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Epsilon Reports Third Quarter 2023 Results

HOUSTON, Nov. 09, 2023 (GLOBE NEWSWIRE) -- Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today reported third quarter 2023 financial and operating results.

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.
  • Realized average price of $2.32 per Mcfe including hedges ($1.64 per Mcfe excluding hedges) for the quarter ended September 30, 2023, a decrease of 5% compared to the prior quarter.

  • Reported total revenues of $6.3 million for the quarter ended September 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 ended September 30, 2023.

  • Cash, cash equivalents (including restricted cash), and short term investments totaled $31.9 million at September 30, 2023.

  • Returned $4.0 million to shareholders during the quarter ended September 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 on Henry Hub (HH) and TGP Z4 basis swaps totaling 455,000 MMBTU.

  • Placed Henry Hub (HHUB) and TGP Z4 basis swaps for November 2023 through March 2024 (at a net realized price of $2.59 per MMBTU, for 380,000 MMBTU) and April 2024 through October 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 for November 2023 through March 2024 (at a net realized price of $2.65 per MMBTU, for 380,000 MMBTU) and April 2024 through October 2024 (at a net realized price of $2.09 per MMBTU, for 535,000 MMBTU).

Third Quarter Operating Results:

Epsilon’s capital expenditures were $5.5 million for the quarter ended September 30, 2023, including certain pre-paid well costs. This capital was primarily related to the drilling of one gross (0.25 net) well and the completion of two gross (0.5 net) wells in Ector Co. Texas ($4.8 million).

During the quarter, we received well proposals from our operating partner in Pennsylvania for the drilling and completion of seven gross wells (0.74 net). The first three wells have been drilled, and drilling is expected to commence on the fourth this month. All seven wells are expected to be drilled by year end with completions expected in the first half of 2024.

In addition, initial investment plans for 2024 on our position in Ector Co. Texas call for the drilling and completion of up to four gross (1.0 net) wells, starting in the first quarter. The two gross (0.5 net) wells drilled in 2023 are now completed and on flowback. Initial results are encouraging and in-line with our pre-drill projections.

Jason Stabell, Epsilon's Chief Executive Officer, commented, "Our announced investments and ongoing activities in Pennsylvania and Texas position the company for per share volume and cash flow growth next year, and represent the next step in our objective to deliver sustainable and attractive returns across a more diversified portfolio. These investments will be comfortably funded from cash flow and cash on hand while allowing us to pursue additional opportunities on existing assets and in new areas, to pay our annual dividend and to repurchase our shares opportunistically.”

Earning’s Call:

The Company will host a conference call to discuss its results on Friday, November 10, 2023 at 10:00 a.m. Central Time (11:00 a.m. Eastern Time).

Interested parties in the United States and Canada may participate toll-free by dialing (833) 816-1385. International parties may participate by dialing (412) 317-0478. Participants should ask to be joined to the “Epsilon Energy Third Quarter 2023 Earnings Conference Call.”

A webcast can be viewed at: A webcast replay will be available on the Company’s website ( following the call.

About Epsilon

Epsilon Energy Ltd. is a North American onshore natural gas and oil production and gathering company with assets in Pennsylvania, Texas, New Mexico, and Oklahoma.

For more information, please visit, 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:


Jason Stabell
Chief Executive Officer

Andrew Williamson
Chief Financial Officer

Unaudited Consolidated Statements of Operations
 (All amounts stated in US$)
  Three months ended September 30, Nine months ended September 30,
  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$)
  September 30, December 31,
  2023 2022
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 
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 September 30, 2023 and 23,117,144 issued and outstanding at December 31, 2022  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 September 30,
  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 September 30, Nine months ended September 30,
  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 U.S. GAAP and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with U.S. GAAP or as a measure of profitability or liquidity.

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-U.S. GAAP financial measures or that have different financing and capital structures or tax rates. These non-U.S. GAAP financial measures should be considered in addition to, but not as a substitute for, measures for financial performance prepared in accordance with U.S. GAAP.

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