rate are not included in the lease liability or ROU asset.

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Evolution Petroleum Corporation and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

Supplemental cash flow, balance sheet and other disclosures information related to our operating leases are as follows:



	As of and For the Three Months Ended September 30, 2019
Cash Flow:
Cash paid for amounts included in the measurement of lease liabilities	$	—
ROU asset added in exchange for lease obligation at adoption	161,125

Balance Sheet:
Operating lease ROU asset (included in other assets)	150,249
Accrued liabilities - current	41,369
Operating lease liability - long-term	126,233

Other:
Weighted average remaining lease term in years	3.16
Weighted average discount rate	5.15		%

Maturities of our operating lease liability are as follows:



Fiscal Year	Operating Lease Liability
Remainder of 2020	$	34,322
2021	59,945
2022	61,843
2023	26,098
Total lease payments	182,208
Less imputed interest	(14,606		)
Total lease liability	$	167,602

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Evolution Petroleum Corporation and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

Note 69 — Other Assets

As of ~~December 31, 2018~~September 30, 2019 and June 30, ~~2018,~~2019, other assets consisted of the following:


	December 31, 2018			June 30, 2018			September 30, 2019			June 30, 2019
Royalty rights	$	108,512		$	108,512		$	108,512		$	108,512
Less: Accumulated amortization of royalty rights	(40,692		)	(33,910		)	(50,865		)	(47,474		)
Investment in Well Lift Inc., at cost	108,750			108,750			108,750			108,750
Deferred loan costs	168,972			168,972			168,972			168,972
Less: Accumulated amortization of deferred loan costs	(134,349		)	(126,771		)	(145,716		)	(141,927		)
Right of use asset under operating lease							161,125			—
Less: Accumulated amortization of right of use asset							(10,876		)	—
Software license	20,662			20,662			20,662			20,662
Less: Accumulated amortization of software license	(3,450		)	(1,380		)	(9,184		)	(7,462		)
Other assets, net	$	228,405		$	244,835		$	351,380		$	210,033

Our royalty rights and investment in Well Lift, Inc. ("WLI") resulted from the separation of our artificial lift technology operations in December 2015. We conveyed our patents and other intellectual property to WLI and retained a 5% royalty on future gross revenues associated with the technology. We own 17.5% of the common stock of WLI and account for our investment in this private company at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, if such were to occur. The Company evaluates the investment for impairment when it identifies any events or changes in circumstances that might have a significant adverse effect on the fair value of the investment.

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~~Evolution Petroleum Corporation And Subsidiaries~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

Note 710 — Accrued Liabilities and Other

As of ~~December 31, 2018~~September 30, 2019 and June 30, ~~2018,~~2019, our other current liabilities consisted of the following:


	December 31, 2018		June 30, 2018		September 30, 2019		June 30, 2019
Accrued incentive and other compensation	$	217,171	$	415,182	$	182,855	$	369,719
Accrued severance payments	—		160,089
Asset retirement obligations due within one year	35,539		35,539		50,244		50,244
Accrued royalties, including suspended accounts	11,498		11,498
Operating lease liability, current					41,369		—
Accrued franchise taxes	99,000		162,805		34,238		5,738
Accrued ad valorem taxes	—		89,773		150,750		100,500
Other accrued liabilities					11,556		11,554
Accrued liabilities and other	$	363,208	$	874,886	$	471,012	$	537,755

Note 811 — Asset Retirement Obligations

Our asset retirement obligations represent the estimated present value of the amount we expect to incur to plug, abandon and remediate our producing properties at the end of their productive lives in accordance with applicable laws. The following is a reconciliation of the beginning and ending asset retirement obligations for the ~~six~~three months ended ~~December 31, 2018~~September 30, 2019 and for the year ended June 30, ~~2018:~~2019:


	December 31, 2018			June 30, 2018			September 30, 2019			June 30, 2019
Asset retirement obligations — beginning of period	$	1,422,955		$	1,288,743		$	1,610,845		$	1,422,955
Liabilities incurred	31,268			44,700			—			31,268
Accretion of discount	48,962			90,290			26,287			101,506
Revision of previous estimates	—			(778		)	—			55,116
Asset retirement obligations — end of period	$	1,503,185		$	1,422,955		$	1,637,132		$	1,610,845
Less current portion in accrued liabilities	(35,539		)	(35,539		)	(50,244		)	(50,244		)
Long-term portion of asset retirement obligations	$	1,467,646		$	1,387,416		$	1,586,888		$	1,560,601

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Evolution Petroleum Corporation and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

Note 912 — Stockholders’ Equity

Common Stock

As of ~~December 31, 2018,~~September 30, 2019, we had ~~33,186,665~~33,003,134 shares of common stock outstanding.

The Company began paying quarterly cash dividends on common stock in December 2013. We paid dividends of ~~$6,634,896~~$3,306,408 and ~~$4,969,335~~$3,315,785 to our common stockholders during the ~~six~~three months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017,~~ respectively. The following table reflects the dividends paid within the respective three month periods:


	Fiscal Year
	2018		2017
Common Stock Cash Dividends per Share					2019		2018
First quarter ended September 30,	$	0.10	$	0.075	$	0.10	$	0.10
Second quarter ended December 31,	$	0.10	$	0.075

In May 2015, the Board of Directors approved a share repurchase program covering up to $5 million of the Company's common stock. ~~Between June 2015 and December 2015,~~Since inception of the program through September 30, 2019, the Company spent ~~$1,609,008~~$2.9 million to repurchase ~~265,762~~488,629 common shares at an average price of ~~$6.05~~$5.98 per ~~share. There have been no~~share, including 222,437 shares ~~repurchased in~~at an average cost of $5.89 during the ~~open market since December 2015.~~three months ended September 30, 2019. Under the program's terms, shares are repurchased only on the open market and in accordance with the requirements of the Securities and Exchange Commission. Such shares are initially recorded as treasury stock, then subsequently canceled. The timing and amount of repurchases depends upon several factors, including financial resources and market and business conditions. There is no fixed termination date for this repurchase program, and it may be suspended or discontinued at any time.

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~~Evolution Petroleum Corporation And Subsidiaries~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

During the ~~six~~three months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017,~~ the Company also acquired treasury stock from holders of newly vested stock-based awards to fund the recipients' payroll tax withholding obligations. The treasury shares were subsequently canceled. Such shares were valued at fair market value on the date of ~~vesting, as reflected~~vesting. The following table shows all treasury stock purchases in the ~~following table:~~respective periods:


	Six Months Ended December 31,				Three Months Ended September 30,
	2018		2017		2019		2018
Number of treasury shares acquired(1)	15,489		55,018		231,376		9,087
Average cost per share	$	8.95	$	7.19	$	5.89	$	9.90
Total cost of treasury shares acquired	$	138,638	$	395,550	$	1,362,424	$	89,992

(1) The fiscal 2019 number of shares is net of 8,939 shares forfeited in the period.

Expected Tax Treatment of Dividends

For the fiscal year ended June 30, ~~2018,~~2019, all common stock dividends were treated for tax purposes as qualified dividend income to recipients. Based on our current projections for the fiscal year ending June 30, ~~2019,~~2020, we expect all common dividends for such period to be treated as qualified dividend income. Such projections are based on our reasonable expectations as of ~~December 31, 2018~~September 30, 2019 and are subject to change based on our final tax calculations at the end of the fiscal year.

Note 1013 — Stock-Based Incentive Plan

At the December 8, 2016 annual meeting, the stockholders approved the adoption of the Evolution Petroleum Corporation 2016 Equity Incentive Plan (the “2016 Plan”), which replaced the Evolution Petroleum Corporation Amended and Restated 2004 Stock Plan (the "2004 Plan") for which there were no shares available for future grants. The 2016 Plan authorizes the issuance of 1,100,000 shares of common stock prior to its expiration on December 8, 2026. Incentives under the 2016 Plan may be granted to employees, directors and consultants of the Company in any one or a combination of the following forms: incentive stock options and non-statutory stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards, performance share awards, performance cash awards, and other forms of incentives valued in whole or in part by reference to, or otherwise based on, our common stock, including its appreciation in value. As of ~~December 31, 2018, 852,111~~September 30, 2019, 603,239 shares remained available for grant under the 2016 Plan.

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Evolution Petroleum Corporation and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

All outstanding awards granted under the 2004 Plan continue to be subject to the terms and conditions as set forth in the agreements evidencing such awards and the terms of the 2004 Plan. Under these agreements, we have outstanding grants of restricted common stock awards ("Restricted Stock") and contingent restricted common stock awards ("Contingent Restricted Stock") to employees and directors of the Company.

