Epsilon Energy Ltd. (“
Epsilon” or the
“
Company”) (NASDAQ: EPSN) today reported third
quarter 2022 financial and operating results, as well as material
subsequent events following the end of the quarter through the date
of this release.
Third Quarter Highlights:
- Maintained total net revenue
interest (NRI) production of 27.6 MMcfe/d (Working Interest of 32.0
MMcfe/d) for the three months ended September 30, 2022;
- Continued to realize strong prices
of $7.54/Mcfe including hedges ($7.55/Mcfe excluding hedges) for
the three months ended September 30, 2022;
- Reported total revenues of $21.2
million, an increase of 7% compared to the prior quarter:
- $19.2 million from natural gas,
oil, and NGL sales;
- $2.1 million from gathering and
compression fees through our ownership in the Auburn Gas Gathering
System, after eliminating revenue earned from Epsilon production
($0.37 million);
- Increased Adjusted EBITDA by 6%
from the prior quarter to $16.5 million for the third quarter and
$41.5 million year-to-date in 2022;
- Generated net cash from operations
of $13.7 million and $29.4 million for the three and nine months
ended September 30, 2022;
- Generated Free cash flow (FCF)
before changes in working capital of $11.2 million and $26.0
million for the three and nine months ended September 30,
2022;
- Grew cash at quarter end by 32%
from the prior quarter to $40.8 million while maintaining a strong,
debt-free balance sheet;
- Returned a total of $3.1 million to
shareholders in the third quarter of 2022:
- $1.68 million through the
repurchase of 285,400 shares, representing a 1% reduction of shares
outstanding
- $1.45 million through the quarterly
dividend
Note: Adjusted EBITDA and Free Cash Flow are
Non-GAAP financial measures and are described and reconciled to the
closest GAAP measure at the end of this release.
Jason Stabell, Epsilon’s Chief Executive
Officer, commented, “We had a strong third quarter operationally
and financially as we continue to generate significant free cash
flow. A strong market for natural gas coupled with the higher than
forecasted Koromlan 107HC well results, helped drive an increase in
sequential quarterly revenue of 7%. Our cash balance grew by more
than $9 million in the quarter, to over $40 million, and we remain
largely unhedged with no debt.
The Koromlan well has been on-line since
mid-August and has produced well above our pre-drill estimates with
cumulative gross production of over 3.9 Bcf (EPSN 16% NRI). The
Koromlan is a long lateral (nearly 14,000 ft.) completed in the
Lower Marcellus. No material capital expenditures are expected in
the fourth quarter of this year.
With our strong balance sheet, we have begun to
actively pursue new opportunities. With our deep knowledge and long
history in the basin, our initial focus will be on the
Marcellus/Utica. We are poised for continued success in the current
commodity price environment and are well-positioned to pursue
attractive organic and inorganic growth opportunities.”
Financial and Operating
Results
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas revenue |
|
$ |
17,893,822 |
|
|
$ |
9,511,357 |
|
|
$ |
44,581,254 |
|
|
$ |
20,950,378 |
|
Volume (MMcf) |
|
|
2,419 |
|
|
|
2,753 |
|
|
|
7,094 |
|
|
|
7,767 |
|
Avg. Price ($/Mcf) |
|
$ |
7.40 |
|
|
$ |
3.46 |
|
|
$ |
6.28 |
|
|
$ |
2.70 |
|
Natural gas liquids revenue |
|
$ |
497,843 |
|
|
$ |
490,535 |
|
|
$ |
1,500,668 |
|
|
$ |
588,685 |
|
Volume (MBO) |
|
|
12.5 |
|
|
|
14.4 |
|
|
|
38.5 |
|
|
|
18.9 |
|
Avg. Price ($/Bbl) |
|
$ |
39.91 |
|
|
$ |
34.02 |
|
|
$ |
38.96 |
|
|
$ |
31.13 |
|
Oil and condensate revenue |
|
$ |
779,456 |
|
|
$ |
1,060,551 |
|
|
$ |
2,484,360 |
|
|
$ |
1,201,289 |
|
Volume (MBO) |
|
|
7.6 |
|
|
|
15.0 |
|
|
|
24.1 |
|
|
|
17.4 |
|
Avg. Price ($/Bbl) |
|
$ |
102.26 |
|
|
$ |
70.80 |
|
|
$ |
103.21 |
|
|
$ |
69.04 |
|
Gathering system revenue |
|
$ |
2,072,806 |
|
|
$ |
2,038,616 |
|
|
$ |
6,180,747 |
|
|
$ |
5,891,868 |
|
Total Revenues |
|
$ |
21,243,927 |
|
|
$ |
13,101,059 |
|
|
$ |
54,747,029 |
|
|
$ |
28,632,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter Results
Epsilon generated revenues of $21.2 million for
the three months ended September 30, 2022, an increase of 7%
compared to $19.9 million for the three months ended June 30,
2022.
