Industry Analysis - The oil and gas industry is described as a boom-bust, cyclical industry, requiring patience and experience to navigate effectively [2] - The industry has experienced low natural gas prices in some basins, leading to challenging conditions for operators [2] Company Analysis: Epsilon Energy (EPSN) - Epsilon Energy (EPSN) now derives most of its earnings from oil and liquids, which has positively impacted its results amid low natural gas prices [2] - The company's financials, competitive position, and development prospects are key areas of focus for analysis [1] Research Service - The Oil & Gas Value Research service provides in-depth analysis of undervalued oil and gas companies, including balance sheets, competitive positions, and development prospects [1] - Members of the service receive exclusive analysis on certain companies that is not published on the free site [1]

Financial Data and Key Metrics Changes - The company reported a quarter-over-quarter oil production growth of 19% in the Permian region, driven by the seventh Ector well coming online [4] - Realized prices in Pennsylvania were $1.54 per Mcf, with operating costs increasing by approximately 40% due to plugging and abandonment activities [9] - Adjusted EBITDA from the Permian contributed approximately $8.5 million year-to-date, accounting for 70% of the total company figure [10] Business Line Data and Key Metrics Changes - In Pennsylvania, three of the seven previously announced deferred TILs were put on production, with expectations for quarter-over-quarter growth in natural gas volumes in the fourth quarter [5][6] - The company invested approximately $40 million in the Permian starting in Q2 2023, with cash flows of approximately $12 million received by the end of Q3 [10] Market Data and Key Metrics Changes - Wellhead prices in Pennsylvania remained low heading into winter, impacting production and pricing [5] - The company has added to its hedge book for 2025, locking in prices above the current strip [13] Company Strategy and Development Direction - The company announced its entry into Alberta, Canada, through two joint ventures, focusing on the Garrington area for initial development [7][12] - The company plans to continue paying dividends and monitor opportunities to reduce share count at attractive prices [8] Management's Comments on Operating Environment and Future Outlook - Management indicated that the current quarter was the trough for the Pennsylvania business, with expectations for recovery as curtailments are lifted and better pricing is anticipated [9] - The company expects to be active in Texas in 2025 and resume growth, with drilling activity scheduled to start in Alberta [11] Other Important Information - The company is currently evaluating opportunities for additional investments, particularly in Canada, due to favorable cost structures and royalty regimes [12] - Liquidity remains strong with available revolver capacity at $45 million, positioning the company well for future opportunities [13] Q&A Session Summary Question: What is the net production from the three wells put on flowback? - The net production is approximately 8 million a day, reflecting a little over 13% net revenue interest in that pad [20] Question: Will the increase in realized gas price spur the 3 million to 4 million a day coming back online? - Management believes that curtailed volumes will come back online as prices dictate, although visibility on the exact schedule remains unclear [21]