Restricted Stock and Contingent Restricted Stock

The Company has awarded grants of both Restricted Stock and Contingent Restricted Stock as part of its long-term incentive plan. Such grants, which expire after a maximum of four years if unvested, contain service-based, performance-based and market-based vesting provisions. The common shares underlying the Restricted Stock grants are issued on the date of grant. Contingent Restricted Stock grants vest only upon the attainment of higher performance-based or market-based vesting thresholds and are issued only upon vesting. Shares underlying Contingent Restricted Stock awards are reserved from the Plan they were granted under.

During the three months ended September 30, 2019, the only awards granted by the Company were to its new chief executive officer upon his employment. He received 48,872 shares of serviced-based restricted common stock which vest in three equal amounts on June 30, 2020, 2021 and 2022, and was also awarded a total of 200,000 market-based restricted stock units consisting of four equal tranches, each of which may vest only if its respective stock price requirement is met before the award term expires. Each tranche has a separate stated price requirement and respective vesting will occur only if, before July 1, 2023, the ninety-day trailing average Company stock share price equals or exceeds its tranche price requirement.

Service-based awards vest with continuous employment by the Company, generally in annual installments over their terms of three to four years. ~~Certain awards may contain other vesting periods, including quarterly installments and~~Awards to the Company's directors have one-year cliff vesting. Restricted Stock grants which vest based on service are valued at the fair market value on the date of grant and amortized over the service period. During the six months ended December 31, 2018, we granted 31,777 service-based and 43,990 market-based Restricted Stock awards to our employees as well as 35,215 service-based awards to the Company's directors. We did not grant any performance-based awards, nor any Contingent Restricted Stock awards, during this period. The employees' service-based awards vest annually over a three-year period and the directors' service-based awards have a one-year cliff vesting period.

Performance-based grants vest upon the attainment of earnings, revenue and other operational goals and require that the recipient remain an employee or director of the Company through the vesting date. The Company recognizes compensation expense for performance-based awards ratably over the expected vesting period based on the grant date fair value when it is

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~~Evolution Petroleum Corporation And Subsidiaries~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

deemed probable, for accounting purposes, that the performance criteria will be achieved. The expected vesting period may be deemed to be shorter than the term of the award. As of ~~December 31, 2018,~~September 30, 2019, there were no performance-based awards outstanding.

~~Market-based~~Many of our past market-based awards could vest if their respective two- or three-year trailing total returns on the Company’s common stock exceed the corresponding total returns of various quartiles of indices consisting of ~~either~~ peer ~~companies or a broad market index of companies in our industry.~~companies. More recent market-based awards vest ifwhen the average of the Company's closing stock ~~prices~~price over a defined ~~quarterly~~ measurement ~~periods together with accumulated paid dividends~~period meets or exceeds a ~~defined value.~~required stock price. The fair values and expected vesting periods of these awards are determined using a Monte Carlo simulation based on the historical volatility of the Company's total return compared to the historical volatilities of the other companies in the index. Compensation expense for market-based awards is recognized over the expected vesting period using the straight-line method, so long as the holder remains an employee or director of the Company. Total compensation expense is based on the fair value of the awards at the date of grant and is independent of vesting or expiration of the awards, except for termination of service.

For market-based awards granted during the ~~six~~three months ended ~~December 31,~~September 30, 2019 and 2018, the ~~range of~~ assumptions used in the Monte Carlo simulation valuations, expected lives and fair values were as follows:



	~~Six Months Ended~~ ~~December 31,~~
	~~2018~~
~~Risk-free interest rate~~	~~2.69~~	%
~~Expected life in years~~	~~2.82~~
~~Expected volatility~~	~~41.8~~	%
~~Dividend yield~~	~~4.0~~	%

~~Unvested Restricted Stock awards at December 31, 2018 consisted of the following:~~

Number of
Restricted
Shares Weighted
Average
Grant-Date
Fair Value
Service-based awards 121,265
$ 8.62
Market-based awards 64,302
7.35
Unvested Restricted Stock at December 31, 2018 185,567
$ 8.18

~~The following table sets forth the Restricted Stock transactions for the six months ended December 31, 2018:~~

Number of
Restricted
Shares Weighted
Average
Grant-Date
Fair Value Unamortized Compensation Expense at December 31, 2018 Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2018 199,477
$ 6.83

Service-based shares granted 66,992
9.17

Market-based shares granted 43,990
8.24

Vested (124,892 ) 6.57

Unvested Restricted Stock at December 31, 2018 185,567
$ 8.18
$ 1,260,881
2.02

~~Unvested Contingent Restricted Stock awards at December 31, 2018 consisted of the following:~~

Number of
Contingent
Restricted
Shares Weighted
Average
Grant-Date
Fair Value
Market-based awards 10,156
$ 3.42



	Three Months Ended September 30,
	2019			2018
Weighted average fair value of market-based awards granted	$	3.50		$	8.24
Risk-free interest rate	1.87		%	2.69		%
Expected vesting term in years	1.35			2.82
Expected volatility	43.7		%	41.8		%
Dividend yield	6.0		%	4.0		%

1115

Table of Contents

Evolution Petroleum Corporation ~~And~~and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

Unvested Restricted Stock awards at September 30, 2019 consisted of the following:



	Number of Restricted Shares	Weighted Average Grant-Date Fair Value
Service-based awards	142,132	$	7.83
Market-based awards	41,888	8.24
Unvested Restricted Stock at September 30, 2019	184,020	$	7.92

The following table sets forth ~~Contingent~~the Restricted Stock transactions for the ~~six~~three months ended ~~December 31, 2018:~~September 30, 2019:

Number of
Contingent
Restricted
Shares Weighted
Average
Grant-Date
Fair Value Unamortized Compensation Expense at December 31, 2018 Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2018 28,562
$ 6.06

Vested (10,629 ) 5.67

Expired (7,777 ) 10.05

Unvested contingent shares at December 31, 2018 10,156
$ 3.42
$ 6,058
.49



	Number of Restricted Shares		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at September 30, 2019		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2019	176,683		$	8.09
Service-based shares granted	48,872		6.65
Vested	(33,287	)	6.53
Forfeited	(8,248	)	9.48
Unvested Restricted Stock at September 30, 2019	184,020		$	7.92	$	889,543	2.06

Unvested Contingent Restricted Stock awards table below consists solely of market-based awards:



	Number of Contingent Restricted Shares		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at September 30, 2019		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2019	10,156		$	3.42
Market-based awards granted	200,000		3.50
Vested	(10,156	)	3.42
Unvested contingent shares at September 30, 2019	200,000		$	3.50	$	574,045	1.1

Stock-based compensation expense related to Restricted Stock and Contingent Restricted Stock grants for the three months ended ~~December 31,~~September 30, 2019 and 2018 was $332,013 and ~~2017 was $254,111 and $484,326, respectively. For the corresponding six month periods, stock-based compensation expense was $469,484 and $971,810,~~$215,373, respectively.

Note 1114 — Income Taxes

We file a consolidated federal income tax return in the United States and various combined and separate filings in several state and local jurisdictions.

There were neither unrecognized tax benefits nor any accrued interest or penalties associated with unrecognized tax benefits during any periods presented in the financial statements. We believe we have appropriate support for the income tax positions taken and to be taken on our tax returns and that the accruals for tax liabilities are adequate for all open years based on our assessment of various factors including past experience and interpretations of tax law applied to the facts of each matter. The Company’s federal and state income tax returns are open to audit under the statute of limitations for the years ended June 30, 2015 through June 30, 2018 for federal tax purposes and for the years ended June 30, ~~2014~~2016 through June 30, 2018 for state tax purposes. To the extent we utilize net operating losses generated in earlier years, such earlier years may also be subject to audit.

For the ~~six~~three months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017,~~ respectively, we recognized income tax ~~expense~~expenses of ~~$2.2~~$0.5 million and ~~an income tax benefit of $(4.7)~~$1.3 million. This benefit included a one-time $6.0 million tax credit, resulting from adjustment of our deferred income tax liabilities at December 31, 2017 in connection with enactment of the Tax Cut and Jobs Act (the "Tax Act"). For the ~~six~~three months ended ~~December 31,~~September 30, 2019 and 2018, ~~and 2017,~~ the corresponding effective tax rates were ~~18%~~15.6% and ~~(63)%~~18.5%. ~~Excluding the effect of the $6.0 million tax credit, income tax as a percentage of income before income taxes would have been approximately 19% for the six months ended December 31, 2017.~~ Our effective tax rate will typically differ from the statutory federal rate as a result of state income taxes, primarily in the State of Louisiana, and differences related to percentage depletion in excess of basis, stock-based compensation and other permanent differences. For ~~the six months ended December 31, 2018 and 2017,~~both periods, our respective statutory federal tax ~~rates were~~rate was 21% and 27.55%, as we used a blended rate during our fiscal year in which the Tax Act was enacted. The benefit of this statutory rate reduction was partially offset by a decreased benefit from depletion in excess of basis as much of our depletion carryover had been utilized in fiscal 2018..