Epsilon reported net after tax income of $9.6
million attributable to common shareholders or $0.42 per basic and
$0.41 per diluted common share outstanding for the three months
ended September 30, 2022, compared to net after tax income of $10.6
million, and $0.45 per basic and $0.44 per diluted common share
outstanding for the three months ended June 30, 2022.
For the three months ended September 30, 2022,
Epsilon's Adjusted Earnings Before Interest, Taxes, Depreciation,
Amortization ("Adjusted EBITDA") was $16.5 million an increase of
6% as compared to $15.6 million for the three months ended June 30,
2022.
Epsilon’s capital expenditures were $1.6 million
for the three months ended September 30, 2022. This capital was
mainly related to the completion of one gross (0.16 net to EPSN)
well in Pennsylvania and the completion of one gross (0.15 net to
EPSN) well in Oklahoma.
The Auburn Gas Gathering System gathered and
delivered 16.0 Bcf gross of natural gas during the quarter as
compared to 16.7 Bcf during the second quarter of 2022. Primary
gathering volumes increased 10.7% quarter over quarter to 12.6 Bcf.
Imported cross-flow volumes decreased 38.7% to 3.3 Bcf (as a result
of the increased primary volumes).
Earnings Call:
The Company will host a conference call to
discuss its financial and operational results on Friday, November
11, 2022 at 10:00 a.m. Central Time (11:00 a.m. Eastern Time).
Interested parties in the United States and
Canada may participate toll-free by dialing (833) 816-1385.
International parties may participate by dialing (412) 317-0478.
Participants should ask to be joined to the “Epsilon Energy Third
Quarter 2022 Earnings Conference Call”
A webcast can be viewed at:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=jg4bbE54.
A webcast replay will be available on the Company’s website
(www.epsilonenergyltd.com) following the call.
About Epsilon
Epsilon Energy Ltd. is a North American onshore
natural gas production and midstream company with a current focus
on the Marcellus Shale of Pennsylvania.
Forward-Looking Statements
Certain statements contained in this news
release constitute forward looking statements. The use of any of
the words “anticipate”, “continue”, “estimate”, “expect”, ‘may”,
“will”, “project”, “should”, ‘believe”, and similar expressions are
intended to identify forward-looking statements. These statements
involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from
those anticipated. Forward-looking statements are based on
reasonable assumptions, but no assurance can be given that these
expectations will prove to be correct and the forward-looking
statements included in this news release should not be unduly
relied upon.
The reserves and associated future net revenue
information set forth in this news release are estimates only. In
general, estimates of oil and natural gas reserves and the future
net revenue therefrom are based upon a number of variable factors
and assumptions, such as production rates, ultimate reserves
recovery, timing and amount of capital expenditures, ability to
transport production, marketability of oil and natural gas, royalty
rates, the assumed effects of regulation by governmental agencies
and future operating costs, all of which may vary materially from
actual results. For those reasons, estimates of the oil and natural
gas reserves attributable to any particular group of properties, as
well as the classification of such reserves and estimates of future
net revenues associated with such reserves prepared by different
engineers (or by the same engineers at different times) may vary.
The actual reserves of the Company may be greater or less than
those calculated. In addition, the Company's actual production,
revenues, development and operating expenditures will vary from
estimates thereof and such variations could be material.
Statements relating to "reserves" are deemed to
be forward-looking statements as they involve the implied
assessment, based on certain estimates and assumptions, that the
reserves described exist in the quantities predicted or estimated
and can be profitably produced in the future. There is no assurance
that forecast price and cost assumptions will be attained and
variances could be material.
Proved reserves are those reserves which are
most certain to be recovered. There is at least a 90% probability
that the quantities actually recovered will equal or exceed the
estimated proved reserves. Undeveloped reserves are those reserves
expected to be recovered from known accumulations where a
significant expenditure (for example, when compared to the cost of
drilling a well) is required to render them capable of production.
They must fully meet the requirements of the reserves
classification (proved, probable) to which they are assigned.
Proved undeveloped reserves are those reserves that can be
estimated with a high degree of certainty and are expected to be
recovered from known accumulations where a significant expenditure
is required to render them capable of production.
