Third Quarter Financial Highlights:
- Reported net revenue interest (NRI) production of 2.0 Bcfe (21.5 MMcfe per day) for the quarter ended
September 30, 2023 , a decrease of 14% compared to the prior quarter.- As previously disclosed in our August operational update, the quarter over quarter decrease was caused in part by seven wells brought offline for 52 days during the quarter in
Pennsylvania to accommodate a workover operation (cumulative NRI production rate for the wells before shut-in was 3.5 MMcf per day). These wells are now back online.
- As previously disclosed in our August operational update, the quarter over quarter decrease was caused in part by seven wells brought offline for 52 days during the quarter in
- Realized average price of
$2.32 per Mcfe including hedges ($1.64 per Mcfe excluding hedges) for the quarter endedSeptember 30, 2023 , a decrease of 5% compared to the prior quarter. - Reported total revenues of
$6.3 million for the quarter endedSeptember 30, 2023 , a decrease of 3% compared to the prior quarter.$3.2 million from natural gas, oil, and NGL sales, a decrease of 25% compared to the prior quarter$3.1 million from gathering and compression fees through our ownership in the Auburn Gas Gathering System, after eliminating revenue earned from Epsilon production ($0.3 million ), an increase of 39% compared to the prior quarter. This included$1.0 million of revenue received from a backward looking fee adjustment as a result of an internal audit by the system operator.
- Reported Adjusted EBITDA of
$3.9 million for the quarter endedSeptember 30, 2023 . - Cash, cash equivalents (including restricted cash), and short term investments totaled
$31.9 million atSeptember 30, 2023 . - Returned
$4.0 million to shareholders during the quarter endedSeptember 30, 2023 .$2.6 million through the repurchase of 525,000 shares at$5.00 per share, over a 2% reduction of shares outstanding$1.4 million through the quarterly dividend- 1.4 million shares remain under the approved buyback program (expires in
March 2024 )
- Realized gains of
$1.3 million onHenry Hub (HH) and TGP Z4 basis swaps totaling 455,000 MMBTU. - Placed
Henry Hub (HHUB) and TGP Z4 basis swaps forNovember 2023 throughMarch 2024 (at a net realized price of$2.59 per MMBTU, for 380,000 MMBTU) andApril 2024 throughOctober 2024 (at a net realized price of$2.05 per MMBTU, for 1,070,000 MMBTU).- After quarter-end, we placed additional
Henry Hub (HHUB) and TGP Z4 basis swaps forNovember 2023 throughMarch 2024 (at a net realized price of$2.65 per MMBTU, for 380,000 MMBTU) andApril 2024 throughOctober 2024 (at a net realized price of$2.09 per MMBTU, for 535,000 MMBTU).
- After quarter-end, we placed additional
Third Quarter Operating Results:
Epsilon’s capital expenditures were
During the quarter, we received well proposals from our operating partner in
In addition, initial investment plans for 2024 on our position in
Earning’s Call:
The Company will host a conference call to discuss its results on
Interested parties in
A webcast can be viewed at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=TKIiaI4y. A webcast replay will be available on the Company’s website (www.epsilonenergyltd.com) following the call.
About Epsilon
For more information, please visit www.epsilonenergyltd.com, where we routinely post announcements, updates, events, investor information, presentations and recent news releases.
Forward-Looking Statements
Certain statements contained in this news release constitute forward looking statements. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, ‘may”, “will”, “project”, “should”, ‘believe”, and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated. Forward-looking statements are based on reasonable assumptions, but no assurance can be given that these expectations will prove to be correct and the forward-looking statements included in this news release should not be unduly relied upon.
