Epsilon Energy .(US:EPSN)2023-03-24 18:18Financial Data and Key Metrics Changes - Free cash flow before changes in working capital increased by 139% year-over-year to $35 million [8] - Cash balance increased by 69% year-over-year to $45.8 million, representing $1.96 per diluted share [8] - Net income for the year was $35.4 million, representing $1.51 per diluted share [12] - Adjusted EBITDA grew 120% year-over-year to $53.1 million [12] Business Line Data and Key Metrics Changes - Net revenue interest production was 27.3 MMcfe per day, down 6% year-over-year [12] - Production in Oklahoma increased to 2.6 MMcfe per day, a 30% increase over last year [16] - Midstream revenues increased by 3% year-over-year, with a 5% increase in throughput in the Auburn Gas Gathering System [17] Market Data and Key Metrics Changes - Average realized price for the year was $6.09 per Mcfe, with natural gas realizations nearly doubling year-over-year [9] - SEC proved reserves reported at year-end 2022 were 94.3 Bcfe, with an increase of 7.2 Bcfe in improved developed producing reserves [20] Company Strategy and Development Direction - The company is focused on maintaining a disciplined approach to capital allocation and is considering opportunities in Appalachia and other basins [33] - A new buyback program was announced, allowing for the repurchase of up to 10% of shares outstanding [44] - The company aims to return capital to shareholders through dividends and share buybacks while pursuing accretive business development opportunities [45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position for continued success in various commodity price environments [32] - The recent volatility in commodity prices is seen as an opportunity for attractive acquisitions and farm-out deals [26] - The board is comfortable with the current dividend policy and continues to evaluate it [38] Other Important Information - The company reported a debt-free balance sheet with available liquidity of approximately $75 million [13] - The PV10 value of SEC proved reserves increased by $85 million to $193 million due to higher SEC pricing [24] Q&A Session Summary Question: Thoughts on investing in Marcellus given current natural gas prices - Management acknowledged the challenges in the current investment environment but remains open to opportunities that meet their cost of capital criteria [28][36] Question: Concerns about share buyback effectiveness - Management noted that previous share count issues were due to management transitions and expressed commitment to reducing share count through buybacks [29] Question: Dividend policy outlook - Management confirmed that the board is comfortable with the current dividend level and continues to evaluate it based on earnings from the midstream system [38][52] Question: Investment capacity and deal sizes - Management indicated flexibility in considering both small and large investment opportunities, leveraging their strong balance sheet [74] Question: Hedging strategy updates - Management confirmed that the hedging position established in December remains in place, with no additional hedges implemented since then [75]