Epsilon Reports Third Quarter 2020 Results
HOUSTON, Nov. 10, 2020 (GLOBE NEWSWIRE) — Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today reported third quarter 2020 financial and operating results and material subsequent events following the end of the quarter through the date of this release.Net cash provided by operations of $3.8 million and $12.1 million for the three and nine months ended September 30, 2020, respectively, with free cash flow (FCF) of $2.4 million and $6.6 million for the same periods.
Realized gas prices of $1.18/Mcf, (excluding hedges) and $1.72/Mcf (including hedges) for the three months ended September 30, 2020.
Following the June 30, 2020 deadline for the previously announced Tender Offer, $7.15 million was returned to shareholders in exchange for 2,337,034 shares which were properly tendered representing 8.9% of outstanding shares for $3.06/share. During the first nine months of 2020 the company returned a total of $9.1 million to shareholders through share repurchases representing a reduction of 11.2% of outstanding shares as at December 31, 2019.
Marcellus net revenue interest (NRI) gas production averaged 32.5 MMcf/d (Working Interest of 37.4 MMcf/d) for the third quarter. Due to the usual weak shoulder season demand the operator curtailed the third quarter NRI exit rate to 26.0 MMcf/d (Working Interest of 29.9 MMcf/d).
Auburn System gathered and delivered 15.3 Bcfe gross (5.4 Bcfe net to Epsilon’s interest) which represents approximately 83% of maximum throughput as currently configured. The September 30th exit gathering volume rate was 107.2 MMcf/d due to the aforementioned well curtailments and elevated pipeline pressures.
Total revenues of $5.8 million; net loss of $0.3 million; and EBITDA of $3.9 million for the quarter.
Cash at quarter end of $11.6 million.
Net loss before tax of $0.3 million for the quarter.
Operating expenses including SG&A was $1.22/Mcfe and $1.12/Mcfe excluding $0.3 million of non-recurring legal costs.Michael Raleigh, CEO, commented, “The impact of the oil and gas shale industry adopting capital spending discipline is becoming evident in restrained production volumes and higher forward price expectations for natural gas. The rig count in the US onshore oil basins remains 60-80% below the peak rig counts observed in March 2020. The resulting associated natural gas production from new wells is not expected to make up for natural declines from the existing onshore well inventory. Despite improving pricing for natural gas, Appalachia rig counts remain approximately 35% below the peak rig levels observed in March. During the third quarter, NYMEX Henry Hub natural gas futures prices for 2021 increased 10%. We expect the market environment to be positive for natural gas prices as LNG and heating related demand begin to ramp up as domestic natural gas supply is expected to be flat to declining.Epsilon remains focused on free cash flow generation. Given the current production rate and prices for natural gas, we continue to anticipate the company will generate $9.0 – $10.0 million of free cash flow for 2020. We are currently working through our development options for our 2021 capital program including discussions with the upstream operator on a regular basis. Our goal is to deploy capital to maintain yearly average production levels for the coming year and continue to generate free cash flow. We look forward to sharing our 2021 budget plans with our shareholders at the appropriate time.”Financial and Operating ResultsCapital Expenditures