1216

Table of Contents

Evolution Petroleum Corporation ~~And~~and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

Note 1215 — Net Income Per Share

The following table sets forth the computation of basic and diluted income per share:


	Three Months Ended December 31,				Six Months Ended December 31,				Three Months Ended September 30,
	2018		2017		2018		2017		2019		2018
Numerator
Net income available to common shareholders	$	3,904,565	$	9,876,848	$	9,700,366	$	12,017,380	$	2,792,820	$	5,795,801
Denominator
Weighted average number of common shares — Basic	33,167,159		33,109,448		33,134,726		33,099,546		33,126,645		33,102,292
Effect of dilutive securities:
Contingent restricted stock grants	9,344		30,830		13,049		40,711		7,727		16,765
Weighted average number of common shares and potentially dilutive common shares used in diluted EPS	33,176,503		33,140,278		33,147,775		33,140,257
Weighted average number of common shares and potentially dilutive common shares used in diluted earnings per share									33,134,372		33,119,057

Net income per common share — Basic	$	0.12	$	0.30	$	0.29	$	0.36	$	0.08	$	0.18
Net income per common share — Diluted	$	0.12	$	0.30	$	0.29	$	0.36	$	0.08	$	0.17

~~Outstanding potentially dilutive securities as of December 31, 2018 were as follows:~~

~~Outstanding potentially dilutive securities as of December 31, 2017 were as follows:~~

Note 1316 — Senior Secured Credit Agreement

On April 11, 2016, the Company entered into a three-year, senior secured reserve-based credit facility ("Facility") in an amount up to $50 million. On May 25, 2018, we entered into the third amendment to our credit agreement governing the revolving credit facility to, among other things, extend the maturity date to April 11, 2021. On December 31, 2018, we entered into the fourth amendment to our credit agreement governing the revolving credit facility to broaden the definition for the Use of Proceeds.

As of ~~December 31, 2018,~~September 30, 2019, the Company's elected commitment and borrowing base were $40 million, ~~and~~ we were in compliance with all financial covenants ~~contained in the Facility. No~~and there were no amounts ~~were~~ outstanding under the Facility, which is secured by substantially all of the Company’s assets.

Under the Facility the borrowing base shall be determined semiannually as of every May 15 and November 15 during the term of the Facility. During the current quarter, the bank performed its periodic fall redetermination of the borrowing base and confirmed our elected amount of $40 million.

Borrowings from the Facility may be used for the acquisition and development of oil and gas properties, investments in cash flow generating assets complimentary to the production of oil and gas, and for letters of credit and other general corporate purposes. ~~Availability of borrowings under the Facility is subject to semi-annual borrowing base redeterminations.~~

The Facility included a placement fee of 0.50% on the initial borrowing base, amounting to $50,000, and carries a commitment fee of 0.25% per annum on the undrawn portion of the borrowing base. Any borrowings under the Facility will bear interest, at the Company’s option, at either LIBOR plus 2.75% or the Prime Rate, as defined under the Facility, plus 1.00%. The Facility contains financial covenants including a requirement that the Company maintain, as of the last day of each fiscal quarter, (a) a maximum total leverage ratio of not more than 3.00 to 1.00, (b) a debt service coverage ratio of not less than 1.10 to 1.00, and (c) a consolidated tangible net worth of not less than $50 million, all as defined under the Facility.

Table of Contents

Evolution Petroleum Corporation and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

In connection with this agreement, the Company incurred $168,972 of debt issuance costs. Such costs were capitalized in Other Assets and are being amortized to expense. The unamortized balance in debt issuance costs related to the Facility was ~~$34,623~~$23,256 as of ~~December 31, 2018.~~September 30, 2019.

~~Table of Contents~~

~~Evolution Petroleum Corporation And Subsidiaries~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

Note 1417 — Commitments and Contingencies

We are subject to various claims and contingencies in the normal course of business. In addition, from time to time, we receive communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which we operate. At a minimum, we disclose such matters if we believe it is reasonably possible that a future event or events will confirm a loss through impairment of an asset or the incurrence of a liability. We accrue a loss if we believe it is probable that a future event or events will confirm a loss and we can reasonably estimate such loss and we do not accrue future legal costs related to that loss. Furthermore, we will disclose any matter that is unasserted if we consider it probable that a claim will be asserted and there is a reasonable possibility that the outcome will be unfavorable. We expense legal defense costs as they are incurred.

~~Lease Commitments.~~ ~~We have a non-cancelable operating lease for office space that expires on May 31, 2019. Future minimum lease commitments as of December 31, 2018 under this operating lease are as follows:~~

Twelve month periods ended December 31,
2019 $ 30,447

Rent expense for the three months ended December 31, 2018 and 2017 was $18,726 and $19,198, respectively. For the six months ended December 31, 2018 and 2017, rent expense was $38,104 and $39,049, respectively.

Note 1518 — ~~Enduro Purchase~~Subsequent Event

On November 1, 2019, and ~~Sale Agreement~~

~~As previously disclosed, the Company entered into~~effective as of October 1, 2019, our wholly-owned subsidiary, Evolution Petroleum West, Inc., a ~~Purchase~~Delaware corporation, purchased a 23.51% non-operating working interest and ~~Sale Agreement ("PSA") on May 15, 2018, to acquire, as the "stalking horse" bidder, certain oil and gas assets from an affiliate of Enduro Resource Partners LLC ("Enduro") for~~ a purchase price of $27.5 million, subject to the outcome of Enduro's Chapter 11 process. Contemporaneous with executing the PSA, the Company made a $2.75 million deposit to an acquisition escrow account which was reflected in restricted cash together with earned19.70% revenue interest ~~on the Company's June 30, 2018 statement of financial position. On July 20, 2018, the Company was repaid its deposit together with related earned interest as a higher bidder emerged~~ in the ~~Chapter 11 bidding process. In August 2018, upon the closing~~Hamilton Dome field located in Hot Springs County, Wyoming, from entities owned or controlled by Merit Energy Company ("Merit") of ~~a higher bidder's purchase transaction, the Company received payment~~Dallas, Texas. The consideration to Merit consisted of ~~a $1.1~~$9.5 million ~~breakup fee under the terms~~in cash and our assumption of ~~the PSA. This breakup fee was effectively intended to cover the Company’s Enduro transaction costs, time~~asset retirement obligations. The assets included 265 producing and ~~effort, substantially all of which occurred before June 30, 2018.~~water injection wells and associated facilities.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto contained herein and in our Annual Report on Form 10-K for the year ended June 30, 2018 (the “Form 10-K”), along with Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~contained in the Form 10‑K. Any terms used but not defined herein have the same meaning given to them in the Form 10-K. Certain dollar amounts~~

Liquidity and ~~percentages in this Management’s Discussion~~Capital Resources

Critical Accounting Policies and ~~Analysis of Financial Condition and Results of Operations and other parts of this Quarterly Report on Form 10-Q have been rounded for presentation, and certain amounts may not sum due to rounding.~~

~~We use the terms, “EPM,” “Company,” “we,” “us” and “our” to refer to Evolution Petroleum Corporation and its wholly owned subsidiaries.~~

Estimates

Executive Overview

General

~~General~~

Evolution Petroleum Corporation is an oil and gas company focused on delivering a sustainable dividend yield to its stockholders through the ownership, management and development of ~~producing~~ oil and gas properties. The Company's long-term goal is to build a diversified portfolio of oil and gas assets primarily through ~~acquisition,~~acquisitions, while seeking opportunities to maintain and increase production through selective development, production enhancement and other exploitation efforts on its properties.

Our ~~largest active investment is~~producing assets consist of our ~~interest~~interests in the Delhi Holt-Bryant Unit in the Delhi field in Northeast Louisiana, a CO₂ enhanced oil recovery project, and a de minimis overriding royalty interest retained in ~~Louisiana's Delhi field.~~two onshore Texas wells.

By policy, every employee and director maintains a beneficial ownership position in our common stock. We believe this ownership helps ensure that the interests of our employees and directors are aligned with our stockholders.

In May 2018, our then President and Chief Executive Officer elected to retire as of May 31, 2018. Robert Herlin, our Chairman of the Board, founder and previous CEO, was elected by the board to the position of Executive Chairman and Interim CEO. A special Transition Services Committee of the board was created with one member, William Dozier, to provide additional operational oversight to the Company during the transition to a new CEO. The Nominating and Corporate Governance Committee is working with Mr. Herlin to identify candidates and the process is expected to be completed during the quarter ending June 30, 2019.

