Evolution Petroleum Corp. (NYSE: EPM) said Dec. 9 it will spin off its oilfield technology unit. The terms of the transaction weren't disclosed.
The Houston company management recommended and the board has approved a majority transfer of its Gas Assisted Rod Pump, or GARP, oilfield technology operations to employees of the NGS Technologies subsidiary (NGST).
The separation of NGST is expected to reduce the company's ongoing general and administrative costs by about $1 million per year, according to the release.
Evolution will retain a minority equity interest in NGST and will have the option to convert part of our initial funding into a substantially increased equity stake in the future.
In addition, the company will retain a 5% royalty on all future gross revenues associated with the GARP technology.
The employees who have primary responsibilities for the GARP operations will become full-time employees of NGST and will cease to be employees of Evolution. They include Daryl Mazzanti who is currently Evolution's senior vice president of operations, a GARP sales engineer and a field superintendent.
Evolution also promoted Randy Keys to president and CEO of the company. He currently serves as president and CFO.
Robert Herlin, the current CEO, board chair and co-founder of the company, will continue to serve as executive chairman of the board and will work closely with the management team on strategic and litigation issues.
The specific terms of the spinoff transaction are subject to definitive legal agreements, and certain provisions may be modified for legal, tax, accounting or other business purposes.
The combined costs of severance and other related expenses are expected to result in a one-time restructuring charge in the second fiscal quarter ended Dec. 31, with a preliminary estimate of about $700,000.
Evolution develops petroleum reserves and shareholder value by applying conventional and specialized technology to known oil and gas resources, onshore in the U.S. The company's principal asset is its interest in a CO2-EOR project in Louisiana's Delhi Field.
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