Financial Performance - The company reported a net operating revenue of $29,000,000 for the quarter, with an adjusted EBITDA of $10,000,000, indicating a margin of approximately 34.5%[15]. - Total revenue for the three months ended September 30, 2023, was $7,287,941, an increase from $6,310,527 in the same period last year, representing a growth of approximately 15.4%[18]. - Net income for the three months ended September 30, 2023, was $366,021, compared to $388,775 in the prior year, reflecting a decrease of about 5.8%[18]. - Operating income decreased to $240,618 for the three months ended September 30, 2023, down from $746,802 in the same period last year, a decline of approximately 67.8%[18]. - Total operating costs and expenses increased to $7,047,323 for the three months ended September 30, 2023, compared to $5,563,725 in the prior year, marking an increase of about 26.6%[18]. - The company reported a net comprehensive income of $405,866 for the three months ended September 30, 2023, compared to $412,570 in the prior year, a slight decrease of about 1.7%[18]. - Net income for the nine months ended September 30, 2023, was $2,688,577, compared to $4,349,191 for the same period in 2022[33]. - The company reported a net income of $3,570,041 for the nine months ended September 30, 2024, compared to $6,632,419 in the same period of 2023, reflecting a decrease of approximately 46.3%[117]. Asset and Equity Changes - Cash and cash equivalents decreased from $13,403,628 on December 31, 2023, to $8,304,971 on September 30, 2024, representing a decline of approximately 38.5%[15]. - Total current assets decreased significantly from $41,128,796 to $14,811,129, a reduction of about 64.0%[15]. - Shareholders' equity decreased from $100,612,965 to $98,358,664, a decline of approximately 2.2%[15]. - As of September 30, 2023, total shareholders' equity was $99,456,110, a decrease from $105,172,300 at March 31, 2023[21]. - The balance of cash, cash equivalents, and restricted cash at the end of the period was $8,774,971, down from $12,993,051 at the beginning of the period[33]. - Total oil and gas properties, net, increased to $98,473,841 as of September 30, 2024, from $72,060,174 as of December 31, 2023, reflecting an increase of approximately 36.7%[46]. - The total property and equipment, net, increased to $106,147,464 as of September 30, 2024, from $80,188,022 as of December 31, 2023, indicating an increase of approximately 32.4%[46]. Revenue and Production Insights - Gas, oil, NGL, and condensate revenue for the three months ended September 30, 2023, was $6,203,953, up from $3,241,531 in the same period last year, indicating a growth of approximately 91.5%[18]. - Natural gas sales revenue for the nine months ended September 30, 2024, was $6,828,155, compared to $11,351,618 for the same period in 2023, indicating a decrease of about 39.5%[108]. - Total revenues for the nine months ended September 30, 2024, increased by $0.4 million, or 2%, to $22.6 million from $22.2 million in the same period of 2023[167]. - Upstream oil and condensate revenue increased by 310% to $7.7 million for the nine months ended September 30, 2024, compared to the same period in 2023, driven by additional sales volumes from new wells in the Permian Basin[169]. - Total net revenue interest production in the Permian Basin increased by 428% to 73.3 Mboe for Q3 2024 compared to 13.9 Mboe in Q3 2023, and a 565% increase for the nine months ended September 30, 2024, totaling 191.4 Mboe compared to 28.8 Mboe in the same period of 2023[163]. Cost and Expense Management - Interest income for the three months ended September 30, 2023, was $96,220, a decrease from $384,732 in the same period last year, representing a decline of approximately 75.0%[18]. - Total operating costs for the nine months ended September 30, 2024, were $12,641,773, compared to $13,668,534 in 2023, reflecting a decrease of approximately 7.5%[117]. - Operating costs increased by 25% to $1.1 million for the nine months ended September 30, 2024, primarily due to acquired and developed wells in the Permian Basin[170]. - Capital expenditures for the nine months ended September 30, 2024, totaled $32,911,026, up from $16,024,631 in the same period of 2023, representing an increase of approximately 105.5%[117]. Strategic Initiatives and Future Outlook - The company plans to expand its market presence through strategic partnerships and new product launches in the upcoming quarters[12]. - Management anticipates a gradual recovery in commodity prices, which could positively impact revenue in the next fiscal year[12]. - The company is actively pursuing opportunities for acquisitions to enhance its asset portfolio and market share[12]. - The company formed a joint venture in October 2024, earning a 25% working interest across approximately 160,000 gross acres in Alberta, Canada, with a carried interest commitment of $7.3 million[128]. - The company executed a new Anchor Shipper Gas Gathering Agreement in May 2024, establishing fixed rates for gathering services, with a new fixed rate of $0.475 per MMBtu for 2024[162]. Stock and Shareholder Activities - A new share repurchase program was authorized on March 20, 2024, allowing for the repurchase of up to 2,191,320 common shares for an aggregate purchase price of not more than $12 million[54]. - The company repurchased and retired 248,700 shares at an average price of $4.82 per share during the nine months ended September 30, 2024[55]. - The Company declared quarterly dividends of $0.0625 per common share, totaling approximately $4.1 million for the nine months ended September 30, 2024[82]. - The company repurchased 125,000 shares at a price of $5.00 per share under the new program[96]. Tax and Compliance - The effective tax rate for the nine months ended September 30, 2024 was higher than the statutory federal rate due to state income taxes, partially offset by a valuation allowance against the Canadian net operating loss[90]. - The company is currently assessing the potential effects of new accounting standards issued by the FASB, including ASU No. 2023-09, which requires enhanced income tax disclosures effective for fiscal years beginning after December 15, 2024[64].