Highlights for our ~~Second~~First Quarter of Fiscal ~~2019~~2020 and Operations Update

"Current quarter" refers to the three months ended ~~December 31, 2018,~~September 30, 2019, the Company's ~~second~~first quarter of fiscal 2020.

"Prior quarter" refers to the three months ended June 30, 2019, the Company's fourth quarter of fiscal 2019.

"~~Prior~~Year-ago quarter" refers to the three months ended September 30, 2018, the Company's first quarter of fiscal 2019.

~~"Year-ago quarter" refers to the three months ended December 31, 2017, the Company's second quarter of fiscal 2018.~~

Highlights for the Quarter

We paid our ~~twenty-first~~twenty-fourth consecutive quarterly cash dividend on common shares, and declared our ~~twenty-second~~twenty-fifth quarterly dividend of $0.10 per share payable on ~~March 29,~~December 31, 2019.

~~Current~~We appointed Jason E. Brown as President and Chief Executive Officer, succeeding Robert S. Herlin who remains non-executive Chairman of the Board.

We ended the current quarter ~~net income was $3.9~~with $31.7 million ~~or $0.12 per diluted common share,~~of working capital and remain debt free.

Recorded revenues of $9.2 million for the current quarter, an 11.8% decrease from the prior quarter, and 25.6% lower than the year-ago quarter, primarily due to lower commodity pricing.

Production expenses were $3.1 million, a 13.3% decrease compared to prior quarter, and a 10.7% decrease from the year-ago quarter.

Reported net income of ~~$5.8~~$2.8 million, ~~or $0.17 per diluted common share,~~compared to $3.3 million in the prior quarter and ~~$9.9~~$5.8 million ~~or $0.30 per diluted common share,~~ in the year-ago ~~quarter that included a $6.0 million, or $0.18 per diluted share, non-recurring income tax benefit related to the Tax Cuts and Jobs Act.~~

We reported revenues of $11 million for the current quarter, a decrease of 10% from the prior quarter primarily due a 10% decline in realized oil price and a 40% decline in realized NGL price. The Louisiana Light Sweet ("LLS") oil price premium at Delhi increased to $5.03 per barrel resulting in a higher realized oil price premium over the NYMEX oil price.

~~Total production (BOE's) grew 2% compared to the prior~~ quarter.

~~General and administrative expenses were $1.3 million for the current quarter, a 4% decrease compared to the prior quarter and a 24% decrease from the year-ago quarter.~~

~~Working capital increased 12% to $30.8 million compared to year-ago quarter end and we remain debt free.~~

Delhi Field - Enhanced Oil Recovery Project

Our interests in the Delhi field consist of a 23.9% working interest (with associated 19.0% net revenue interest) and separate overriding royalty and mineral interests of 7.2%. This yields a total net revenue interest of 26.2%. The field is operated by Denbury Onshore LLC, a subsidiary of Denbury Resources, Inc. (the "operator").

Net production of oil and NGL averaged 1,910 BOEPD during the quarter which is a decrease of 7% compared to the 2,058 BOEPD during the prior quarter. Gross oil production at Delhi averaged ~~6,772~~approximately 6,200 BOPD during the quarter, a ~~2.8% increase~~3% decrease from the prior quarter. Gross NGL production for quarter was ~~983~~approximately 1,100 BOEPD, down ~~2.9%~~26% from the prior quarter. Oil production improved quarter over quarter as we saw production from six of the new infill wells as compared to five in the prior quarter. The Company anticipates the seventh infill well will be put on production early, and the remaining two infill wells to be put on production late, inwas impacted by seasonal high ambient temperatures during the quarter ending March 31, 2019. In addition, the operator added a third workover rig in the fiscal second quarter with positive results which also helped to improve production. Two of the infill injection wells commenced injectingcausing limited CO₂~~, contributing~~

recycle capacity. This resulted in limited capacity to ~~an overall increase~~produce high gas/oil ratio wells. Facility modifications resulting in ~~field injection volumes from~~NGL volume uplift in the ~~prior quarter. We expect~~spring were not sustained due to ~~see future improvement in offset wells as~~complications caused by the separation of rich gas to a ~~result of this work.~~dedicated facility. The operator ~~continues~~is reviewing solutions to ~~take steps~~return to ~~improve plant efficiency and minimize unplanned downtimes. We expect to see improved NGL~~the higher rates ~~this year as a result of this work.~~seen in the past quarters.

During the current quarter, we incurred ~~$1.3~~$0.6 million on capital projects ~~at Delhi, the majority~~consisting of ~~which, or $0.7~~$0.1 million ~~was spent completing the drilling~~for capital maintenance and $0.5 million primarily for remaining completion costs of a water injection well and a water source well ~~and completing the water facilities~~ in preparation for Phase V ~~expansion of the flood. Additionally, $0.3 million was expended on workovers and conformance projects, $0.2 million on NGL plant improvements and $0.1 million for the infill drilling program.~~

The current expectation for net capital spending for the remainder of the fiscal year ended June 30, 2019 is up to $1.0 million for the ongoing infrastructure projects in advance of Phase V, the next area of field development, and various conformance and workover projects. We believe that the operator will continue the development of the field through Phase V in our fiscal year 2020. The operator has not yet announced their capital budget for calendar year 2019.expansion.

In the current quarter, operating revenues were ~~$11.0~~$9.2 million, based on an average realized oil price of ~~$64.37~~$59.32 per barrel and an average realized NGL price of ~~$22.46~~$11.54 per BOE,~~and we generated $4.7~~ resulting in $3.3 million in income from operations. ~~The decline in~~Our realized oil price decreased 8.4% from the prior quarter and oil volumes declined 1.8%. Our NGL realized ~~prices~~price was 24.5% lower than the prior quarter's and volumes decreased 24.9%.

Our NGL price received for our royalty production is ~~directly related to~~burdened by a fixed capital recovery charge, which is mostly offset by our working interest share of such capital recovery that is reflected as a reduction in lease operating expense. The impact of this charge on our NGL royalty revenue is more significant at lower price levels.

Production costs in the ~~fall in oil prices~~Delhi field were $3.1 million in the current quarter, ~~together with~~down 13.3% from the ~~Delhi operator’s ongoing fixed,~~prior quarter, primarily due to a 24.3% decrease in purchased CO₂ volumes which averaged 69.7 million cubic feet (MMcf) per ~~barrel post production cost allocation~~day compared to the ~~field’s royalty and mineral interests which reduces our revenue from such interests. This earnings effect is partially offset by~~prior quarter's rate of 92.1 MMcf per day. Current quarter CO₂ purchase cost of $0.84 per mcf was 8% lower ~~lease operating expense for our Delhi working interest which shares in recovered post production costs. In~~than the ~~year-ago~~previous quarter, ~~operating revenues were $10.9 million and we had income from operations of $4.8 million, based on an average~~reflecting the lower current quarter realized oil price of $57.30 per barrel and an average realized NGL price of $28.45 per BOE. Net production volumes in the current quarter were 2,034 barrels of oil equivalent per day (“BOEPD”), up from the 1,992 BOEPD in the prior quarter and down from the year-ago quarter’s 2,215 BOEPD. to which CO₂ cost is linked.

Net income for the quarter was ~~$3.9~~$2.8 million, or ~~$0.12~~$0.08 per diluted share, compared to ~~$5.8~~$3.3 million, or ~~$0.17~~$0.10 per diluted share, in the previous ~~quarter and $9.9 million, or $0.30 per diluted share, in the year-ago~~ quarter.

Additional property and project information is included under Item 1. Business, Item 2. Properties, Notes to the Financial Statements and Exhibit 99.1 of our Form 10-K for the year ended June 30, ~~2018. Our interests in the Delhi field consist of a 23.9% working interest (with associated 19.0% net revenue interest) and separate overriding royalty and mineral~~2019.

~~interests~~

Results of ~~7.2%. This yields a total net revenue interest of 26.2%. The field is operated by Denbury Onshore LLC, a subsidiary of Denbury Resources, Inc. (the "operator").~~

~~Production costs in the Delhi field were $3.5 million in the current quarter, down less than 1% from the prior quarter despite a 10% increase in purchased CO~~₂ ~~volumes, largely offset by a decrease in CO~~₂ ~~cost per mcf. Purchased CO~~₂ ~~volumes increased 10% compared to the previous quarter and year-ago quarter to 76.3 million cubic feet (MMcf) per day due to completion of injection wells added in the 2018 infill drilling program. CO~~₂ ~~costs were 19% higher than the year-ago quarter due to a 12% higher oil price to which CO~~₂ ~~prices are linked and the increase in purchased CO~~₂ ~~volumes. For six months ended December 31, 2018, CO~~₂ costs increased due to a 21% increase in price per mcf, which reflected the higher realized oil price at Delhi, together with a 5% increase in purchased volumes. The increase in other production costs was primarily attributable to higher NGL plant costs, electricity and fuel costs, increased chemicals and labor, impacted in many cases by the increased number of workover projects and the additional infill wells.

