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Epsilon Reports Second Quarter 2023 Results

HOUSTON, Aug. 10, 2023 (GLOBE NEWSWIRE) -- Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today reported second quarter 2023 financial and operating results.

Second Quarter Financial Highlights:

  • Reported net revenue interest (NRI) production of 2.3 Bcfe (24.9 MMcfe per day) for the quarter ended June 30, 2023.

  • Realized average price of $2.45 per Mcfe including hedges ($1.89 per Mcfe excluding hedges) for the quarter ended June 30, 2023.

  • Delivered total revenues of $6.5 million for the quarter ended June 30, 2023, a decrease of 31% compared to the prior quarter.

    • $4.3 million from natural gas, oil, and NGL sales (including $0.7 million from the recently acquired New Mexico properties), a decrease of 38% compared to the prior quarter
    • $2.2 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), a decrease of 8% compared to the prior quarter
  • Reported Adjusted EBITDA of $4.2 million for the quarter ended June 30, 2023.

  • Cash, cash equivalents (including restricted cash), and short term investments totaled $36.8 million at June 30, 2023, a decrease of 26% compared to March 31, 2023, due to the Permian investments made during the quarter.

  • Returned $3.1 million to shareholders during the quarter ended June 30, 2023.

    • $1.7 million through the repurchase of 325,055 shares (average price of $5.17 per share), representing a 1% reduction of shares outstanding
    • $1.4 million through the quarterly dividend
    • An additional 525,000 shares were repurchased after the quarter end in a block trade (at $5.00 per share)
    • 1.4 million shares remain under the approved buyback program (expires in March 2024)
  • Realized gains of $0.6 million on Henry Hub (HH) and TGP Z4 basis swaps totaling 455,000 MMBTU. The current unrealized gain on the remaining hedge book for 2023 is $1.3 million at June 30, 2023.

  • Closed two liquids focused investments in the Permian Basin, as previously disclosed.

  • Closed a new $35 million credit facility, as previously disclosed.

Second Quarter Operating Results:

Epsilon’s capital expenditures were $12.4 million for the quarter ended June 30, 2023. This capital was primarily related to leasehold acquisitions costs in Ector Co. Texas ($7.5 million), the drilling of one gross (0.25 net) well in Ector Co. Texas ($2.4 million), the drilling and completion of two gross (0.2 net) wells in Eddy Co. New Mexico ($2.1 million), and the completion of one gross (0.11 net) well in Dewey Co. Oklahoma ($0.2 million).

At June 30, 2023, the Company has one gross (0.25 net) Ector Co. Texas well waiting on completion.

Jason Stabell, Epsilon's Chief Executive Officer, commented, "We had a solid quarter in a difficult natural gas price environment. We made two liquids focused investments in the Permian, added liquidity with a new credit facility, and returned $3.1 million to our shareholders through a combination of dividends and share buybacks.

Early results on our New Mexico investment are very encouraging and activity is continuing in Texas which we expect to add additional oil volumes in the 4th quarter of this year.

Epsilon’s increasingly diversified asset based and strong balance sheet keep us well positioned to continue to create value for our shareholders. An example of this is our opportunistic purchase of 525,000 shares in early July at $5 per share.”

Earning’s Call:

