Evolution Petroleum Corporation (EPM) Discussion Materials Tuesday, April 1, 2014 1 Marnie Georges Qianyi (Cathy) Han Jason Mudrock.

1

Evolution Petroleum Corporation (EPM)Discussion Materials

Tuesday, April 1, 2014

Marnie GeorgesQianyi (Cathy) HanJason Mudrock

2

Table of Contents

Section 1 Executive Summary 3

Section 2 Industry Overview 4

Section 3 Company Overview and Positioning 8

Section 4 Valuation Analysis 13

Section 5 Questions 21

3

Executive Summary

The Oil Drilling and Gas Extraction industry will benefit from strong global demand and rising prices despite high exploration risks

Evolution Petroleum Corporation (EPM) possesses a solid asset base with a unique strategy and innovations to pose a competitive advantage

We value the company at about $9.19 per share

We recommend placing Evolution Petroleum Corporation on the Watch List so future analysts can evaluate its changing risks and growth strategies

MARVEL GROUP

4

Industry Overview

Section 1

MARVEL GROUP

5

Industry Overview

Oil and gas extraction is a mature, stable market in the United States

Trends include rising global demand from emerging economies, increased crude oil output from offshore drilling, increased natural gas production from new fields, and pressures from regulations and alternative energy growth

New technologies have allowed increased exploration of previously unattainable resources

Price volatility and high capital costs continue to threaten smaller industry players

Industry Trends

The oil and gas extraction industry benefits from rising oil and gas prices and strong global demand

Sources: 1. Deutsche Bank Markets Research. “Oil & Gas for Beginners.” 25 January 2013.2. Credit Suisse. Oil & Gas Primer. September 2011. 3. IBISWorld Industry Reports.

Oil Demand Correlation with Real GDP Growth (1969 – 2008)

Industry Composition

The oil and gas drilling and extraction industry is worth $319.5 billion in the United States

Crude oil makes up 58.4% of the market while natural gas represents 41.6%

The United States sends 59% of its oil and gas exports to Canada and 19% to Mexico

Texas, Oklahoma, and Louisiana contain the largest amount of industry output and revenue in the continental United States

59.3%18.6%

11.1%

9.3%

1.0% 0.7%Petroleum refining industry

Natural gas distribution industry

Utilities

Industrial users

Oil exports

Gas exports

MARVEL GROUP

U.S. Oil & Gas Drilling and Extraction Market Segmentation

6

Industry Overview

Competitive Landscape

Low concentration due to high geographic dispersion Top four competitors account for 28% of industry

revenue Economies of scale resulting from large oil and gas

deposits help competitors spread high capital costs Largest players practice downstream vertical integration

to guarantee buyers Stringent regulations threaten large and small

competitors and increase capital requirements

Dominant Players in Oil & Gas Drilling and Extraction

Sources: 1. Deutsche Bank Markets Research. “Oil & Gas for Beginners.” 25 January

2013.2. EIA 2014 Report.3. IBISWorld Industry Reports.

8.2%

7.7%

6.1%

5.8%

72.2%

ConocoPhillipsChevron CorporationRoyal Dutch Shell PLCBP PLCOther

U.S. Production of Crude Oil

The oil and gas drilling and extraction industry features regional dispersion and high revenue volatility

MARVEL GROUP

Price Determinants

Prices remain volatile due to changes in supply and demand Global economic recovery increases transportation and

industrial energy demands Different grades of oil (heavy, light) typically attract different

prices with lighter oils earning a premium since they are easier to refine

Impurities also affect the price of oil with sweet oils, or those with a low sulfur content, commanding a premium

High barriers to entry result from security and regulation, capital investments, and the high risks associated with exploration

7

Porter’s Five Forces

Sources: 1. Deutsche Bank Markets Research. “Oil & Gas for Beginners.” 25 January

2013.2. EIA 2014 Report.3. IBISWorld Industry Reports.

The oil and gas drilling and extraction industry is attractive with the potential for long-term profitability

