SecProbe.io

CORRESP
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filename1.htm

March 24,
2009

Via Facsimile and EDGAR

Mr. H.
Roger Schwall

Assistant
Director

U.S.
Securities and Exchange Commission

Division
of Corporation Finance

100
F Street, NE – Mail Stop 7010

Washington,
D.C. 20549-7010

Re:
Evolution Petroleum Corporation

Form 10-K for Fiscal Year Ended June 30, 2008

Filed September 24, 2008

Amended Schedule 14A

Filed November 4, 2008

Response Letter Dated March 4, 2009 Filed March 5, 2009

File No. 001-32942

Dear
Mr. Schwall:

On
behalf of Evolution Petroleum Corporation (the “Company”, “we”, “our” or “us”),
I am responding to comments received in your follow up letter dated March 12,
2009 with respect to the filings listed above.
For your convenience, I have repeated in bold type the comments and
requests for additional information as set forth in your letter.  My response follows each applicable comment
or request.

Evolution Petroleum Corporation   ·
2500 CityWest Blvd., Suite 1300   ·   Houston, Texas  77042

Tel:
713-935-0122          FAX:  713-935-0199

Form 10-K
for the Fiscal Year Ended June 30, 2008

General

1.              We note
your response to our prior comment 1. Given that you determined that the sales
contracts with DCP Midstream, LP, and ETC Texas Pipeline, LTD may be considered
material contracts, please amend Part IV of your Form 10-K to include
such contracts as exhibits.

Response:

We
undertake to timely file an amendment to our Form 10-K for our fiscal year
ended June 30, 2008, by attaching the above referenced contracts as
Exhibits.

Item 2.
Properties, page 16

2.              We note
your response to our prior comment 2. Please provide an example of disclosure
you will use in future filings using the information you provided in your
response.

Response:

To
the extent we choose to again make any statements regarding our “belief that
the Delhi Holt Bryant Unit is an excellent candidate for a CO2-EOR project”, we
offer the following proposed disclosure:

We,
and the companies that submitted offers to participate with us in the Delhi
Holt Bryant Unit, believe that the Unit is an excellent candidate for a CO2-EOR
project.  We base our belief on (i) our
internal analyses of CO2 pilot tests successfully completed in the Delhi Holt
Bryant Unit by a prior field operator, (ii) our analysis of favorable
analogous comparisons to successful full scale projects in the same or similar
geological formation, (iii) a competitive offering process, wherein we
solicited major participants with CO2-EOR expertise, funding and operating
abilities, leading to two confidential competitive offers made to us in
writing, (iv) our qualitative assessment that the competitive offers were
based on the CO2-EOR potential of the Unit, and not on the relatively minor
associated proved reserves existing at that time, and (v) the buyer’s
written commitment of a portion of its proved CO2 reserves and a minimum $100
million minimum future investment in a CO2 project in the Unit.

Amended Schedule 14A filed November 4,
2008

Short
Term Incentive Bonuses, page 11

3.              We note
your response to our prior comment 8 and reissue the comment in part.

·                  Please
clarify the significance of the “bonus targets” and whether the percentage
listed for the executive officers (100% or 75%) is the percentage of base
salary that will be paid as a short term incentive bonus if all of the goals
are achieved.

·                  To the
extent necessary, make changes to other disclosure in your compensation
discussion and analysis so as to present a clear and uniform discussion of your
executive compensation practices. In particular, please refer uniformly to the
corporate and individual  factors
throughout your compensation discussion and analysis.

·                  Discuss
whether the market factors discussed in the section, Setting Executive
Compensation, are included in the determination of short term incentive bonus
and how this changes the equation for calculating the singe payout factor.

·                  Please
include the corporate goals on which each executive officer’s corporate
performance is measured when determining the corporate factor.

·                  We note
your statement that your “named executive officers took a
substantial portion of their short term bonus in the form of restricted stock.”
Emphasis added. Please disclose who makes the determination as to whether the
executive officers are to be paid their short term incentive bonus in cash or
restricted stock.

Please provide an example of disclosure you will use in future filings
using the information you provided in your response.

Response:

Bullet  1 — See proposed disclosure below.

Bullet  2 — See proposed disclosure below.

Bullet  3 — See proposed disclosure below.