The estimates of reserves and future net revenue
for individual properties may not reflect the same confidence level
as estimates of reserves and future net revenue for all properties
due to the effects of aggregation. The estimated future net
revenues contained in this news release do not necessarily
represent the fair market value of the Company's reserves.
Contact Information:
281-670-0002
Jason StabellChief Executive
OfficerJason.Stabell@EpsilonEnergyLTD.com
Andrew WilliamsonChief Financial
OfficerAndrew.Williamson@EpsilonEnergyLTD.com
Special note for news distribution in
the United States The securities described in the news
release have not been registered under the United Stated Securities
Act of 1933, as amended, (the “1933 Act”) or state securities laws.
Any holder of these securities, by purchasing such securities,
agrees for the benefit of Epsilon Energy Ltd. (the “Corporation”)
that such securities may not be offered, sold, or otherwise
transferred only (A) to the Corporation or its affiliates; (B)
outside the United States in accordance with applicable state laws
and either (1) Rule 144(as) under the 1933 Act or (2) Rule 144
under the 1933 Act, if applicable.
EPSILON ENERGY
LTD.Unaudited Condensed Consolidated Statements of
Operations and Comprehensive Income (All
amounts stated in US$)
|
|
Three months endedSeptember 30, |
|
Nine months endedSeptember 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenues from contracts with customers: |
|
|
|
|
|
|
|
|
|
|
|
|
Gas, oil, NGL, and condensate revenue |
|
$ |
19,171,121 |
|
|
$ |
11,062,443 |
|
|
$ |
48,566,282 |
|
|
$ |
22,740,352 |
|
Gas gathering and compression revenue |
|
|
2,072,806 |
|
|
|
2,038,616 |
|
|
|
6,180,747 |
|
|
|
5,891,868 |
|
Total revenue |
|
|
21,243,927 |
|
|
|
13,101,059 |
|
|
|
54,747,029 |
|
|
|
28,632,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
|
2,399,092 |
|
|
|
2,240,259 |
|
|
|
6,791,496 |
|
|
|
5,618,585 |
|
Gathering system operating expenses |
|
|
225,809 |
|
|
|
138,887 |
|
|
|
556,515 |
|
|
|
503,381 |
|
Development geological and geophysical expenses |
|
|
2,387 |
|
|
|
11,583 |
|
|
|
7,159 |
|
|
|
34,573 |
|
Depletion, depreciation, amortization, and accretion |
|
|
1,706,030 |
|
|
|
1,846,911 |
|
|
|
4,898,988 |
|
|
|
5,175,865 |
|
Gain on sale of oil and gas properties |
|
|
— |
|
|
|
— |
|
|
|
(221,642 |
) |
|
|
— |
|
General and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense |
|
|
500,597 |
|
|
|
300,249 |
|
|
|
836,949 |
|
|
|
738,789 |
|
Other general and administrative expenses |
|
|
2,015,272 |
|
|
|
1,461,703 |
|
|
|
4,651,547 |
|
|
|
4,837,164 |
|
Total operating costs and expenses |
|
|
6,849,187 |
|
|
|
5,999,592 |
|
|
|
17,521,012 |
|
|
|
16,908,357 |
|
Operating income |
|
|
14,394,740 |
|
|
|
7,101,467 |
|
|
|
37,226,017 |
|
|
|
11,723,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
89,638 |
|
|
|
11,070 |
|
|
|
126,804 |
|
|
|
27,786 |
|
Interest expense |
|
|
(17,501 |
) |
|
|
(16,962 |
) |
|
|
(33,565 |
) |
|
|
(66,380 |
) |
Loss on derivative contracts |
|
|
(929,637 |
) |
|
|
(5,055,130 |
) |
|
|
(1,124,547 |
) |
|
|
(6,417,123 |
) |
Other (expense) income |
|
|
(32,777 |
) |
|
|
(907 |
) |
|
|
(99,896 |
) |
|
|
756 |
|
Other income (expense), net |
|
|
(890,277 |
) |
|
|
(5,061,929 |
) |
|
|
(1,131,204 |
) |
|
|
(6,454,961 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before income tax expense |
|
|
13,504,463 |
|
|
|
2,039,538 |
|
|
|
36,094,813 |
|
|
|
5,268,902 |
|
Income tax expense |
|
|
3,896,010 |
|
|
|
643,072 |
|
|
|
10,097,484 |