Core Viewpoint - Epsilon Energy Ltd. reported its third quarter 2024 financial and operational results, highlighting a mixed performance with significant growth in oil production and revenue, while natural gas production and revenues declined. Financial Performance - NRI Production: - Gas production decreased to 1,304 MMcf, down 7% quarter-over-quarter (QoQ) and 29% year-over-year (YoY) [2] - Oil production increased to 53 Mbbl, up 19% QoQ and 317% YoY [2] - NGL production decreased to 17 Mbbl, down 11% QoQ and up 99% YoY [2] - Revenues: - Total gas revenue was $1,904 million, down 3% QoQ and 9% YoY [2] - Total oil revenue was $3,965 million, up 13% QoQ and 329% YoY [2] - Total NGL revenue was $335 million, down 14% QoQ and up 47% YoY [2] - Midstream revenue was $1,084 million, down 25% QoQ and 65% YoY [2] - Adjusted EBITDA was $3,744 million, down 4% QoQ and 5% YoY [2] - Cash and short-term investments totaled $8,775 million, down 7% QoQ and 72% YoY [2] - Capital expenditures (Capex) were $3,908 million, down 32% QoQ and 26% YoY [2] Operational Updates - Capital expenditures primarily related to the completion of one well in Texas and drilling two wells in Alberta, Canada [4] - Three of the seven Marcellus wells completed in Q1 2024 were put on flowback, producing approximately 60 MMcf per day gross [5] - The company anticipates increased production and cash flow in Q4 2024 and 2025 due to improving natural gas fundamentals [6] Strategic Developments - Epsilon's entry into Alberta, Canada is seen as an attractive opportunity for capital deployment starting in Q4 2024 [7] - The company returned $2 million to shareholders through dividends and share repurchases during the quarter [2] Hedge Book - The current hedge book includes various swaps for natural gas and crude oil, with notable contracts starting in 2025 [7]

Earnings Announcement and Conference Call - Epsilon Energy Ltd will release its third quarter 2024 earnings on November 06, 2024 after market close [1] - The company will host a conference call on November 7, 2024 at 2:00 p m Central Time to discuss financial and operating results [1] - Toll-free dial-in numbers are provided for US, Canada, and international participants [1] - A webcast of the conference call will be available at the provided link and a replay will be accessible on the company's website [1] Company Overview - Epsilon Energy Ltd is a North American onshore natural gas and oil production and gathering company [2] - The company has assets located in Pennsylvania, Texas, New Mexico, and Oklahoma [2] - Key executive contacts include CEO Jason Stabell and CFO Andrew Williamson [2]

We wrote about Epsilon Energy Ltd. (NASDAQ: EPSN ) in May of this year, when the North American onshore independent natural gas and oil company was upgraded to a 'Buy'. Since our upgrade, shares have returned just over 15%, including dividend distributions. Although commodity Individual investor with a keen interest in deriving income from investment setups. We do this by buying undervalued profitable stocks with strong balance sheets & minimal debt. Furthermore, when the opportunity arises, we like to writ ...

Epsilon Energy Ltd. (EPSN) delivered a mixed performance in its second-quarter 2024 results, marked by significant growth in oil production that offset declines in natural gas revenues. The company's strategic focus on its Permian assets drove a notable increase in oil output and revenues, while challenges in the Marcellus shale impacted natural gas production. Despite a modest decline in overall profitability, EPSN maintained a strong balance sheet and continued to invest in its asset base, positioning its ...

HOUSTON, July 24, 2024 (GLOBE NEWSWIRE) -- Epsilon Energy Ltd. ("Epsilon" or the "Company") (NASDAQ: EPSN) today announced that it will issue its second quarter 2024 earnings release on Tuesday, August 13, 2024 after the market close and host a conference call to discuss its financial and operating results on Wednesday, August 14, 2024 at 9:30 a.m. Central Time (10:30 a.m. Eastern Time). Interested parties in the United States and Canada may participate toll-free by dialing (833) 816-1385. International par ...

HOUSTON, June 25, 2024 (GLOBE NEWSWIRE) -- Epsilon Energy Ltd. ("Epsilon" or the "Company") (NASDAQ: EPSN) today reported the results of a borrowing base redetermination on the Company's senior secured reserve-based revolving credit facility (the "Credit Facility") with Frost Bank (the "Lender"). Effective on June 21, 2024, the Lender redetermined the Company's borrowing base at $45 million, which will remain until the next redetermination in the fourth quarter of 2024. The borrowing base now includes the r ...

Effective on June 21, 2024, the Lender redetermined the Company's borrowing base at $45 million, which will remain until the next redetermination in the fourth quarter of 2024. The borrowing base now includes the recently acquired and developed properties in Ector County, Texas. The Lender's total commitment is equal to the borrowing base amount. All other terms of the Credit Facility remain the same. In Ector County, Texas, the recently completed Ava well, the sixth well drilled in the Pradera Fuego projec ...