Operations

Three Months Ended ~~December 31,~~September 30, 2019 and 2018 ~~and 2017~~

Revenues

Compared to the corresponding year-ago ~~quarter,~~period, current ~~quarter~~period revenues ~~increased slightly~~decreased 26% due to ~~10% higher~~22% lower realized commodity prices ~~partially offset by an 8%~~together with a 4.2% decrease in production volumes. The following table summarizes total production volumes, daily production volumes, average realized prices and ~~revenue~~revenues for the three months ended ~~December 31, 2018~~September 30, 2019 and ~~2017:~~2018:


	Three Months Ended December 31,									Three Months Ended September 30,
	2018		2017		Variance			Variance %		2019		2018		Variance			Variance %
Oil and gas production:
Oil and gas production
Crude oil revenues	$	10,515,875	$	10,185,635	$	330,240		3.2	%	$	8,845,504	$	11,397,452	$	(2,551,948	)	(22.4	)%
NGL revenues	532,243		740,585		(208,342		)	(28.1	)%	305,944		909,627		(603,683		)	(66.4	)%
Natural gas revenues										767		—		767			n.m.
Total revenues	$	11,048,118	$	10,926,220	$	121,898		1.1	%	$	9,152,215	$	12,307,079	$	(3,154,864	)	(25.6	)%

Crude oil volumes (Bbl)	163,361		177,767		(14,406		)	(8.1	)%	149,107		158,906		(9,799		)	(6.2	)%
NGL volumes (Bbl)	23,701		26,033		(2,332		)	(9.0	)%	26,516		24,401		2,115			8.7	%
Natural gas volumes (Mcf)										356		—		356			n.m.
Equivalent volumes (BOE)	187,062		203,800		(16,738		)	(8.2	)%	175,682		183,307		(7,625		)	(4.2	)%

Crude oil (BOPD, net)	1,776		1,932		(156		)	(8.1	)%	1,621		1,727		(106		)	(6.1	)%
NGLs (BOEPD, net)	258		283		(25		)	(8.8	)%	288		265		23			8.7	%
Natural gas (BOEPD, net)										1		—		1			n.m.
Equivalent volumes (BOEPD, net)	2,034		2,215		(181		)	(8.2	)%	1,910		1,992		(82		)	(4.1	)%

Crude oil price per Bbl	$	64.37	$	57.30	$	7.07		12.3	%	$	59.32	$	71.72	$	(12.40	)	(17.3	)%
NGL price per Bbl	22.46		28.45		(5.99		)	(21.1	)%	11.54		37.28		(25.74		)	(69.0	)%
Natural gas price per Mcf										2.15		—		2.15			n.m.
Equivalent price per BOE	$	59.06	$	53.61	$	5.45		10.2	%	$	52.10	$	67.14	$	(15.04	)	(22.4	)%

n. m. Not meaningful.

Production Costs

The ~~$0.7~~$0.4 million ~~increase~~decrease in production costs was due to a ~~29% increase~~9% decrease in other production costs together with a ~~19% increase~~13% decrease in CO₂ costs. The ~~$0.4~~$0.2 million ~~increase~~decrease in other production costs ~~consisted~~was primarily ~~of $0.2 million of higher~~due to lower chemical and fuel gas ~~expense, increased electricity expense of $0.1million and workover expense of $0.1 million.~~expenses.


	Three Months Ended December 31,								Three Months Ended September 30,
	2018		2017		Variance		Variance %		2019		2018		Variance			Variance %
CO₂ costs (a)	$	1,504,930	$	1,265,582	$	239,348	18.9	%	$	1,284,767	$	1,483,852	$	(199,085	)	(13.4	)%
Other production costs	1,947,238		1,508,239		438,999		29.1	%	1,805,322		1,974,578		(169,256		)	(8.6	)%
Total production costs	$	3,452,168	$	2,773,821	$	678,347	24.5	%	$	3,090,089	$	3,458,430	$	(368,341	)	(10.7	)%

CO₂ costs per BOE	$	8.05	$	6.21	$	1.84	29.6	%	$	7.31	$	8.09	$	(0.78	)	(9.6	)%
All other production costs per BOE	10.40		7.40		3.00		40.5	%	10.28		10.78		(0.50		)	(4.6	)%
Production costs per BOE	$	18.45	$	13.61	$	4.84	35.6	%	$	17.59	$	18.87	$	(1.28	)	(6.8	)%

(a) Under our contract with the operator, purchased CO₂ is priced at 1% of the realized oil price in the field per Mcf, plus sales taxes of approximately 8.5% and transportation costs of $0.20 per Mcf. Transportation costs will decline effective January 1, 2020 as per contract terms.

The $0.2 million ~~increase in CO~~₂ ~~costs was due to an increase in purchased volumes together with an increase in unit purchase cost reflecting a higher realized oil price.~~

Three Months Ended December 31,
2018 2017 Variance Variance %
CO₂ costs per mcf
$ 0.90
$ 0.83
$ 0.07
8.4 %
CO₂ volumes (MMcf per day, gross)
76.3
69.7
6.6
9.5 %

~~Calculated solely on our Delhi working interest volumes, production costs were $25.42 per BOE, of which $11.08 per BOE was CO~~₂ costs. These costs per equivalent barrel exclude production volumes from our royalty interests in the Delhi field, which bear almost no production costs, and are therefore higher than the rates per barrel on our total production volumes.

~~Depletion, Depreciation and Amortization ("DD&A")~~

~~For the current quarter DD&A was virtually flat compared to the year-ago period as the oil and gas DD&A rate increase of 5% was offset by a 8%~~ decrease in ~~production volumes.~~

Three Months Ended December 31,
2018 2017 Variance Variance %
DD&A of proved oil and gas properties $ 1,571,321
$ 1,626,324
$ (55,003 ) (3.4 )%
Depreciation of other property and equipment 4,143
4,153
(10 ) —
Amortization of intangibles 3,391
3,391
—
— %
Accretion of asset retirement obligations 24,778
23,023
1,755
7.6 %
Total DD&A $ 1,603,633
$ 1,656,891
$ (53,258 ) (3.2 )%

Oil and gas DD&A rate per BOE $ 8.40
$ 7.98
$ 0.42
5.3 %

~~General and Administrative Expenses~~

Expenses for the current quarter decreased $0.4 million, or 24%, to $1.3 million from the year-ago quarter due to lower expenses of $0.3 million for incentive bonuses and stock compensation, $0.1 million for litigation expense and $0.1 million of acquisition due diligence costs, partially offset by $0.1 million of higher current quarter board compensation expenses.

~~Other Income and Expenses~~

~~Other income and expense (net) increased due higher interest income partially offset by increased interest expense.~~

Three Months Ended December 31,
2018 2017 Variance Variance %
Interest and other income $ 59,858
$ 15,841
$ 44,017
277.9 %
Interest expense (29,345 ) (20,456 ) (8,889 ) 43.5 %
Total other income, net $ 30,513
$ (4,615 ) $ 35,128
n.m.

~~n. m. Not meaningful.~~

~~Net Income~~

Although income before income taxes for the three months ended December 31, 2018 was essentially flat compared to the year-ago quarter, net income available to common stockholders decreased $6.0 million, or 60%, compared to the year-ago quarter which included a non-recurring $6.0 million deferred tax credit. This income tax benefit resulted from the revaluation of our deferred income tax liabilities at December 31, 2017 to reflect a lower federal statutory rate under the Tax Cut and Jobs Act. Excluding this tax benefit, income taxes as a percentage of income before income taxes would have been approximately 21% for the year-ago quarter.