The Company will host a conference call to discuss its results on Friday, August 11, 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 Second 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 June 30, Six months ended June 30,
  2023 2022 2023 2022
Revenues from contracts with customers:                
Gas, oil, NGL, and condensate revenue $4,298,072  $17,915,836  $11,267,653  $29,395,161 
Gas gathering and compression revenue  2,202,064   1,987,168   4,588,759   4,107,941 
Total revenue  6,500,136   19,903,004   15,856,412   33,503,102 
Operating costs and expenses:                
Lease operating expenses  1,440,521   2,252,017   2,844,800   3,657,507 
Gathering system operating expenses  570,934   541,228   1,222,275   1,065,603 
Development geological and geophysical expenses     2,386      4,772 
Depletion, depreciation, amortization, and accretion  1,615,728   1,803,739   3,388,734   3,192,958 
Loss (gain) on sale of oil and gas properties  1,449,871   (221,642)  1,449,871   (221,642)
General and administrative expenses:                
Stock based compensation expense  179,748   194,050   359,496   336,352 
Other general and administrative expenses  1,596,626   1,465,143   3,620,399   2,636,275 
Total operating costs and expenses  6,853,428   6,036,921   12,885,575   10,671,825 
Operating income (loss)  (353,292)  13,866,083   2,970,837   22,831,277 
Other income (expense):                
Interest income  433,201   21,945   923,963   37,166 
Interest expense  (34,422)  (745)  (62,859)  (16,064)
Gain (loss) on derivative contracts  628,178   776,994   1,696,838   (194,910)
Other income (expense)  3,066   (61,713)  4,701   (67,119)
Other income (expense), net  1,030,023   736,481   2,562,643   (240,927)
Net income before income tax expense  676,731   14,602,564   5,533,480   22,590,350 
Income tax expense  246,142   4,019,576   1,573,064   6,201,474 
NET INCOME $430,589  $10,582,988  $3,960,416  $16,388,876 
Currency translation adjustments  1,129   (19,150)  (1,471)  (13,748)
Unrealized loss on securities  (47,006)     (47,006)   
NET COMPREHENSIVE INCOME $384,712  $10,563,838  $3,911,939  $16,375,128 
Net income per share, basic $0.02  $0.45  $0.17  $0.69 
Net income per share, diluted $0.02  $0.44  $0.17  $0.69 
Weighted average number of shares outstanding, basic  22,749,322   23,576,746   22,869,440   23,627,015 
Weighted average number of shares outstanding, diluted  22,783,987   23,822,123   22,904,922   23,796,166 

Unaudited Consolidated Balance Sheets
(All amounts stated in US$)
  June 30, December 31,
  2023 2022
Current assets        
Cash and cash equivalents $9,488,094  $45,236,584 
Accounts receivable  4,355,076   7,201,386 
Short term investments  26,804,482    
Fair value of derivatives  1,286,070   1,222,090 
Prepaid income taxes  1,233,669   1,140,094 
Other current assets  391,007   632,154 
Operating lease right-of-use assets     31,383 
Total current assets  43,558,398   55,463,691 
Non-current assets        
Property and equipment:        
Oil and gas properties, successful efforts method        
Proved properties  152,014,489   148,326,265 
Unproved properties  25,989,679   18,169,157 
Accumulated depletion, depreciation, amortization and impairment  (109,996,874)  (107,729,293)
Total oil and gas properties, net  68,007,294   58,766,129 
Gathering system  42,673,506   42,639,001 
Accumulated depletion, depreciation, amortization and impairment  (35,026,730)  (34,500,740)
Total gathering system, net  7,646,776   8,138,261 
Land  637,764   637,764 
Buildings and other property and equipment, net  312,830   286,035 
Total property and equipment, net  76,604,664   67,828,189 
Other assets:        
Operating lease right-of-use assets, long term  495,842    
Restricted cash  495,000   570,363 
Total non-current assets  77,595,506   68,398,552 
Total assets $121,153,904  $123,862,243 
Current liabilities        
Accounts payable trade $1,334,008  $1,695,353 
Gathering fees payable  498,438   935,012 
Royalties payable  1,511,168   2,223,043 
Accrued capital expenditures  134,224   41,694 
Accrued compensation  405,448   598,351 
Other accrued liabilities  467,387   690,655 
Operating lease liabilities  24,748   35,299 
Total current liabilities  4,375,421   6,219,407 
Non-current liabilities        
Asset retirement obligations  2,777,847   2,780,237 
Deferred income taxes  10,847,721   10,617,394 
Operating lease liabilities, long term  519,652    
Total non-current liabilities  14,145,220   13,397,631 
Total liabilities  18,520,641   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 22,649,290 shares issued and 22,554,169 shares outstanding at June 30, 2023 and 23,117,144 issued and outstanding at December 31, 2022  121,348,004   123,904,965 
Treasury shares, at cost, 95,121 at June 30, 2023 and 0 at December 31, 2022  (497,814)   
Additional paid-in capital  10,215,725   9,856,229 
Accumulated deficit  (38,158,726)  (39,290,540)
Accumulated other comprehensive income  9,726,074   9,774,551 
Total shareholders' equity  102,633,263   104,245,205 
Total liabilities and shareholders' equity $121,153,904  $123,862,243 