Contact Information:
281-670-0002
Chief Executive Officer
Jason.Stabell@EpsilonEnergyLTD.com
Chief Financial Officer
Andrew.Williamson@EpsilonEnergyLTD.com
Unaudited Consolidated Statements of Operations | ||||||||||||||||
(All amounts stated in US$) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenues from contracts with customers: | ||||||||||||||||
Gas, oil, NGL, and condensate revenue | $ | 3,241,531 | $ | 19,171,121 | $ | 14,509,184 | $ | 48,566,282 | ||||||||
Gas gathering and compression revenue | 3,068,996 | 2,072,806 | 7,657,755 | 6,180,747 | ||||||||||||
Total revenue | 6,310,527 | 21,243,927 | 22,166,939 | 54,747,029 | ||||||||||||
Operating costs and expenses: | ||||||||||||||||
Lease operating expenses | 1,559,957 | 2,024,229 | 4,404,757 | 5,681,736 | ||||||||||||
Gathering system operating expenses | 631,725 | 600,672 | 1,854,000 | 1,666,275 | ||||||||||||
Development geological and geophysical expenses | - | 2,387 | - | 7,159 | ||||||||||||
Depletion, depreciation, amortization, and accretion | 1,392,032 | 1,706,030 | 4,780,766 | 4,898,988 | ||||||||||||
Loss (gain) on sale of oil and gas properties | - | - | 1,449,871 | (221,642 | ) | |||||||||||
General and administrative expenses: | ||||||||||||||||
Stock based compensation expense | 439,653 | 500,597 | 799,149 | 836,949 | ||||||||||||
Other general and administrative expenses | 1,540,358 | 2,015,272 | 5,160,757 | 4,651,547 | ||||||||||||
Total operating costs and expenses | 5,563,725 | 6,849,187 | 18,449,300 | 17,521,012 | ||||||||||||
Operating income | 746,802 | 14,394,740 | 3,717,639 | 37,226,017 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 384,732 | 89,638 | 1,308,695 | 126,804 | ||||||||||||
Interest expense | (8,760 | ) | (17,501 | ) | (71,619 | ) | (33,565 | ) | ||||||||
(Loss) gain on derivative contracts | (24,303 | ) | (929,637 | ) | 1,672,535 | (1,124,547 | ) | |||||||||
Other income (expense), net | 468 | (32,777 | ) | 5,169 | (99,896 | ) | ||||||||||
Other income (expense), net | 352,137 | (890,277 | ) | 2,914,780 | (1,131,204 | ) | ||||||||||
Net income before income tax expense | 1,098,939 | 13,504,463 | 6,632,419 | 36,094,813 | ||||||||||||
Income tax expense | 710,164 | 3,896,010 | 2,283,228 | 10,097,484 | ||||||||||||
NET INCOME | $ | 388,775 | $ | 9,608,453 | $ | 4,349,191 | $ | 25,997,329 | ||||||||
Currency translation adjustments | (846 | ) | (34,524 | ) | (2,317 | ) | (48,272 | ) | ||||||||
Unrealized gain (loss) on securities | 24,641 | - | (22,365 | ) | - | |||||||||||
NET COMPREHENSIVE INCOME | $ | 412,570 | $ | 9,573,929 | $ | 4,324,509 | $ | 25,949,057 | ||||||||
Net income per share, basic | $ | 0.02 | $ | 0.42 | $ | 0.19 | $ | 1.11 | ||||||||
Net income per share, diluted | $ | 0.02 | $ | 0.41 | $ | 0.19 | $ | 1.11 | ||||||||
Weighted average number of shares outstanding, basic | 22,118,984 | 23,011,729 | 22,616,539 | 23,419,666 | ||||||||||||
Weighted average number of shares outstanding, diluted | 22,178,686 | 23,169,658 | 22,631,550 | 23,524,574 | ||||||||||||
Unaudited Consolidated Balance Sheets | ||||||||
(All amounts stated in US$) | ||||||||
2023 | 2022 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 12,498,051 | $ | 45,236,584 | ||||
Accounts receivable | 4,006,278 | 7,201,386 | ||||||
Short term investments | 18,870,468 | - | ||||||
Fair value of derivatives | - | 1,222,090 | ||||||
Prepaid income taxes | 1,954,788 | 1,140,094 | ||||||
Other current assets | 920,224 | 632,154 | ||||||
Operating lease right-of-use assets | - | 31,383 | ||||||
Total current assets | 38,249,809 | 55,463,691 | ||||||
Non-current assets | ||||||||
Property and equipment: | ||||||||
Oil and gas properties, successful efforts method | ||||||||
Proved properties | 154,190,226 | 148,326,265 | ||||||
Unproved properties | 26,185,843 | 18,169,157 | ||||||
Accumulated depletion, depreciation, amortization and impairment | (111,142,288 | ) | (107,729,293 | ) | ||||
