EPSN...Another debt free NG company...Nice earnings released last night after the close...
Epsilon Energy Ltd. Announces Full Year 2021 Results
HOUSTON, March 23, 2022 (GLOBE NEWSWIRE) -- Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today reported its financial results for the fourth quarter and full-year ended December 31, 2021.
Epsilon’s highlights for 2021 and material subsequent events following year end through the date of this release include:
Total Revenues of $42.4 million for the year as compared to $24.4 million for the same period of 2020.
Net after tax income of $11.6 million ($0.49 per share) for the year as compared to $0.9 million ($0.03 per share) for the same period of 2020.
Adjusted EBITDA of $24.1 million for the year as compared to $15.7 million for the same period of 2020.
Average net natural gas prices of $2.68/Mcf including hedges ($3.10/Mcf excluding hedges) for the year as compared to $1.78/Mcf including hedges ($1.36/Mcf excluding hedges) for the same period in 2020. Realized natural gas prices averaged $3.65/Mcf including hedges ($4.36/Mcf excluding hedges) in the fourth quarter of 2021. Hedges total 0.9 Bcf for Q1 2022 and nil thereafter
Cash and cash equivalents at the end of 2021 were $27.1 million (net of $2.4 MM of share repurchases in 2021) as compared to $13.8 million at the end of 2020.
Total estimated proved natural gas reserves of 111.0 Bcf as of December 31, 2021 after 2021 production of 10.2 Bcf, and 1.1 MMbbl of proved oil and other liquid reserves after 2021 production of 54.4 Mbbl. This compares with 88.7 Bcf of gas reserves and 0.37 MMbbls of oil reserves at the end of 2020.
Gathered and delivered 63.2 Bcf gross (22.1 Bcf net to Epsilon’s interest) during the year, or 173 MMcf/d through the Auburn Gas Gathering System.
Marcellus net gas production averaged 26.9 MMcf/d for the year as compared to 30.0 MMcf/d net gas production in 2020. Net gas production as of this release is approximately 22.3 MMcf/d (or 25.7 MMcf/d of working interest gas production) Epsilon has 14 gross (2.29 Net) wells offline for adjacent completion operations and pad compression installations. The shut-in wells (2.29 Net) were producing, in aggregate, slightly more than 4.0 MMcf/d net (or 4.6 MMcf/d working interest gas production) prior to shut-in.
Michael Raleigh, CEO, commented, “During the past year, the Company performed exceptionally well with EBITDA and free cash flow rising significantly year over year. Our cash balance grew roughly 100% to $27 MM, even with our share repurchases of $2.4 MM, and the company remains debt free. We expect to benefit in this more constructive price environment throughout the remainder of the 2022 calendar year as consolidation coupled with capital discipline provides support for constructive commodity prices. The E&P industry has committed to capital spending restraint and generating free cash flow rather than simply expanding production. The new paradigm is flat or slight (5% or less) y-o-y production growth, and living within cash flow.
We continued our measured appraisal program on our Meramec acreage in Oklahoma in early 2022. The Company will complete 2 gross (.55 net) wells during early April 2022. The timing of these completion operations coincides with our expectation for very constructive prices for oil and natural gas liquids. Our evaluation of these two wells will inform our decision regarding further appraisal and development in 2022.
After evaluating our capital expenditures, strong balance sheet, and outlook for 2022, we expect another solid year of cash generation. The Board of Directors elected to expand our commitment to returning capital to shareholders through additional share repurchases and the initiation of a quarterly dividend. All dividends paid by the Company are “eligible dividends” as defined in subsection 89(1) of the Income Tax Act (Canada), unless indicated otherwise.”
Financial and Operating Results
Year ended
December 31,
2021
2020
Revenues
Natural gas revenue
$
31,708,185
$
15,207,227
Volume (MMcf)
10,233
11,204
Avg. Price ($/Mcf)
$
3.10
$
1.36
PA Exit Rate (MMcfpd)
29.3
32.8
Oil and other liquids revenue
$
2,829,982
$
338,325
Volume (MBO)
54.4
14.9
Avg. Price ($/Bbl)
$
52.02
$
22.66
Gathering system revenue
$
7,865,825
$
8,879,728
Total Revenues
$
42,403,992
$
24,425,280
Capital Expenditures
Epsilon’s development capital expenditures were $5.4 million for the year ended December 31, 2021. This capital was mainly related to the drilling of three gross (0.42 net) and completion of three gross (0.09 net) Marcellus wells and the drilling of four gross (0.75 net) and completion of two gross (0.6 net) wells in Oklahoma.
The Company has one gross (0.18 net) Marcellus well and two gross (0.55 net) Oklahoma wells that were drilled in 2021 and are scheduled to be completed in April 2022.
Fourth Quarter Results
Epsilon generated revenues of $13.8 million for the three months ended December 31, 2021 compared to $5.9 million for the three months ended December 31, 2020. The Company’s net revenue interest production was 2.60 Bcf in the fourth quarter primarily in Pennsylvania.
Realized natural gas prices averaged $3.65/Mcf including hedges ($4.36/Mcf excluding hedges) in the fourth quarter of 2021. Operating expenses for Marcellus Upstream operations in the fourth quarter were $1.6 million.
The Auburn Gas Gathering system delivered 16.6 Bcf of natural gas during the quarter as compared to 15.3 Bcf during the fourth quarter of 2020. Primary gathering volumes decreased 11.1% quarter over quarter from 13.3 Bcf to 11.8 Bcf. Imported cross-flow volumes decreased 138% from 2.0 Bcf to 4.8 Bcf.
Epsilon reported a net after tax income of $8.0 million attributable to shareholders or $0.34 per basic and $0.33 per diluted shares outstanding for the three months ended December 31, 2021, compared to net income of $1.4 million, and $0.06 per basic and diluted shares outstanding for the three months ended December 31, 2020.
For the three months ended December 31, 2021, Epsilon's Adjusted Earnings Before Interest, Income Taxes, Depreciation, Amortization ("Adjusted EBITDA") was $9.0 million as compared to $4.0 million for the three months ended December 31, 2020. The increase in Adjusted EBITDA was primarily due to the increase in upstream revenue due to the higher prices and increased production due to the completion of six new wells during the year.
Adjusted EBITDA
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.
About Epsilon
Epsilon Energy Ltd. is a North American on-shore focused independent exploration and production company engaged in the acquisition, development, gathering and production of oil and gas reserves. Our primary area of operation is the Marcellus basin in northeast Pennsylvania. Our assets are concentrated in areas with known hydrocarbon resources, which are conducive to multi-well, repeatable drilling programs. For more information, please visit www.epsilonenergyltd.com, where we routinely post announcements, updates, events, investor information, presentations and recent news releases.
https://finance.yahoo.com/news/epsilon-energy-ltd-announces-full-010800563.html
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