|
|
|
1,621,894 |
|
NET INCOME |
|
$ |
9,608,453 |
|
|
$ |
1,396,466 |
|
|
$ |
25,997,329 |
|
|
$ |
3,647,008 |
|
Currency translation adjustments |
|
|
(34,524 |
) |
|
|
(15 |
) |
|
|
(48,272 |
) |
|
|
(1,256 |
) |
NET COMPREHENSIVE INCOME |
|
$ |
9,573,929 |
|
|
$ |
1,396,451 |
|
|
$ |
25,949,057 |
|
|
$ |
3,645,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, basic |
|
$ |
0.42 |
|
|
$ |
0.06 |
|
|
$ |
1.11 |
|
|
$ |
0.15 |
|
Net income per share, diluted |
|
$ |
0.41 |
|
|
$ |
0.06 |
|
|
$ |
1.11 |
|
|
$ |
0.15 |
|
Weighted average number of shares outstanding,
basic |
|
|
23,011,729 |
|
|
|
23,564,288 |
|
|
|
23,419,666 |
|
|
|
23,757,895 |
|
Weighted average number of shares outstanding,
diluted |
|
23,169,658 |
|
|
|
23,772,943 |
|
|
|
23,524,574 |
|
|
|
23,871,495 |
|
EPSILON ENERGY
LTD.Unaudited Condensed Consolidated Balance
Sheets(All amounts stated in US$)
|
|
September 30, |
|
December 31, |
|
|
2022 |
|
2021 |
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
40,254,729 |
|
|
$ |
26,497,305 |
|
Accounts receivable |
|
|
10,069,516 |
|
|
|
4,596,931 |
|
Fair value of derivatives |
|
|
32,326 |
|
|
|
— |
|
Other current assets |
|
|
775,587 |
|
|
|
569,870 |
|
Total current assets |
|
|
51,132,158 |
|
|
|
31,664,106 |
|
Non-current assets |
|
|
|
|
|
|
Property and equipment: |
|
|
|
|
|
|
Oil and gas properties, successful efforts method |
|
|
|
|
|
|
Proved properties |
|
|
147,196,218 |
|
|
|
138,032,413 |
|
Unproved properties |
|
|
18,085,385 |
|
|
|
21,700,926 |
|
Accumulated depletion, depreciation, amortization and
impairment |
|
|
(106,457,257 |
) |
|
|
(102,480,972 |
) |
Total oil and gas properties, net |
|
|
58,824,346 |
|
|
|
57,252,367 |
|
Gathering system |
|
|
42,617,954 |
|
|
|
42,475,086 |
|
Accumulated depletion, depreciation, amortization and
impairment |
|
|
(34,262,838 |
) |
|
|
(33,443,949 |
) |
Total gathering system, net |
|
|
8,355,116 |
|
|
|
9,031,137 |
|
Land |
|
|
637,764 |
|
|
|
637,764 |
|
Buildings and other property and equipment, net |
|
|
295,446 |
|
|
|
309,102 |
|
Total property and equipment, net |
|
|
68,112,672 |
|
|
|
67,230,370 |
|
Other assets: |
|
|
|
|
|
|
Restricted cash |
|
|
569,883 |
|
|
|
568,118 |
|
Total non-current assets |
|
|
68,682,555 |
|
|
|
67,798,488 |
|
Total assets |
|
$ |
119,814,713 |
|
|
$ |
99,462,594 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable trade |
|
$ |
2,203,443 |
|
|
$ |
1,189,905 |
|
Gathering fees payable |
|
|
1,020,921 |
|
|
|
963,546 |
|
Royalties payable |
|
|
2,827,880 |
|
|
|
1,853,508 |
|
Income taxes payable |
|
|
3,119,671 |
|
|
|
1,098,425 |
|
Accrued capital expenditures |
|
|
398,026 |
|
|
|
1,016,830 |
|
Other accrued liabilities |
|
|
1,001,792 |
|
|
|
1,098,127 |
|
Fair value of derivatives |
|
|
— |
|
|
|
239,824 |
|
Asset retirement obligations |
|
|
— |
|
|
|
85,207 |
|
Total current liabilities |
|
|
10,571,733 |
|
|
|
7,545,372 |
|
Non-current liabilities |
|
|
|
|
|
|
Asset retirement obligations |
|
|
2,758,831 |
|
|
|
2,748,449 |
|
Deferred income taxes |
|
|
10,345,297 |
|
|
|
9,905,440 |
|
Total non-current liabilities |
|
|
13,104,128 |
|
|
|
12,653,889 |
|
Total liabilities |
|
|
23,675,861 |
|
|
|
20,199,261 |
|
Commitments and contingencies (Note 9) |
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
Common shares, no par value, unlimited shares authorized and
23,571,108 issued and 23,011,608 outstanding at September 30, 2022
and 24,202,218 issued and 23,668,203 shares outstanding at December
31, 2021 |
|
|
127,231,845 |
|
|
|
131,815,739 |