MARVEL GROUP

Bargaining Power of Buyers

• Few available substitutes

• Price volatility can deter buyers

Bargaining Power of Suppliers

• Low concentration of industry players

• Critical commodity product

Entry of New Competitors

• Economies of scale

• High capital requirements

• Stringent regulations

• High risk and volatility

Rivalry Among Existing

Competitors

• Limited oil fields and gas reserves

• Smaller firms may share buyers

• Larger firms vertically integrate

Threat of Substitutes

• Low use of alternative energies

• Oil and gas serve separate markets

LOW MEDIUM LOW HIGH LOW

8

Company Overview

Section 2

MARVEL GROUP

9

Evolution Petroleum Company (EPM) — Company Overview

Firm Overview

EPM is a petroleum company engaged primarily in acquisition, exploitation and development of properties for the production of crude oil and natural gas

Differentiates through innovative proprietary technology, reliance on unconventional drilling techniques, and exploration of previously uneconomical reserves

Management and employees own 21% of shares Market capitalization of $414 million in 2014

Primary Asset Locations

The company has attractive investments and dedicated management that could sustain future growth

MARVEL GROUP

MS Lime

Giddings Field

Delhi Field

Customer Relations

EPM sells commodities so purchasers retain little buying power in the long term

Purchaser 2013Plains Marketing L.P. 90.0%Enterprise Crude Oil LLC 4.0%Flint Hills 2.0%DCP Midstream, LP 1.0%Kinder Morgan 1.0%Enervest, LLC 1.0%Orion Exploration Partners, LLC 1.0%

Revenue Growth

10

Evolution Petroleum Corporation (EPM) — Company Overview

Enhanced Oil Recovery

Increase the production and recovery of oil and natural gas

Enhanced Oil Recovery from the Holt Bryant Unit in the Delhi Field in Louisiana

Purchased in 2003 for $2.8 million Operated by Denbury Resources, Inc. Owns 7.4% interest and 23.9% revisionary

interest

EPM earns money through Enhanced Oil Recovery, Bypassed Primary Resources, and Unconventional Development.

MARVEL GROUP

Carbon Dioxide Oil Recovery at Delhi Field

Bypassed Primary Resources and Unconventional Development

Focus on horizontal drilling Mississippi Lime, North Central Oklahoma GARP Artificial Lift Technology

11

SWOT Analysis

Evolution Petroleum Corporation’s reliance on innovative technology and alternative production and exploration methods differentiate it from the competition and provide a foundation for future growth.

Sources: 1. Company website.2. EIA 2014 Outlook.

Strengths WeaknessesProprietary GARP Artificial Lift technology and patents Depends on a few large clients

Rich in assets and proved reserves Depends on crude oil for revenues

Generates scalable reserves potential at a low unit cost with long-term growth potential

No presence in growing global markets

Experienced, trained management team with deep experience in innovative oil and gas exploration and production strategies

Relies on third party operators, marketers, and technologies

Royalty and interest contracts reduce risk and increase revenues Light debt use may limit exploration opportunities

Opportunities ThreatsDelhi Field previously produced millions of barrels of oil indicating future success

Exposure to commodity risk stemming from changing world prices of oil and gas

GARP technology provides licensing opportunities Cyclicality of end markets

Increased demand from transportation and industrial sectors Uncertainties inherent in reserve estimations

Cash reserves can help secure future investment opportunities Increased competition from large, vertically-integrated peers

Increased push for domestic energy output could spur demand Price-elastic, highly competitive environment

MARVEL GROUP

12

Recent Stock Performance

13

Valuation Analysis

Section 3

MARVEL GROUP

14

EPM WACC Calculation

Source: Capital IQ and Consensus Estimates as of 12/31/2011

MARVEL GROUP

Risk Free Rate 3.50%Beta 1.28MRP 5%CAPM 9.90%

2-Year Return 35.48%Annualized 16.40%Div Yield 3.20%ROE 19.60%

WeightCAPM 9.9% 80%ROE 19.60% 20%Cost of Equity 11.84%

Return on Equity

CAPMWACC

Cost of Equity

Cost of Debt 4.54% (online source)Tax Rate 35.00%After-Tax 2.95%

Cost of PE 8.50% (dividend yield)

