Evolution Petroleum Corp. (NYSE: EPM) said June 29 it has entered into a settlement agreement with a Denbury Resources Inc. (NYSE: DNR) subsidiary over a contract dispute regarding a Louisiana oil field.
The settlement provides a new foundation for continuing the successful development of the Delhi Field, Evolution's principal asset located east of Monroe, La., the release said. Denbury is the operator of the oil field.
As part of the settlement, Evolution will receive $27.5 million in cash, along with other mutual consideration including working interest from Denbury in the Mengel Upper Glen Rose Sand interval within the Delhi Unit.
The interest is proportionate to Evolution's 23.9% working interest in the primary Holt-Bryant zones in the Delhi Unit.
The parties also reached agreements on other contractual issues related to Evolution's proportionate ownership of the CO2 recycle facility and associated real estate and terms related to long-term CO2 pipeline transportation costs following the late 2019 expiration of the current fixed price arrangement.
In addition, Denbury will receive about 0.2% of Evolution's overriding royalty interest effective July 1.
"This settlement closes a long-running contract dispute and better defines and aligns the rights and obligations of both parties," said Bob Herlin, executive chairman of Evolution, in a statement. "It removes the uncertainty related to this litigation and clarifies the previously undefined CO2 transportation costs beginning in 2020. We believe our shareholders are well-served by this agreement."
Following the settlement, Evolution's combined mineral and overriding royalty interests will be reduced to 7.2% from about 7.4%. Meanwhile its working interest will remain unchanged at 23.9% with a net revenue interest of 19%, for a combined net revenue interest of 26.2%.
The settlement also gives Evolution access to certain geological, geophysical and technical information about the Delhi Field for its internal analysis and reserves report.
The parties have agreed to the settlement to avoid the costs and uncertainty of continuing litigation with no admission of fault or liability by either party with regard to any of the claims or counterclaims. Each party dismissed with prejudice all of its claims and counterclaims in the litigation.
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