|
Treasury shares, 559,500 at September 30, 2022 and 534,015 at
December 31, 2021 |
|
|
(3,326,880 |
) |
|
|
(2,423,007 |
) |
Additional paid-in capital |
|
|
9,672,152 |
|
|
|
8,835,203 |
|
Accumulated deficit |
|
|
(47,208,598 |
) |
|
|
(68,783,207 |
) |
Accumulated other comprehensive income |
|
|
9,770,333 |
|
|
|
9,818,605 |
|
Total shareholders' equity |
|
|
96,138,852 |
|
|
|
79,263,333 |
|
Total liabilities and shareholders' equity |
|
$ |
119,814,713 |
|
|
$ |
99,462,594 |
|
EPSILON ENERGY
LTD.Unaudited Condensed Consolidated Statements of
Cash Flows(All amounts stated in US$)
|
|
Nine months ended September 30, |
|
|
2022 |
|
2021 |
Cash flows from operating activities: |
|
|
|
|
|
|
Net income |
|
$ |
25,997,329 |
|
|
$ |
3,647,008 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
Depletion, depreciation, amortization, and accretion |
|
|
4,898,988 |
|
|
|
5,175,865 |
|
Loss on derivative contracts |
|
|
1,124,547 |
|
|
|
6,417,123 |
|
Gain on sale of oil and gas properties |
|
|
(221,642 |
) |
|
|
|
Settlement paid on derivative contracts |
|
|
(1,396,697 |
) |
|
|
(2,488,702 |
) |
Settlement of asset retirement obligation |
|
|
(118,260 |
) |
|
|
|
Stock-based compensation expense |
|
|
836,949 |
|
|
|
738,789 |
|
Deferred income tax expense (benefit) |
|
|
439,857 |
|
|
|
(651,606 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
(5,472,585 |
) |
|
|
(3,558,519 |
) |
Other current assets |
|
|
(205,717 |
) |
|
|
(6,920 |
) |
Accounts payable, royalties payable and other accrued
liabilities |
|
|
1,511,652 |
|
|
|
3,237,559 |
|
Income taxes payable |
|
|
2,021,246 |
|
|
|
1,016,153 |
|
Net cash provided by operating activities |
|
|
29,415,667 |
|
|
|
13,526,750 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
Additions to unproved oil and gas properties |
|
|
(226,439 |
) |
|
|
(140,498 |
) |
Additions to proved oil and gas properties |
|
|
(5,528,037 |
) |
|
|
(3,479,386 |
) |
Additions to gathering system properties |
|
|
(129,985 |
) |
|
|
(199,801 |
) |
Additions to land, buildings and property and equipment |
|
|
(13,258 |
) |
|
|
(5,745 |
) |
Proceeds from sale of oil and gas properties |
|
|
200,000 |
|
|
|
|
Prepaid drilling costs |
|
|
|
|
|
379 |
|
Net cash used in investing activities |
|
|
(5,697,719 |
) |
|
|
(3,825,051 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
Buyback of common shares |
|
|
(6,234,879 |
) |
|
|
(2,377,181 |
) |
Exercise of stock options |
|
|
747,112 |
|
|
|
|
Dividends |
|
|
(4,422,720 |
) |
|
|
|
Net cash used in financing activities |
|
|
(9,910,487 |
) |
|
|
(2,377,181 |
) |
Effect of currency rates on cash, cash equivalents and restricted
cash |
|
|
(48,272 |
) |
|
|
(1,257 |
) |
Increase in cash, cash equivalents and restricted cash |
|
|
13,759,189 |
|
|
|
7,323,261 |
|
Cash, cash equivalents and restricted cash, beginning of
period |
|
|
27,065,423 |
|
|
|
13,836,771 |
|
Cash, cash equivalents and restricted cash, end of
period |
|
$ |
40,824,612 |
|
|
$ |
21,160,032 |
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures: |
|
|
|
|
|
|
Income taxes paid |
|
$ |
7,626,000 |
|
|
$ |
1,164,025 |
|
Interest paid |
|
$ |
50,872 |
|
|
$ |
78,980 |
|
|
|
|
|
|
|
|
Non-cash investing activities: |
|
|
|
|
|
|
Change in unproved properties accrued in accounts payable and
accrued liabilities |
|
$ |
|
|
$ |
(65,000 |
) |
Change in proved properties accrued in accounts payable and accrued
liabilities |
|
$ |
(194,391 |
) |
|
$ |
(18,150 |
) |
Change in gathering system accrued in accounts payable and accrued
liabilities |
