• Oil Production Growth: 19% quarter over quarter increase in the Permian.
• Realized Prices: $1.54 per MCF in Pennsylvania.
• Adjusted EBITDA: Approximately $8.5 million year-to-date from the Permian, representing 70% of the total company figure.
• Investment in Permian: Approximately $40 million since Q2 2023, with 20% in undeveloped leasehold.
• Cash Flows: Approximately $12 million received through the end of the third quarter.
• CapEx in Alberta: Approximately $10 million expected over the next 12 months starting December.
• Available Revolver Capacity: $45 million.
• Net Drilling and Completion Costs: Approximately $1.7 million for two wells in Alberta.
• Net Production in Northeast PA: Approximately 8 million a day net from new wells.

• Warning! GuruFocus has detected 7 Warning Sign with EPSN.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Epsilon Energy Ltd (NASDAQ:EPSN) reported a 19% quarter-over-quarter oil production growth in the Permian due to the successful online launch of the seventh Hector well.
• The company anticipates quarter-over-quarter growth in natural gas volumes in the fourth quarter as curtailed volumes are brought back online.
• Epsilon Energy Ltd (NASDAQ:EPSN) entered into two joint ventures in Alberta, Canada, with plans to earn a 25% interest in approximately 160,000 acres, indicating strategic expansion.
• The company remains well-positioned for volume and cash flow growth in 2025, with continued evaluation of investment opportunities, particularly in Canada.
• Epsilon Energy Ltd (NASDAQ:EPSN) has added to its hedge book for 2025, locking in prices above the current strip, which could provide financial stability amid market fluctuations.

Negative Points

• Wellhead prices in Pennsylvania have remained low, impacting the company's revenue from this region.
• Production curtailments and plugging and abandonment activities in Pennsylvania increased operating costs by approximately 40% for the quarter.
• The company does not forecast incremental drilling in Pennsylvania in 2025, which could limit growth opportunities in this area.
• Results from the two multi-leg horizontal wells in Alberta's Killam area have been mixed, indicating potential challenges in achieving expected performance.
• There is uncertainty regarding investment activity details for Texas in the coming year, as the strategic alternatives review process is still underway.

Q & A Highlights

Q: He said in the press release, three of the seven wells were put on flow back during the last week of October producing 60 million a day. What is the net production from that? A: That's the 8 million a day that I reported in the call there. We have about a 13% net revenue interest in that pad, so it equates to about 8 million a day.

Q: In the third quarter, you had a negative natural gas differential of $0.65 with your realized gas price at $1.46. Looking at Q4, if we use Henry Hub at $2.75 and a negative differential of $0.91, you get $1.84 realized gas price. Do you think that will spur the 3 million to 4 million a day coming back online? A: From what we understand from the operator, they're going to be bringing back those curtailed volumes as price dictates. The forward curve suggests those volumes will come on. We don't have clear visibility day-to-day, but we think it will clear out by the beginning of the first quarter. Some volumes are already coming back as indicated.

Q: Congratulations on the West Texas results. A: Thank you, John.

Q: Do you have any closing remarks? A: Thank you, operator. I want to thank everyone for their interest in Epsilon and for joining us today. If you have additional questions or comments, feel free to contact us at the Houston office. Have a great day.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.