Unaudited Consolidated Statements of Cash Flows
(All amounts stated in US$)
  Six months ended June 30,
  2023 2022
Cash flows from operating activities:        
Net income $3,960,416  $16,388,876 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depletion, depreciation, amortization, and accretion  3,388,734   3,192,958 
Accretion of discount on available for sale securities  (343,328)   
Gain on available for sale securities  (47,659)   
Loss (gain) on sale of oil and gas properties  1,449,871   (221,642)
(Gain) loss on derivative contracts  (1,696,838)  194,910 
Settlement received (paid) on derivative contracts  1,632,858   (1,375,287)
Settlement of asset retirement obligation     (118,259)
Stock-based compensation expense  359,496   336,352 
Deferred income tax expense (benefit)  230,327   319,326 
Changes in assets and liabilities:        
Accounts receivable  2,846,310   (5,333,960)
Prepaid income taxes and other assets and liabilities  332,214   328,872 
Accounts payable, royalties payable and other accrued liabilities  (1,910,674)  738,023 
Income taxes payable     1,312,365 
Net cash provided by operating activities  10,201,727   15,762,534 
Cash flows from investing activities:        
Additions to unproved oil and gas properties  (7,821,248)  (162,445)
Additions to proved oil and gas properties  (5,653,284)  (4,935,370)
Additions to gathering system properties  (30,264)  (82,855)
Additions to land, buildings and property and equipment  (47,933)  (1,234)
Purchases of short term investments  (32,812,974)   
Proceeds from short term investments  6,352,473    
Proceeds from sale of oil and gas properties  12,498   200,000 
Net cash used in investing activities  (40,000,732)  (4,981,904)
Cash flows from financing activities:        
Buyback of common shares  (3,054,775)  (3,956,403)
Exercise of stock options     608,787 
Dividends paid  (2,828,602)  (2,969,677)
Debt issuance costs  (140,000)   
Net cash used in financing activities  (6,023,377)  (6,317,293)
Effect of currency rates on cash, cash equivalents, and restricted cash  (1,471)  (13,748)
(Decrease) increase in cash, cash equivalents, and restricted cash  (35,823,853)  4,449,589 
Cash, cash equivalents, and restricted cash, beginning of period  45,806,947   27,065,423 
Cash, cash equivalents, and restricted cash, end of period $9,983,094  $31,515,012 
Supplemental cash flow disclosures:        
Income taxes paid $1,432,000  $4,566,000 
Interest paid $80,075  $33,885 
Non-cash investing activities:        
Change in proved properties accrued in accounts payable and accrued liabilities $72,999  $(1,097,247)
Change in gathering system accrued in accounts payable and accrued liabilities $4,240  $8,554 
Change in share buybacks accrued in accounts payable and accrued liabilities $  $598,419 
Asset retirement obligation asset additions and adjustments $4,640  $7,666 

Adjusted EBITDA Reconciliation
 (All amounts stated in US$)
  Three months ended June 30, Six months ended June 30,
  2023 2022 2023 2022
Net income $430,589  $10,582,988  $3,960,416  $16,388,876 
Add Back:                
Interest (income) expense, net  (398,779)  (21,200)  (861,104)  (21,102)
Income tax expense  246,142   4,019,576   1,573,064   6,201,474 
Depreciation, depletion, amortization, and accretion  1,615,728   1,803,739   3,388,734   3,192,958 
Stock based compensation expense  179,748   194,050   359,496   336,352 
Loss (gain) on sale of assets  1,449,871   (221,642)  1,449,871   (221,642)
Loss (gain) on derivative contracts net of cash received or paid on settlement  641,380   (940,553)  (63,980)  (1,180,377)
Foreign currency translation loss  (5)  (1,071)  (987)  4,331 
Adjusted EBITDA $4,164,674  $15,415,887  $9,805,510  $24,700,870 

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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