Three Months Ended December 31,
2018 2017 Variance Variance %
Income before income taxes $ 4,764,260
$ 4,824,637
$ (60,377 ) (1 )%
Income tax provision (benefit) 859,695
(5,052,211 ) 5,911,906
(117 )%
Net income available to common stockholders $ 3,904,565
$ 9,876,848
$ (5,972,283 ) (60 )%
Income tax provision (benefit) as a percentage of income before income taxes 18 % (105 )%

~~Six Months Ended December 31, 2018 and 2017~~

~~Revenues~~

Compared to the corresponding year-ago period, current period revenues increased 21% due to 29% higher realized commodity prices partially offset by a 6% decrease in production volumes. The following table summarizes total ~~production volumes, daily production volumes, average realized prices and revenue for the six months ended December 31, 2018 and 2017:~~

Six Months Ended December 31,
2018 2017 Variance Variance %
Oil and gas production:
  Crude oil revenues $ 21,913,327
$ 18,014,890
$ 3,898,437
21.6 %
  NGL revenues 1,441,870
1,313,297
128,573
9.8 %
  Total revenues $ 23,355,197
$ 19,328,187
$ 4,027,010
20.8 %

  Crude oil volumes (Bbl) 322,267
344,504
(22,237 ) (6.5 )%
  NGL volumes (Bbl) 48,102
51,279
(3,177 ) (6.2 )%
Equivalent volumes (BOE) 370,369
395,783
(25,414 ) (6.4 )%

  Crude oil (BOPD, net) 1,751
1,872
(121 ) (6.5 )%
  NGLs (BOEPD, net) 261
279
(18 ) (6.5 )%
Equivalent volumes (BOEPD, net) 2,012
2,151
(139 ) (6.5 )%

  Crude oil price per Bbl $ 68.00
$ 52.29
$ 15.71
30.0 %
  NGL price per Bbl 29.98
25.61
4.37
17.1 %
   Equivalent price per BOE $ 63.06
$ 48.84
$ 14.22
29.1 %

~~Production Costs~~

~~The $1.4 million increase in production costs was due to a 23% increase in other production costs together with a 27% increase in CO~~₂ costs. The $0.7 million increase in other production costs consisted primarily of $0.2 million of higher NGL plant expense, $0.1 million of fuel gas expense, increased electricity expense of $0.1 million, of $0.1 million of higher labor, $0.1 million for chemicals and increased workover expense of $0.1 million.

Six Months Ended December 31,
2018 2017 Variance Variance %
CO₂ costs (a)
$ 2,988,782
$ 2,353,843
$ 634,939
27.0 %
Other production costs 3,921,816
3,175,660
746,156
23.5 %
Total production costs $ 6,910,598
$ 5,529,503
$ 1,381,095
25.0 %

CO₂ costs per BOE
$ 8.07
$ 5.95
$ 2.12
35.6 %
All other production costs per BOE 10.59
8.02
2.57
32.0 %
Production costs per BOE $ 18.66
$ 13.97
$ 4.69
33.6 %

~~(a) Under our contract with the operator, purchased CO~~₂ ~~is priced at 1% of the realized oil price in the field per Mcf, plus sales taxes of approximately 8.5% and transportation costs of $0.20 per Mcf.~~

~~The $0.6 million increase in~~ CO₂costs was virtually all due to a ~~5% increase in purchased volumes together with a 21% increase in~~lower purchase price per mcf which decreased 13% from the year-ago quarter reflecting ~~higher~~the lower realized oil ~~price.~~price, while purchased CO2 volumes were flat.

Six Months Ended December 31,
2018 2017 Variance Variance %
CO₂ costs per mcf
$ 0.93
$ 0.77
$ 0.16
20.8 %
CO₂ volumes (MMcf per day, gross)
72.9
69.5
3.4
4.9 %

~~Calculated solely on our Delhi working interest volumes, production costs were $25.70 per BOE, of which $11.11 per BOE was CO~~₂ costs. These costs per equivalent barrel exclude production volumes from our royalty interests in the Delhi field, which bear almost no production costs, and are therefore higher than the rates per barrel on our total production volumes.



	Three Months Ended September 30,
	2019		2018		Variance			Variance %
CO₂ costs per mcf	$	0.84	$	0.97	$	(0.13	)	(13.4	)%
CO₂ volumes (MMcf per day, gross)	69.7		69.6		0.1			0.1	%

Depletion, Depreciation and Amortization ("DD&A")

DD&A expense was ~~virtually flat~~(6.4)% lower compared to the same year-ago period ~~as the oil and gas~~due to a (2.4)% decline in DD&A rate ~~increase of 5% was offset by~~along with a 6%4.2% decrease in production ~~volumes.~~volumes in the period.


	Six Months Ended December 31,									Three Months Ended September 30,
	2018		2017		Variance			Variance %		2019		2018		Variance			Variance %
DD&A of proved oil and gas properties	$	3,088,063	$	3,137,205	$	(49,142	)	(1.6	)%	$	1,417,754	$	1,516,742	$	(98,988	)	(6.5	)%
Depreciation of other property and equipment	8,286		8,424		(138		)	(1.6	)%	2,322		4,143		(1,821		)	(44.0	)%
Amortization of intangibles	6,782		6,782		—			—	%	3,391		3,391		—			—	%
Accretion of asset retirement obligations	48,962		44,602		4,360			9.8	%	26,287		24,184		2,103			8.7	%
Total DD&A	$	3,152,093	$	3,197,013	$	(44,920	)	(1.4	)%	$	1,449,754	$	1,548,460	$	(98,706	)	(6.4	)%

Oil and gas DD&A rate per BOE	$	8.34	$	7.93	$	0.41		5.2	%	$	8.07	$	8.27	$	(0.20	)	(2.4	)%

General and Administrative Expenses

Expenses for the ~~six~~three months ended ~~December 31, 2018 decreased $0.7 million, or 21%~~September 30, 2019 increased slightly by 2.5%, to ~~$2.6~~$1.3 million from the same year-ago ~~period~~quarter, primarily due to ~~lower~~higher non-cash stock ~~and incentive~~based compensation ~~of $0.6 million, a $0.1 million decrease~~expenses in ~~litigation and $0.2 million of lower severance benefits and other G&A expense, partially~~the current period, offset by ~~$0.2 million of higher board compensation expenses during the six months ended December 31, 2018.~~normal variations in professional services expenses.

Other Income and Expenses

Other income and expense (net) ~~increased~~decreased due primarily to the Enduro breakup fee received during August 2018.


	Six Months Ended December 31,											Three Months Ended September 30,
	2018			2017			Variance			Variance %		2019			2018			Variance			Variance %
Enduro transaction breakup fee	1,100,000			—			1,100,000			n.m.		—			1,100,000			(1,100,000		)	(100.0	)%
Interest and other income	106,429			30,691			75,738			246.8	%	66,129			46,571			19,558			42.0	%
Interest expense	(58,690		)	(40,911		)	(17,779		)	43.5	%	(29,345		)	(29,345		)	—			—	%
Total other income, net	$	1,147,739		$	(10,220	)	$	1,157,959		n.m.		$	36,784		$	1,117,226		$	(1,080,442	)	(96.7	)%

~~n. m. Not meaningful.~~

Net Income

Net income available to common stockholders for the ~~six~~three months ended ~~December 31, 2018~~September 30, 2019 decreased ~~$2.3~~$3.0 million, or ~~19%~~52%, to ~~$9.7~~$2.8 million compared to the same year-ago ~~period~~quarter primarily due to ~~a non-recurring prior year deferred tax credit of $6.0 million, partially offset by a $4.5 million, or 61%, increase~~the aforementioned operating variances and the one-time breakup fee collected in ~~income before income taxes. This income tax benefit resulted from~~ the ~~revaluation of our deferred income tax liabilities at December 31, 2017 to reflect the lower federal statutory~~year-ago quarter.



	Three Months Ended September 30,
	2019			2018			Variance			Variance %
Income before income taxes	3,310,803			7,112,153			(3,801,350		)	(53.4	)%
Income tax provision	517,983			1,316,352			(798,369		)	(60.7	)%
Net income available to common stockholders	$	2,792,820		$	5,795,801		$	(3,002,981	)	(51.8	)%
Income tax provision as a percentage of income before income taxes	16		%	19		%

~~rate under the Tax Cut and Jobs Act.~~

Six Months Ended December 31,
2018 2017 Variance Variance %
Income before income taxes 11,876,413
7,355,491
4,520,922
61.5 %
Income tax provision (benefit) 2,176,047
(4,661,889 ) 6,837,936
(146.7 )%
Net income available to common stockholders $ 9,700,366
$ 12,017,380
$ (2,317,014 ) (19.3 )%
Income tax provision as a percentage of income before income taxes 18 % (63 )%

Excluding the effect of the $6.0 million tax benefit from income taxes for the six months ended December 31, 2017, income tax as a percentage of income before income taxes would have been approximately 19%. For the six months ended December 31, 2018 and 2017, our respective statutory federal tax rates were 21% and 27.55%, as we used a blended rate during our fiscal 2018 in which the Tax Cut and Jobs Act was enacted. The benefit of the lower statutory rate was partially offset by a decreased benefit from depletion in excess of basis as much of our depletion carryover had been utilized by June 30, 2018.

