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

Table of Contents 2 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

Executive Summary 3 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

Industry Overview Section 1 4

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 5 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 Credit Suisse. Oil & Gas Primer. September 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 U.S. Oil & Gas Drilling and Extraction Market Segmentation

Industry Overview 6 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 EIA 2014 Report. 3. IBISWorld Industry Reports. U.S. Production of Crude Oil The oil and gas drilling and extraction industry features regional dispersion and high revenue volatility 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

Porters Five Forces 7 Sources: 1. Deutsche Bank Markets Research. Oil & Gas for Beginners. 25 January EIA 2014 Report. 3. IBISWorld Industry Reports. The oil and gas drilling and extraction industry is attractive with the potential for long-term profitability 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 LOWMEDIUMLOWHIGHLOW

Company Overview Section 2 8

Evolution Petroleum Company (EPM) Company Overview 9 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 MS Lime Giddings Field Delhi Field Customer Relations EPM sells commodities so purchasers retain little buying power in the long term Revenue Growth

Evolution Petroleum Corporation (EPM) Company Overview 10 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. 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

SWOT Analysis 11 Evolution Petroleum Corporations 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. StrengthsWeaknesses Proprietary GARP Artificial Lift technology and patentsDepends on a few large clients Rich in assets and proved reservesDepends 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 revenuesLight debt use may limit exploration opportunities OpportunitiesThreats Delhi 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 opportunitiesCyclicality of end markets Increased demand from transportation and industrial sectorsUncertainties inherent in reserve estimations Cash reserves can help secure future investment opportunitiesIncreased competition from large, vertically-integrated peers Increased push for domestic energy output could spur demandPrice-elastic, highly competitive environment

Recent Stock Performance 12

Valuation Analysis Section 3 13

EPM WACC Calculation 14 Source: Capital IQ and Consensus Estimates as of 12/31/2011

EPM Discounted Cash Flow Analysis 15 Source: Capital IQ and Consensus Estimates as of 12/31/2011

EPM Sensitivity Analysis 16 Source: Capital IQ and Consensus Estimates as of 12/31/2011

EPM Comparables Analysis 17 Source: Capital IQ and Consensus Estimates as of 12/31/2011

Recent Stock Performance 18

EPM Comparables Analysis Cont. 19 Source: Capital IQ and Consensus Estimates as of 12/31/2011

EPM Valuation/Recommendation 20 Source: Capital IQ and Consensus Estimates as of 12/31/2011 Recommendation: Watch List

Questions? Section 5 22