Bullet  4 — The executive officer’s individual
performance factor does not determine the corporate performance factor.  The corporate performance factor is
determined by the Compensation Committee of the Board of Directors, expressed
as a percentage from 0 to 100%, assessing the qualitative achievement of the
corporation’s stated goals itemized in the section “Additional Material
Matters”, taken as a whole.

Bullet  5 — “Took” was an inadequate description in
our previous response.  See new
disclosure below.

We
offer the following revised disclosure, in part.

Determination of Executive
Compensation

Compensation
Objectives

The Compensation
Committee of the Board of Directors (the “Committee”) is
responsible for the oversight and determination of compensation, including
salaries, equity compensation, short-term incentive bonuses and other
benefits for all of our executive officers and senior management, and
administers our Evolution Petroleum Corporation Amended and Restated 2004 Stock
Plan (the “2004 Stock Plan”) and our 2003 Stock Plan, as may be further amended
from time to time. The Committee delegates its authority for salary adjustments
for other employees to the Chief Executive Officer. The primary objectives of
the Company’s executive compensation program are to attract and retain key
executives, to stimulate management’s efforts on our behalf in a way that
supports our business plan and to align management’s incentives with the
long-term interests of the Company and its stockholders.

Setting
Executive Compensation

Committee meetings
involving consideration of compensation adjustments and awards for executive
officers (other than the chief executive officer) typically include the Committee
members and our Chief Executive Officer.  The Committee considers
compensation adjustments and awards for our Chief Executive Officer, without
his participation.  For
compensation decisions relating to executive officers and senior management
other than our Chief Executive Officer, the Chief Executive Officer typically
makes recommendations in line with the policy and structure established by the
Compensation Committee and reviews them with the Compensation Committee for
adjustments and approval.   The recommendations of the Chief
Executive Officer are primarily derived from an equal weighting of corporate
achievements against goals for the fiscal year and a review of each person’s
achievements against their individual goals and objectives mutually set and
approved by the Committee at the beginning of the fiscal year, as well as by
market factors. Market factors include compensation being offered for
equivalent positions by competitors, the overall relative contributions of the
person, the future contributions expected and the difficulty in replacing the
person should they choose to leave. The Committee meets in executive session
outside of the presence of any senior executive officer to determine the
amount, form and terms of compensation for the Chief Executive Officer.

The recommendations of
the Chief Executive Officer and considerations of the Committee are influenced
by the (i) findings and recommendations of the compensation consultant
employed from time to time by the Committee to confirm industry competitive pay
and ratify our executive officer compensation levels, and (ii) specific
and localized industry and market conditions directly affecting the Company’s
ability to recruit new staff and retain existing staff. The findings of the
compensation consultant include surveys of relevant peer groups, as determined
by industry and size. The current practice of the Committee and Chief Executive
Officer is to consider the average base pay of the peer groups in determining
our executive officers’ base, but to more heavily weight total compensation
towards short term and long term variable components tied to individual and
corporate performance.

The Committee engaged
Thomas J. Reno & Associates, Inc. (“Reno”)
as its independent compensation consultant for fiscal 2008.  The role of
the compensation consultant is to provide the Committee with information on
competitive practices and pay levels and to advise the Compensation Committee
on executive compensation issues. Reno recommended pay level ranges for the
three executive officers’ base pay, targets for short term incentive pay and
long term incentive awards for fiscal 2008.

For his report, Reno
conducted a competitive market analysis based on data of companies in the
Energy industry with annual revenue of less than $41 million and active in
similar geographic areas and industry segment. The Company had no input into
the selection of the peer group by Reno. This analysis drew data from various
sources including the Mercer Energy Compensation 2006 Survey and information
available from filings by public companies in the energy industry with revenues
between $24 million and $79 million. The Mercer Survey provides information on
305 positions reported by 184 organizations in the energy industry. The Reno
Report utilized only information on base salary and short term incentives from
the Mercer Survey. Due to our early stage of growth, Reno established our peer
group more on the basis of assets under management than on revenues.

Reno did not attend our
Board of Directors meeting, nor our Committee meetings. He was employed
directly by the Committee and received no fees from the Company other than for
the services rendered to the Committee.

