12:16:37 EDT Thu 28 Mar 2024
Enter Symbol
or Name
USA
CA



Epsilon Energy Ltd
Symbol EPS
Shares Issued 49,475,700
Close 2014-07-30 C$ 4.72
Market Cap C$ 233,525,304
Recent Sedar Documents

Epsilon earns $5.3-million (U.S.) in Q2

2014-07-30 21:27 ET - News Release

Mr. Michael Raleigh reports

EPSILON REPORTS SECOND QUARTER 2014 RESULTS

Epsilon Energy Ltd. has released its second quarter 2014 financial and operating results. Highlights for the second quarter and material subsequent events following the end of the quarter through the date of this release include:

  • Pretax income of $8.6-million and adjusted earnings before interest, taxes, depreciation and amortization of $11.0-million for the quarter; $12.5-million and $22.4-million, respectively, year to date;
  • Upstream EBITDA of $8.4-million and mid-stream EBITDA of $2.6-million for the quarter; $17.1-million and $5.3-million, respectively, year to date;
  • Marcellus working interest gas production averaging 52 million cubic feet per day for the second quarter and for the six months ended June 30, 2014;
  • Gathered and delivered 29 billion cubic feet equivalent gross (10.2 billion cubic feet equivalent net to Epsilon's interest) during the quarter, or 319 million cubic feet equivalent gross per day with the Auburn gas-gathering system;
  • Repurchased 406,600 common shares at an average price of $3.97 during the quarter; as of the date of this release, 1,281,710 common shares at an average price of $3.72 have been repurchased under the current normal course issuer bid resulting in a current share count of 49,475,700 issued and outstanding.

Management comments

Michael Raleigh, chief executive officer, commented: "We are pleased with the significant free cash flow generation for the quarter, despite the challenging gas price environment in northeastern Pennsylvania. Managing our G&A and operating costs lower in anticipation of the current commodity price has been very beneficial to our shareholders. Our upstream production volumes were relatively flat quarter over quarter, despite only turning two gross (0.14 net) wells into the gathering system.

"Epsilon's mid-stream asset continues to perform well, operating at approximately 90 per cent of capacity for the entire quarter and generating $2.6-million in EBITDA. We continue our planning discussions with our upstream and mid-stream partners and anticipate strengthening these relationships in the future in an effort to optimize the contribution of both segments.

"Over all, we continued to execute on our stated goals: minimize expenses, maximize cash generation from both segments and efficiently return capital to shareholders through our share repurchase program."

Capital expenditures

Epsilon's total capital expenditures were $1.2-million for the three months ended June 30, 2014. A total of $200,000 was allocated to drilling ($100,000) and completing ($100,000) Marcellus wells, and $1.0-million was allocated to the continuing expansion of the Auburn gas-gathering system.

There was, however, a working interest revision from the upstream operator that reduced segment capital spending by $600,000 for the quarter.

Epsilon's 2014 capital forecast for the rest of the year is $13.8-million. The majority of this capital ($12.5-million) is allocated to the continuing expansion of the Auburn gas-gathering system. This capital forecast for the rest of the year could be reduced significantly if the Auburn compression facility expansion does not commence during the third quarter.

Marcellus operational guidance

During the second quarter, Epsilon turned two gross (0.14 net) new wells in line.

Subsequent to June 30, Epsilon received and elected to participate in two wells (0.04 net), which will spud during the third quarter.

Second quarter results

Epsilon generated revenues of $15.0-million for the three months ended June 30, 2014, compared with $9.3-million for the three months ended June 30, 2013. The company's upstream Marcellus working interest production was 4.7 billion cubic feet equivalent net in the second quarter.

Realized natural gas prices averaged $2.86 per thousand cubic feet in the second quarter of 2014. Although differentials narrowed temporarily at the beginning of the second quarter, realized natural gas prices continue to be negatively impacted by a significant differential to Nymex. Operating expenses for Marcellus upstream operations in the second quarter were $700,000.

The mid-stream system delivered 29 billion cubic feet equivalent gross of natural gas during the quarter as compared with 28 billion cubic feet equivalent during the first quarter of 2014. Both primary gathering volumes and imported cross-flow volumes increased slightly quarter over quarter to 17.6 billion cubic feet equivalent and 11.4 billion cubic feet equivalent, respectively. Epsilon reported net after-tax income of $5.3-million attributable to common shareholders or 11 cents per basic and diluted common shares outstanding for the three months ended June 30, 2014, compared with a net loss of $300,000, or one cent per basic and diluted common shares outstanding for the three months ended June 30, 2013.

For the three months ended June 30, 2014, Epsilon's adjusted earnings before interest, income taxes, depreciation and amortization were $11.0-million as compared with $4.5-million for the three months ended June 30, 2013. The increase in adjusted EBITDA was primarily due to increased production, increased cross-flow gas, and decreased general and administrative costs.

              
         INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS      
                        (all amounts stated in U.S.$)                         
                                                                            
                     Three months ended June 30,   Six months ended June 30, 
                             2014          2013          2014          2013 
Revenues
Oil and gas revenue   $ 11,748,130  $  8,420,872  $ 26,046,196  $ 19,814,630
Gas-gathering and
compression
revenue                  3,298,092       869,140     6,625,171     3,447,072
Total revenue           15,046,222     9,290,012    32,671,367    23,261,702
Operating costs and
expenses
Project operating
costs                    2,743,874     2,038,331     5,972,748     5,344,042
Depletion,
depreciation,
amortization and
decomissioning
accretion                3,969,922     3,397,030     8,401,436     6,674,231
Impairment
recovery                        --            --      (420,634)     (384,068)
Stock-based
compensation              (941,635)       48,385      (918,747)      104,440
General and
administrative             571,579     2,389,754       990,935     3,270,649
Total operating
costs and
expenses                 6,343,740     7,873,500    14,025,738    15,009,294
Operating income         8,702,482     1,416,512    18,645,629     8,252,408
Other income and
expense
Interest income              2,636         2,034        12,045         2,099
Finance expense           (989,334)   (1,071,263)   (2,234,120)   (2,160,850)
Realized (loss)
gain on
commodity
contracts               (1,622,450)     (402,615)   (4,206,580)      613,290
Net change in
unrealized (loss)
on commodity
contracts                1,609,796     2,107,035      (597,110)     (805,805)
Gain on sale of
fixed assets               659,654            --       659,194            --
Other income               228,645         9,624       224,746         9,624
Net other
expense                   (111,053)      644,815    (6,141,825)   (2,341,642)
Income tax recovery --
current                         --     1,978,331            --     4,294,256
Income tax expense --
deferred                 3,286,433       382,148     5,198,290       239,232
Net income            $  5,304,996  $   (299,152) $  7,305,514  $  1,377,278
Net income per
share, basic                 $0.11        ($0.01)        $0.15         $0.03
Net income per
share, diluted               $0.11        ($0.01)        $0.15         $0.03

We seek Safe Harbor.

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