Liquidity and Capital Resources

We had ~~$30.0~~$31.4 million in cash and cash equivalents ~~(and no restricted cash)~~ at ~~December 31, 2018~~September 30, 2019 and ~~$27.7~~$31.5 million of cash and cash equivalents ~~and restricted cash~~ at June 30, ~~2018.~~2019.

In addition, we have a senior secured reserve-based credit facility (the "Facility") with a maximum capacity of $50 million. The Facility had $40 million of undrawn borrowing base availability on ~~December 31, 2018.~~September 30, 2019. Under the Facility the borrowing base shall be determined semiannually as of May 15 and November 15. There have been no borrowings under the Facility, which matures on April 11, 2021, and it is secured by substantially all of the Company’s assets.

InDuring the current quarter, ~~we amended~~ the ~~credit agreement to broaden the definition for Use~~bank performed its periodic redetermination of ~~Proceeds to provide funds, limited to an amount not in excess of 25% of the~~ borrowing base ~~for investments into cash flow generating assets complimentary to the production~~and confirmed our elected amount of ~~oil and gas.~~$40 million. Our next scheduled determination will occur next spring.

Any future borrowings bear interest, at the Company's option, at either LIBOR plus 2.75% or the Prime Rate, as defined under the Facility, plus 1.0%. The Facility contains covenants that require the maintenance of (i) a total leverage ratio of not more than 3.0 to 1.0, (ii) a debt service coverage ratio of not less than 1.1 to 1.0 and (iii) a consolidated tangible net worth of not less than $50.0 million, each as defined in the Facility. The Facility also contains other customary affirmative and negative covenants and events of default. As of ~~December 31, 2018,~~September 30, 2019, the Company was in compliance with all covenants contained in the Facility.

During the ~~six~~three months ended ~~December 31, 2018,~~September 30, 2019, we funded our operations, capital expenditures and cash dividends with cash generated from operations resulting in ~~an increase~~a decrease of ~~$2.3~~$0.1 million in ~~cash.~~cash, impacted by $1.3 million spent on repurchasing shares under the buyback program. As of ~~December 31, 2018,~~September 30, 2019, our working capital was ~~$30.8~~$31.7 million, ~~an increase~~a decrease of ~~$3.1~~$0.8 million over working capital of ~~$27.7~~$32.4 million at June 30, ~~2018.~~2019.

We have historically funded our operations through cash from operations and working capital. Our primary source of cash is the sale of oil and natural gas liquids production. A portion of these cash flows are used to fund our capital expenditures. While we expect to continue to expend capital to further develop the Delhi field, we and the operator have flexibility as to when this capital is spent. The Company expects to manage future development activities in the Delhi field within the boundaries of its operating cash flow and existing working capital.

We ~~may choose to pursue~~are pursuing new growth opportunities through acquisitions or other transactions. In addition to our cash on hand, we have access to at least $40 million of undrawn elected borrowing base availability under our senior secured credit facility. In addition we have an effective shelf registration statement with Securities and Exchange Commission under which we may issue up to $500 million of new debt or equity securities. IfAs we ~~choose to~~ pursue new growth opportunities, we would expect to use our internal resources of cash, working capital and borrowing capacity under our credit facility. It may also be advantageous for us to consider issuing additional equity as part of any potential transaction, but we have no specific plans to issue additional equity at this time.

~~Our other significant use~~On November 1, 2019, and effective as of October 1, 2019, our wholly-owned subsidiary, Evolution Petroleum West, Inc., a Delaware corporation, purchased a 23.51% non-operating working interest and a 19.70% revenue interest in the Hamilton Dome field located in Hot Springs County, Wyoming, from entities owned or controlled by Merit Energy Company ("Merit") of Dallas, Texas. The consideration to Merit consisted of $9.5 million in cash and our assumption of asset retirement obligations. Merit will continue to operate the field and Merit retains the majority ownership of the balance of the working interest.

The field was discovered in 1918 and has been on production for 100 years producing over 160 million barrels of oil. We acquired approximately 450 barrels of expected net oil production per day, which should add approximately 23% to our daily production, and represent a 30% increase to our proved reserves. We expect operating expense per barrel to be somewhat higher than Delhi and the realized oil price lower; however we believe that improving pipeline capacity to the region within the next several years will result in a stronger market. As reserves are virtually all proved developed producing, capital expenditures are expected to be nominal. This asset is expected to contribute to our overall profitability and further support our dividend moving forward.

In addition to our on-going cash dividend ~~program.~~program, during September 30, 2019, the Company repurchased $1.3 million of common shares under the stock buyback program approved in May 2015. The Board of Directors instituted a cash dividend on our common stock in December 2013 and we have since paid ~~twenty-one~~twenty-four consecutive quarterly dividends. Distribution of a substantial portion of free cash flow in excess of our operating and capital requirements through cash dividends and potential repurchases of our common stock remains a priority of our financial strategy, and it is our long term goal to increase our dividends over time as appropriate. On ~~February 5,~~November 4 , 2019, the Board declared the next quarterly common stock dividend of $0.10 per share, which will be paid on ~~March 29,~~December 31, 2019 to stockholders of record on ~~March 15,~~December 16, 2019. The Board reviews ~~the~~

the quarterly dividend rate in light of our financial position and operations, forecasted results, including the outlook for oil and NGL prices, the timing of further expansion of Delhi development and other potential growth opportunities.

Capital Budget - Delhi Field

During the ~~six months ended December 31, 2018,~~current quarter, we incurred ~~$4.0~~$0.6 million on capital projects consisting of $0.1 million for capital ~~expenditures at Delhi. Our~~maintenance and $0.5 million for remaining completion costs of a water injection well and a water source well in preparation for Phase V expansion.

The current ~~expectations~~expectation for net capital spending for the remainder of fiscal 2020 is approximately $3.0 million, which includes $0.4 million for the NGL plant filter/separator project, $0.7 million for conformance and capital maintenance, and $1.9 million for Phase V development expected later in the fiscal ~~year ended June 30, 2019 is up to to $1.0~~year. We believe that the operator will continue this development and have also budgeted $3.0 million for ~~continuation of~~ Phase V infrastructure projects and various conformance and workover projects, which represent carryover projects approved from 2018. The operator has not yet announced their capital budget plans for 2019, however wecompletion in fiscal 2021. We anticipate funding for our share of capital expenditure at Delhi to be met from cash flows from operations.

Our proved undeveloped reserves at June 30, ~~2018~~2019 included ~~537~~1,583 MBOE of reserves and ~~$1.9 million of future development costs associated with the infill drilling program and 1,546 MBOE of reserves and $10.9~~$8.6 million of future development costs associated with Phase V development in the eastern portion of the field. The timing of Phase V development is dependent in part on the results and CO₂ requirements of the infill drilling program. The timing of such development is also dependent, in part, on the field operator's available funds and capital spending plans and priorities within its portfolio of properties. At present, we expect to begin this development in our fiscal year 2020.

Funding for our anticipated capital expenditures at Delhi for our fiscal 2020 is expected to be met from cash flows from operations and current working capital.

Overview of Cash Flow Activities

The table below compares a summary of our condensed consolidated statements of cash flows for ~~six~~three months ended ~~December 31,~~September 30, 2019 and 2018 ~~and 2017~~ presented ~~on page 4~~in the consolidated condensed financial statements in Item 1, Part I of this report on Form 10-Q.


	Six Months Ended December 31,									Three Months Ended September 30,
Increases (Decreases) in Cash:	2018			2017			Difference			2019			2018			Difference
	(In Millions)									(In Millions)
Net cash provided by operating activities	$	14.1		$	9.1		$	5.0		$	5.0		$	7.7		$	(2.6	)
Net cash used in investing activities	(5.0		)	(1.0		)	(4.0		)	(0.5		)	(3.1		)	2.6
Net cash used in financing activities	(6.8		)	(5.4		)	(1.4		)	(4.7		)	(3.4		)	(1.3		)
	$	2.3		$	2.7		$	(0.4	)	$	(0.1	)	$	1.2		$	(1.3	)

Cash provided by operating activities in the current year period ~~was $5.0~~decreased $2.6 million ~~more than~~compared to the same year-ago period due to a ~~$5.1~~$3.0 million ~~increase~~decrease in cash provided by net income together with $0.3 million decrease in cash provided by non-cash expenses, ~~and a $2.2~~partially offset by $0.7 million increase in cash provided from current operating assets and liabilities partially offset by $2.3 million of lower current period net income. The year-ago period non-cash items used, rather than provided cash, because of a one-time $6.0 million deferred income tax credit related to enactment of the Tax Cut and Jobs Act.by.