With the exception of
significant promotions and new hires, we review compensation, including equity
awards, annually following the preliminary closing of the books for the fiscal
year.  Actual payment of short term incentive awards is subject to
approval by the Board of Directors following Audit Committee approval of the
report of the independent audit of the financial results for the fiscal
year.  Equity awards are generally made at the same time, following
adoption of a policy in 2006 that all employees would be evaluated for base
salary adjustments, awards of long term incentives, determination of short term
incentive awards and setting of objectives for future short term awards. This
timing enables us to consider full, prior year audited performance by the
Company and the potential recipients against our expectations. Our policy is
that all grants to newly hired employees are effective on the latter of the
employee’s first day of employment or upon authorization of the grant by the
Board of Directors upon the recommendation of the Committee.  The exercise
price of stock options awarded is based upon the grant date fair market value,
which is the closing market price of our common stock on the date of grant.

Elements
of Compensation

The Company’s executive
compensation program consists of the following basic components: base salary,
long-term incentives pursuant to the 2003 and 2004 Stock Plans, short term cash
bonuses and limited perquisites.  Each component of the compensation
program serves a particular purpose and is considered independently on the
basis of achieving that respective purpose.

Base
Salary.
Base salary is primarily designed to reward current and past performance and
may be adjusted from time to time to realign salaries with market levels. The
Committee annually reviews the base salary of each executive officer in
relation to market and specific industry conditions and relative to staff
salaries. In determining the appropriate level of compensation for each
executive officer, the Committee evaluates the responsibilities and authority
of the executive as well as the executive’s performance as to the Company’s
goals, objectives and strategic business plan and reviews. Base salaries for
fiscal 2008 were determined by utilizing the lower end of Reno’s report survey
range, due to our size compared to the peers in the cited surveys and our
stated compensation practice.

In September 2007,
the Committee increased base pay for executive management to reflect market factors
conditions. The base pay for Mr. Mazzanti and Mr. McDonald was
increased to $190,000 and the base pay for Mr. Herlin was increased to
$240,000.

Long-Term
Incentive Compensation.  Grants of long-term incentives are primarily designed to tie a
major portion of each executive’s compensation to long-term future performance
tied directly to the interests of our stockholders.  In determining the
long-term incentive component of our executive officers’ compensation for
fiscal 2008, the Committee reviewed their past contributions in directly
building net asset value per share, their expected future contributions to
building net asset value per share, and their existing equity holdings. Our
intent is for that staff that has contributed or is contributing materially to
building the Company to have a material stake in that value creation without materially
diluting the current stock value to our shareholders.  Our staff is
currently eligible to receive awards under our 2004 Stock Plan, while no new
awards are available under our 2003 Stock Plan.  The 2004 Stock Plan
permits the Board of Directors to award eligible employees, directors and
consultants with restricted stock grants, incentive stock options,
non-statutory stock options and stock appreciation rights. Awards to senior
management and executive officers under the 2004 Stock Plan have generally
consisted of incentive options and warrants.

Under the 2004 Stock
Plan, no more than 5,500,000 shares of our common stock may be subject to
incentive awards.  As of June 30, 2008, there were
1,325,859 shares available to be granted under the 2004 Stock Plan. During
fiscal 2008, we awarded options to purchase 1,435,000 shares of stock to
employees and contractors, and 25,899 shares of restricted stock to the three
independent members of our board of directors.

Short
Term Incentive Bonus.
Short term incentive bonuses, generally and historically paid in cash, are a
major portion of total compensation paid and are intended to vary with
individual overall performance against pre-determined individual goals (the
“Individual Performance Factor”) and Company overall performance against
pre-determined corporate goals (the “Corporate Performance Factor”).  The “Bonus Targets” are 100% of Base Salary base pay
for the chief executive officer and 75% of Base Salary base salary
for other named executive officers. All employees participate in this plan
at percentages of Base Salary ranging from 10% up to 100%. The Committee
determines awards of short term incentive bonuses to our executive officers
based upon overall performance against the predetermined those goals
on a “qualitative” basis as follows: wherein individual and corporate
performances are equally weighted, then multiplied to reach a payout factor.

Bonus to be Paid

=

Individual
Performance Factor % * Corporate Performance Factor % * Bonus Target % * Base
Salary $

Since the Individual
Performance Factor and the Corporate Performance Factor two factors are
multiplied, a 0% factor on either results in no Bonus bonus being
paid.

A substantial list
of goals is  The
pre-determined goals are mutually agreed upon between the employee