Total oil and gas properties, net | 69,233,781 | 58,766,129 | ||||||
Gathering system | 42,694,512 | 42,639,001 | ||||||
Accumulated depletion, depreciation, amortization and impairment | (35,241,595 | ) | (34,500,740 | ) | ||||
Total gathering system, net | 7,452,917 | 8,138,261 | ||||||
Land | 637,764 | 637,764 | ||||||
Buildings and other property and equipment, net | 303,211 | 286,035 | ||||||
Total property and equipment, net | 77,627,673 | 67,828,189 | ||||||
Other assets: | ||||||||
Operating lease right-of-use assets, long term | 468,833 | - | ||||||
Restricted cash | 495,000 | 570,363 | ||||||
Fair value of derivatives, long term | 42,005 | - | ||||||
Prepaid drilling costs | 2,891,250 | - | ||||||
Total non-current assets | 81,524,761 | 68,398,552 | ||||||
Total assets | $ | 119,774,570 | $ | 123,862,243 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable trade | $ | 1,855,591 | $ | 1,695,353 | ||||
Gathering fees payable | 556,437 | 935,012 | ||||||
Royalties payable | 1,241,533 | 2,223,043 | ||||||
Accrued capital expenditures | 195,917 | 41,694 | ||||||
Accrued compensation | 631,646 | 598,351 | ||||||
Other accrued liabilities | 556,814 | 690,655 | ||||||
Fair value of derivatives | 126,508 | - | ||||||
Operating lease liabilities | 55,656 | 35,299 | ||||||
Total current liabilities | 5,220,102 | 6,219,407 | ||||||
Non-current liabilities | ||||||||
Asset retirement obligations | 2,794,743 | 2,780,237 | ||||||
Deferred income taxes | 11,805,453 | 10,617,394 | ||||||
Operating lease liabilities, long term | 498,155 | - | ||||||
Total non-current liabilities | 15,098,351 | 13,397,631 | ||||||
Total liabilities | 20,318,453 | 19,617,038 | ||||||
Commitments and contingencies (Note 10) | ||||||||
Shareholders' equity | ||||||||
Preferred shares, no par value, unlimited shares authorized, none issued or outstanding | - | - | ||||||
Common shares, no par value, unlimited shares authorized and 22,126,800 shares issued and outstanding at | 118,209,690 | 123,904,965 | ||||||
Additional paid-in capital | 10,655,378 | 9,856,229 | ||||||
Accumulated deficit | (39,158,820 | ) | (39,290,540 | ) | ||||
Accumulated other comprehensive income | 9,749,869 | 9,774,551 | ||||||
Total shareholders' equity | 99,456,117 | 104,245,205 | ||||||
Total liabilities and shareholders' equity | $ | 119,774,570 | $ | 123,862,243 | ||||
Unaudited Consolidated Statements of Cash Flows | ||||||||
(All amounts stated in US$) | ||||||||
Nine months ended | ||||||||
2023 | 2022 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 4,349,191 | $ | 25,997,329 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depletion, depreciation, amortization, and accretion | 4,780,766 | 4,898,988 | ||||||
Accretion of discount on available for sale securities | (574,341 | ) | - | |||||
Gain on available for sale securities | (60,494 | ) | - | |||||
Loss (gain) on sale of oil and gas properties | 1,449,871 | (221,642 | ) | |||||
(Gain) loss on derivative contracts | (1,672,535 | ) | 1,124,547 | |||||
Settlement received (paid) on derivative contracts | 2,979,128 | (1,396,698 | ) | |||||
Settlement of asset retirement obligation | (3,482 | ) | (118,259 | ) | ||||
Stock-based compensation expense | 799,149 | 836,949 | ||||||
Deferred income tax expense (benefit) | 1,188,059 | 439,857 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 3,195,108 | (5,472,585 | ) | |||||
Prepaid income taxes | (814,694 | ) | - | |||||
Other assets and liabilities | (67,008 | ) | (205,717 | ) | ||||
Accounts payable, royalties payable and other accrued liabilities | (1,191,558 | ) | 1,511,652 | |||||
Income taxes payable | - | 2,021,246 | ||||||
Net cash provided by operating activities | 14,357,160 | 29,415,667 | ||||||
Cash flows from investing activities: | ||||||||
Additions to unproved oil and gas properties | (8,017,412 | ) | (226,439 | ) | ||||
