Epsilon Energy Ltd. (“Epsilon”) (NASDAQ: EPSN) reported first quarter 2023 financial and operating results along with the announcement
of a new transaction.
First Quarter Financial Highlights:
- Reported net revenue interest (NRI) production of 2.5 Bcfe (27.3 MMcfe per day) for the quarter ended March 31, 2023
- Realized average price of $2.98 per Mcfe including hedges ($2.83 per Mcfe excluding hedges) for the quarter ended March 31, 2023
- Delivered total revenues of $9.4 million for the quarter ended March 31, 2023, a decrease of 39% compared to the prior quarter.
- $7.0 million from natural gas, oil, and NGL sales;
- $2.4 million from gathering and compression fees through our ownership in the Auburn Gas Gathering System, after eliminating revenue earned from Epsilon production ($0.4 million);
- Reported Adjusted EBITDA of $5.6 million for the quarter ended March 31, 2023.
- Reported free cash flow (FCF) before changes in working capital of $3.6 million for the quarter ended March 31, 2023
- Cash, cash equivalents (including restricted cash), and short term investments totaled $49.8 million at March 31, 2023, an increase of 9% compared to December 31, 2022.
- Returned $2.8 million to shareholders during the quarter ended March 31, 2023
- $1.4 million through the repurchase of 237,920 shares (average price of $5.72 per share), representing a 1% reduction of shares outstanding
- $1.4 million through dividends
- An additional 70,406 shares were purchased after the quarter end (average price of $5.35 per share)
- 2.2 million shares remain under the approved buyback (expires March 2024)
- Realized gains of $0.4 million on Henry Hub (HH) and TGP Z4 basis swaps totaling 150,000 MMBTU. The current unrealized gain on the remaining hedge book for 2023 is over $1.9 million at March 31, 2023.
First Quarter Operating Results:
Epsilon’s capital expenditures were $1.2 million for the quarter ended March 31, 2023. This capital was primarily related to the completion of two gross (0.02 net) Marcellus wells and the continuation of drilling one gross (0.11 net) well in Oklahoma.
At March 31, 2023, the Company has one gross (0.11 net) Oklahoma well waiting on completion.
Recent Transaction:
Epsilon is pleased to announce the closing of a drilling focused transaction with a private operator in the Permian Basin.
Epsilon acquired a 10% wellbore interest in two wells recently drilled and completed by a Houston-based private operator. The wells are located in Eddy County, New Mexico in the Northern Delaware Basin and were completed in the Wolfcamp A and C formations. The wells are currently on flow-back. Total capital expenditures (net to Epsilon) are estimated at $2.1 million.
Jason Stabell, Epsilon’s Chief Executive Officer, commented, “We delivered strong results in the first quarter. In a challenging commodity price environment we grew our cash balance 9% to $50 million while simultaneously returning $2.8 million to shareholders in dividends and buybacks.
We are excited to announce a development-focused transaction in a new project area in the Permian Basin, partnered with a basin-focused operator whose principals have a long operating history. We see this as a first step toward our growth objectives and a blueprint for future transactions.
Epsilon’s strong balance sheet, diversified (upstream/midstream) revenue stream and large liquidity position, keep us well positioned to create value for our shareholders in this uncertain economic environment.”