Cash used in investing activities ~~increased $4.0~~decreased $2.6 million ~~primarily~~ due to ~~higher~~lower capital expenditure disbursements in the ~~2019 period.~~fiscal 2020 period while completion of the infill project was underway.

Cash used by financing activities increased ~~$1.4~~$1.3 million due to ~~$1.7 million~~common stock repurchases in the first quarter of ~~increased cash dividends, reflecting~~fiscal 2020 through an ~~higher quarterly dividend rate~~authorized stock buyback program.

Critical Accounting Policies and Estimates

See our Critical Accounting Policies and Estimates as disclosed within Item 7. Management's Discussion and Analysis of ~~$0.10 per share~~Financial Condition and Results of Operations in the 2019 ~~period compared to $0.075 per share during the first half of fiscal 2018, partially offset by $0.3 million of lower common share repurchases in connection with stock-based awards vestings.~~

~~Recently Adopted and Recently Issued Accounting Pronouncements~~

~~See “Note 2 – Summary of Significant Accounting Policies” for discussion of the pronouncements we~~Form 10-K. For recently adopted ~~as well as the~~and recently issued accounting pronouncements from the Financial Accounting Standards ~~Board.~~

~~Other Economic Factors~~

~~Inflation~~. Although the general inflation rate in the United States, as measured by the Consumer Price Index and the Producer Price Index, has been relatively low in recent years, the oil and gas industry has experienced unusually volatile price movements in commodity prices, vendor goods and oilfield services. Prices for drilling and oilfield services, oilfield equipment, tubulars, labor, expertise and other services impact our lease operating expenses and our capital expenditures. During fiscal 2019 to date, we have seen a firmingBoard, please see Note 2 – Summary of prices for operating and capital costs as a result of improving demand and a closer balance with the supply of goods and services in the industry. Product prices, operating costs and development costs may not always move in tandem.

~~Known Trends and Uncertainties~~. General worldwide economic conditions, as well as economic conditions for the oil and gas industry specifically, continue to be uncertain and volatile. Concerns over uncertain future economic growth are affecting numerous industries and companies, as well as consumers, which impact demand for crude oil and natural gas. If the supply of crude oil and natural gas exceeds demand in the future, it may put downward pressure on crude oil and natural gas prices, thereby lowering our revenues, profits, cash flow and working capital going forward.

~~Seasonality~~. Our business is generally not directly seasonal, except for instances when weather conditions may adversely affect access to our properties or delivery of our petroleum products. Although we do not generally modify our production for changes in market demand, we do occasionally experience seasonality in the product prices we receive, driven by summer cooling and driving, winter heating, and extremes in seasonal weather, including hurricanes. We have also experienced adverse impacts on our production from very high summer temperatures and extremely cold winter weather.

~~Off Balance Sheet Arrangements~~

~~The Company had no off-balance sheet arrangements to report for the quarter ended December 31, 2018.~~Significant Accounting Policies herein.

~~ITEM~~Item 3. ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS~~Quantitative and Qualitative Disclosures About Market Risks

Information about market risks for the three months ended ~~December 31, 2018,~~September 30, 2019, did not change materially from the disclosures in Item 7A of our Annual Report on Form 10-K for the year ended June 30, ~~2018.~~2019.

Commodity Price Risk

Our most significant market risk is the pricing for crude oil and NGL's. We expect energy prices to remain volatile and unpredictable. If energy prices decline significantly, our revenues and cash flow would significantly decline. In addition, a non-cash write-down of our oil and gas properties could be required under full cost accounting rules if future oil and gas commodity prices sustained a significant decline. Prices also affect the amount of cash flow available for capital expenditures and our ability to borrow and raise additional capital, as, if and when needed. We may use derivative instruments to manage our exposure to commodity price risk from time to time based on our assessment of such risk.

Interest Rate Risk

We currently have only a small exposure to changes in interest rates. Changes in interest rates affect the interest earned on our cash and cash equivalents. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes.

~~ITEM~~Item 4. ~~CONTROLS AND PROCEDURES~~Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to this Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

As required by Securities and Exchange Commission Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of the Company’s management, including our ~~Interim~~ Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-15(e)) as of the end of the quarter covered by this report. In designing and evaluating our disclosure controls and procedures, our management recognizes that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving desired control objectives. Based on the foregoing, our ~~Interim~~ Chief Executive Officer and Chief Financial Officer concluded that as of ~~December 31, 2018~~September 30, 2019 our disclosure controls and procedures are effective in ensuring that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

Under the supervision and with the participation of the Company’s management, including its ~~Interim~~ Chief Executive Officer and Chief Financial Officer, during the quarter ended ~~December 31, 2018,~~September 30, 2019, we have determined there has been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

~~ITEM~~Item 1. ~~LEGAL PROCEEDINGS~~Legal Proceedings

None.

~~ITEM~~Item 1A. ~~RISK FACTORS~~Risk Factors

Our Annual Report on Form 10-K for the year ended June 30, ~~2018~~2019 includes a detailed description of our risk factors. There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended June 30, ~~2018.~~2019.

~~ITEM~~Item 2. ~~UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS~~Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

During the quarter ended ~~December 31, 2018,~~September 30, 2019, the Company purchased shares of common stock in the open market under its share repurchase program announced in May 2015 and also received shares of common stock from employees of the Company to pay their share of payroll taxes arising from vestings of restricted stock and contingent restricted stock. ~~During this quarter, the Company did not purchase any common stock in the open market under the previously announced share repurchase program.~~ The table below summarizes information about the Company's purchases of its equity securities during the quarter ended ~~December 31, 2018.~~September 30, 2019.

Period
(a) Total Number of
Shares
Purchased (1)

(b) Average Price
Paid per Share(1)

(c) Total Number of Shares Purchased as Part
of Publicly Announced Plans or Programs (2)

(d) Maximum
Dollar Value
of Shares that
May Yet Be Purchased
Under the Plans or
Programs (2)
October 2018 — $— Not applicable $3.4 million
November 2018 — $— Not applicable $3.4 million
December 2018 6,402 $7.60 Not applicable $3.4 million
Total 6,402 $7.60 Not applicable $3.4 million



Period	(a) Total Number of Shares Purchased (1)	(b) Average Price Paid per Share(1)	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	(d) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
July 2019	—	$—	Not applicable	$3.4 million
August 2019	167,805	$5.94	Not applicable	$2.4 million
September 2019	63,571	$5.76	Not applicable	$2.1 million
Total	231,376	$5.89	Not applicable	$2.1 million

(1)During the current quarter the Company received 8,939 shares of common stock from certain of its employees which were surrendered in exchange for their payroll tax liabilities arising from vestings of restricted stock and contingent restricted stock. The acquisition cost per share reflects the weighted-average market price of the Company's shares on the dates vested.

(2)On May 12, 2015, the Board of Directors approved a share repurchase program covering up to $5 million of the Company's common stock. Under the program's terms, shares may be repurchased only on the open market and in accordance with the requirements of the Securities and Exchange Commission. The timing and amount of repurchases will depend upon several factors, including financial resources and market and business conditions. There is no fixed termination date for this repurchase program, and the repurchase program may be suspended or discontinued at any time. Such shares are initially recorded as treasury stock, then subsequently canceled.

~~ITEM~~Item 3. ~~DEFAULTS UPON SENIOR SECURITIES~~Defaults Upon Senior Securities

Not applicable.

~~ITEM~~Item 4. ~~MINE SAFETY DISCLOSURES~~Mine Safety Disclosures

Not applicable.

~~ITEM~~Item 5. ~~OTHER INFORMATION~~Other Information

None.

~~ITEM~~Item 6. ~~EXHIBITS~~Exhibits

A. Exhibits



~~10.1~~			~~Fourth Amendment to Credit Agreement dated April 11, 2016, between Evolution Petroleum Corporation and Midfirst Bank effective December 31, 2018 (filed herewith)~~
31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.
32.1			Certification of Chief Executive Officer pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			C~~ertification~~Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance Document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EVOLUTION PETROLEUM CORPORATION

(Registrant)



	By:	/s/ DAVID JOE
		David Joe
		Senior Vice President, Chief Financial Officer and
		Treasurer
Date: ~~February~~November 8, 2019

2628



	Number of Restricted Shares		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at December 31, 2018		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2018	199,477		$	6.83
Service-based shares granted	66,992		9.17
Market-based shares granted	43,990		8.24
Vested	(124,892	)	6.57
Unvested Restricted Stock at December 31, 2018	185,567		$	8.18	$	1,260,881	2.02

Outstanding Potentially Dilutive Securities

Weighted
Average
Exercise Price

At ~~December 31, 2018~~September 30, 2019

Contingent Restricted Stock grants

~~10,156~~200,000