Additions to proved oil and gas properties | (7,860,073 | ) | (5,528,037 | ) | ||||
Additions to gathering system properties | (52,069 | ) | (129,985 | ) | ||||
Additions to land, buildings and property and equipment | (49,689 | ) | (13,258 | ) | ||||
Purchases of short term investments | (32,812,974 | ) | - | |||||
Proceeds from short term investments | 14,554,976 | - | ||||||
Proceeds from sale of oil and gas properties | 12,498 | 200,000 | ||||||
Prepaid drilling costs | (2,891,250 | ) | - | |||||
Net cash used in investing activities | (37,115,993 | ) | (5,697,719 | ) | ||||
Cash flows from financing activities: | ||||||||
Buyback of common shares | (5,695,275 | ) | (6,234,879 | ) | ||||
Exercise of stock options | - | 747,112 | ||||||
Dividends paid | (4,217,471 | ) | (4,422,720 | ) | ||||
Debt issuance costs | (140,000 | ) | - | |||||
Net cash used in financing activities | (10,052,746 | ) | (9,910,487 | ) | ||||
Effect of currency rates on cash, cash equivalents, and restricted cash | (2,317 | ) | (48,272 | ) | ||||
(Decrease) increase in cash, cash equivalents, and restricted cash | (32,813,896 | ) | 13,759,189 | |||||
Cash, cash equivalents, and restricted cash, beginning of period | 45,806,947 | 27,065,423 | ||||||
Cash, cash equivalents, and restricted cash, end of period | $ | 12,993,051 | $ | 40,824,612 | ||||
Supplemental cash flow disclosures: | ||||||||
Income taxes paid | $ | 1,442,304 | $ | 7,626 | ||||
Interest paid | $ | 88,835 | $ | 50,872 | ||||
Non-cash investing activities: | ||||||||
Change in proved properties accrued in accounts payable and accrued liabilities | $ | 41,947 | $ | (194,391 | ) | |||
Change in gathering system accrued in accounts payable and accrued liabilities | $ | 3,441 | $ | 12,882 | ||||
Asset retirement obligation asset additions and adjustments | $ | 4,640 | $ | 10,821 | ||||
Three months ended | Nine months ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net income | $ | 388,775 | $ | 9,608,453 | $ | 4,349,191 | $ | 25,997,329 | ||||||||
Add Back: | ||||||||||||||||
Interest (income) expense, net | (375,972 | ) | (72,137 | ) | (1,237,076 | ) | (93,239 | ) | ||||||||
Income tax expense | 710,164 | 3,896,010 | 2,283,228 | 10,097,484 | ||||||||||||
Depreciation, depletion, amortization, and accretion | 1,392,032 | 1,706,030 | 4,780,766 | 4,898,988 | ||||||||||||
Stock based compensation expense | 439,653 | 500,597 | 799,149 | 836,949 | ||||||||||||
Loss (gain) on sale of assets | - | - | 1,449,871 | (221,642 | ) | |||||||||||
Loss (gain) on derivative contracts net of cash received or paid on settlement | 1,370,573 | 908,227 | 1,306,593 | (272,151 | ) | |||||||||||
Foreign currency translation loss | (98 | ) | 907 | (1,086 | ) | 1,517 | ||||||||||
Adjusted EBITDA | $ | 3,925,127 | $ | 16,548,087 | $ | 13,730,636 | $ | 41,245,235 | ||||||||
Epsilon defines Adjusted EBITDA as earnings before (1) net interest expense, (2) taxes, (3) depreciation, depletion, amortization and accretion expense, (4) impairments of natural gas and oil properties, (5) non-cash stock compensation expense, (6) gain or loss on derivative contracts net of cash received or paid on settlement, and (7) other income. Adjusted EBITDA is not a measure of financial performance as determined under
Additionally, Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Epsilon has included Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA provides useful information regarding its ability to service debt and to fund capital expenditures. It further provides investors a helpful measure for comparing operating performance on a "normalized" or recurring basis with the performance of other companies, without giving effect to certain non-cash expenses and other items. This provides management, investors and analysts with comparative information for evaluating the Company in relation to other natural gas and oil companies providing corresponding non-
Source:
2023 GlobeNewswire, Inc., source