Evolution Petroleum Corp. (NYSE MKT: EPM) has put in place a limited oil price protection program for the months of July through December 2015. The quantity hedged is 1,100 barrels of oil per day (BOPD), which represents two-thirds of expected sales volume for this period. Half of the hedged quantities (550 BOPD) have a floor price of $54 per barrel and a ceiling price of $66.50 per barrel.
The balance of the hedged quantities, or 550 BOPD for the six-month period, have a floor price of $56 per barrel and a ceiling price of $61.60 per barrel. The remaining one-third of projected sales from our developed assets will continue to receive market prices.
All hedges are based on West Texas Intermediate (WTI) pricing. The company elected to not hedge the basis differential to Light Louisiana Sweet (LLS) crude pricing at this time. The LLS premium versus WTI has averaged over $4.00 per barrel since the beginning of the calendar year.
With the $24 million capital expenditure commitment associated with the planned NGL plant at the Delhi Field through the summer of 2016 combined with the company’s ongoing common stock dividend program of approximately $6.6 million per year, its board of directors determined that these limited hedges were prudent given the volatility and uncertainty in near-term commodity prices.