WACC 9.84%Premium 0.5%Adj WACC 10.34%

Cost of Debt

Cost of Preferred Equity

WACC

Debt 18%Common Equity 70%Perferred Equity 12%

100%

Captial Structure

15

EPM Discounted Cash Flow Analysis

Source: Capital IQ and Consensus Estimates as of 12/31/2011

MARVEL GROUP

2014E 2015E 2016E 2017E 2018EEBIT 12,504,025$ 16,526,333$ 21,778,393$ 28,631,191$ 37,567,162$ Tax Expense (4,418,764)$ (5,839,278)$ (7,694,018)$ (10,113,972)$ (13,269,478)$ Depreciation 1,264,843$ 1,373,196$ 1,490,995$ 1,619,013$ 1,758,103$

9,350,104$ 12,060,251$ 15,575,370$ 20,136,232$ 26,055,787$

Change in NWC (322,071)$ (1,169,816)$ (3,268,762)$ (2,885,949)$ (1,979,261)$ CapEx (3,320,192) (3,611,775) (3,926,620) (4,267,272) (4,636,332) FCF 5,707,841$ 7,278,660$ 8,379,988$ 12,983,011$ 19,440,194$

1 2 3 4 5WACC 10.34% Terminal Growth 3.50%

Terminal Value 294,023,795.75

Discounted FCF 5,172,808$ 5,978,061$ 6,237,446$ 8,757,765$ 179,744,183$

Valuation 205,890,264$ Shares Outstanding 28,205,467

Implied Price 7.30$

Discounted Cash Flow Analysis

16

EPM Sensitivity Analysis

Source: Capital IQ and Consensus Estimates as of 12/31/2011

MARVEL GROUP

7.30$ 2.500% 3.000% 3.500% 4.000% 4.50%8.34% 9.08 9.88 10.85 12.04 13.549.34% 7.56 8.12 8.77 9.54 10.47

10.34% 6.44 6.84 7.30 7.84 8.4711.34% 5.58 5.88 6.22 6.61 7.0612.34% 4.90 5.13 5.39 5.69 6.02

Senstivity Analysis

17

EPM Comparables Analysis

Source: Capital IQ and Consensus Estimates as of 12/31/2011

MARVEL GROUP

P/E Forward P/E EV/Revenue EV/EBITDA P/BMC/Proved reserves

VOC Energy Trust (NYSE:VOC) 8.59 7.18 8.4 8.56 2.2 0.04 ECA Marcellus Trust I (NYSE:ECT) 5.33 6.56 6.6 5.27 0.67 - Cross Timbers Royalty Trust (NYSE:CRT) 13.5 - 13.0 13.38 15.9 0.08 Enduro Royalty Trust (NYSE:NDRO) 8.59 10.1 8.5 8.60 0.73 0.02 Hugoton Royalty Trust (NYSE:HGT) 9.34 8.23 8.5 8.83 3.21 0.09 Synergy Resources Corporation (AMEX:SYRG) 51.5 20.9 13.9 34.99 3.32 0.12

Evolution Petroleum Corp. (AMEX:EPM) 105.3 19.7 18.9 39.52 7.31 0.03

Average 16.14 10.59 9.8 13.27 4.34 0.06 Median 8.97 8.23 8.5 8.72 2.71 0.06

Comparable Companies Analysis

18

Recent Stock Performance

19

EPM Comparables Analysis Cont.

Source: Capital IQ and Consensus Estimates as of 12/31/2011

MARVEL GROUP

Mean Median Weight Mean MedianP/E 3.39$ 1.88$ 15% 0.51$ 0.28$ Forward P/E 6.78$ 5.26$ 15% 1.02$ 0.79$ EV/Revenue 7.10$ 6.16$ 15% 1.06$ 0.92$ EV/EBITA 4.58$ 3.01$ 15% 0.69$ 0.45$ P/B 7.48$ 4.66$ 15% 1.12$ 0.70$ MC/Proved reserves 26.45$ 27.02$ 25% 6.61$ 6.76$

11.01$ 9.90$

Implied Price 10.46$

Implied Price Weighted Price

20

EPM Valuation/Recommendation

Source: Capital IQ and Consensus Estimates as of 12/31/2011

MARVEL GROUP

WeightDCF 7.30$ 40%Comps 10.46$ 60%Price 9.19$

Implied Price

Recommendation: Watch List

Questions?

Section 5

22MARVEL GROUP