HOUSTON, Aug. 13, 2020 (GLOBE NEWSWIRE) — Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today reported second 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 $3.1 million and $8.3 million for the three and six months ended June 30, 2020, respectively, with free cash flow (FCF) of $1.3 million and $4.2 million for the same periods.Realized gas prices of $1.36/Mcfe, (excluding hedges) and $1.75/Mcfe (including hedges).
Returned $0.4 million to shareholders through open market purchases of 169,285 shares through June 30, 2020 for an average price of $2.51/share. 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.
Marcellus net revenue interest (NRI) gas production averaged 30.6 MMcf/d (Working Interest of 35.2 MM/d) for the second quarter.
During the second quarter the Marcellus operator turned to sales 4 Gross wells (0.16 Net wells). In addition, during the quarter, at the request of the upstream producers (including Epsilon), the operator of the Auburn System reduced the gathering pressure in a step-wise manner to 550 psi from the historical gathering pressure of 700 psi. This reduced pressure allowed all wells to increase production in varying degrees. The June 30th, 2020 NRI exit rate was 39.6 MMcf/d (Working Interest of 45.5 MMcfe/d).
Auburn System gathered and delivered 15.6 Bcfe gross (5.5 Bcfe net to Epsilon’s interest) which represents approximately 86% of maximum throughput as currently configured. The June 30th exit gathering volume rate was 183.6 MMcf/d.
Total revenues of $6.3 million; net loss of $0.6 million; and EBITDA of $3.1 million for the quarter.
Cash at quarter end of $16.3 million.
Net loss before tax of $0.74 million for the quarter included a bad debt allowance of $0.82 million.
Operating expenses including SG&A was $1.19/Mcfe and $1.09/Mcfe excluding $0.3 million of non-recurring legal costs.Michael Raleigh, CEO, commented, “We are very pleased with the financial performance of the company as we continue to generate free cash flow even within a challenged price environment. At the current production rate and natural gas prices for the remainder of the year we anticipate the company should be able to generate $9.0 – $10.0 million of free cash flow for the full year. We anticipate exiting the year between 32-33 MMcfe/d of NRI production. Epsilon recorded a bad debt reserve of $0.8 million related to a receivable from a shipper on the Auburn Gas Gathering system who filed for bankruptcy protection during the quarter. Post-filing, the shipper continues to invest capital in both existing and new wells in the contract area. While we ultimately believe that it is possible that some, if not all, of this receivable may be collected, the timing is uncertain, and therefore we recognized this as an allowance for bad debt. As anticipated, the restraint in capital spending across the E&P industry that began in the first quarter of 2020 is having a meaningful impact on natural gas supply. Although the natural gas supply/demand balance has been disappointing this past quarter due to exiting the mild winter with high storage levels and the curtailment of LNG exports, the market is beginning to discount a much tighter balance in 2021 as evidenced by higher prices for future delivery of natural gas.In June, Epsilon elected to participate in three new wells proposed by the operator. While Epsilon’s net interest is minor, these wells are all long reach horizontals, and two of the wells are targeting the Upper Marcellus zone which should provide more productivity data on the Upper Marcellus helping us to better understand how to efficiently develop the significant potential of our acreage.”Financial and Operating Results
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