|
$ |
12,882 |
|
|
$ |
16,225 |
|
Asset retirement obligation asset additions and adjustments |
|
$ |
10,821 |
|
|
$ |
(29,853 |
) |
EPSILON ENERGY
LTD.Adjusted EBITDA
Reconciliation (All amounts stated in
US$)
|
|
Three months endedSeptember 30, |
|
Nine months endedSeptember 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net income |
|
$ |
9,608,453 |
|
|
$ |
1,396,466 |
|
|
$ |
25,997,329 |
|
|
$ |
3,647,008 |
|
Add Back: |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
(72,137 |
) |
|
|
5,892 |
|
|
|
(93,239 |
) |
|
|
38,595 |
|
Income tax expense |
|
|
3,896,010 |
|
|
|
643,072 |
|
|
|
10,097,484 |
|
|
|
1,621,894 |
|
Depreciation, depletion, amortization, and accretion |
|
1,706,030 |
|
|
|
1,846,911 |
|
|
|
4,898,988 |
|
|
|
5,175,865 |
|
Stock based compensation expense |
|
|
500,597 |
|
|
|
300,249 |
|
|
|
836,949 |
|
|
|
738,789 |
|
Loss on derivative contracts net of cash received or paid on
settlement |
|
|
908,227 |
|
|
|
2,593,888 |
|
|
|
(272,150 |
) |
|
|
3,928,421 |
|
Foreign currency translation loss |
|
|
(4,750 |
) |
|
|
907 |
|
|
|
(419 |
) |
|
|
1,517 |
|
Adjusted EBITDA |
|
$ |
16,542,430 |
|
|
$ |
6,787,384 |
|
|
$ |
41,464,942 |
|
|
$ |
15,152,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Epsilon defines Adjusted EBITDA as earnings
before (1) net interest expense, (2) taxes, (3) depreciation,
depletion, amortization and accretion expense, (4) impairments of
natural gas and oil properties, (5) non-cash stock compensation
expense, (6) gain or loss on derivative contracts net of cash
received or paid on settlement, and (7) other income. Adjusted
EBITDA is not a measure of financial performance as determined
under U.S. GAAP and should not be considered in isolation from or
as a substitute for net income or cash flow measures prepared in
accordance with U.S. GAAP or as a measure of profitability or
liquidity.
Additionally, Adjusted EBITDA may not be
comparable to other similarly titled measures of other companies.
Epsilon has included Adjusted EBITDA as a supplemental disclosure
because its management believes that EBITDA provides useful
information regarding its ability to service debt and to fund
capital expenditures. It further provides investors a helpful
measure for comparing operating performance on a "normalized" or
recurring basis with the performance of other companies, without
giving effect to certain non-cash expenses and other items. This
provides management, investors and analysts with comparative
information for evaluating the Company in relation to other natural
gas and oil companies providing corresponding non-U.S. GAAP
financial measures or that have different financing and capital
structures or tax rates. These non-U.S. GAAP financial measures
should be considered in addition to, but not as a substitute for,
measures for financial performance prepared in accordance with U.S.
GAAP.
EPSILON ENERGY LTD.Free
Cash Flow Reconciliation (All amounts stated
in US$)
|
|
Three months endedSeptember 30 |
|
Nine months endedSeptember 30 |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net cash provided by operating activities |
|
$ |
13,653,133 |
|
|
$ |
5,489,631 |
|
|
$ |
29,415,667 |
|
|
$ |
13,526,750 |
|
Less: Net cash used in investing activities (Capital
Expenditures) |
|
|
(715,816 |
) |
|
|
(2,108,750 |
) |
|
|
(5,697,719 |
) |
|
|
(3,825,051 |
) |
Free cash flow |
|
$ |
12,937,317 |
|
|
$ |
3,380,882 |
|
|
$ |
23,717,948 |
|
|
$ |
9,701,699 |
|
Changes in working capital |
|
|
(1,716,480 |
) |
|
|
563,867 |
|
|
|
2,326,913 |
|
|
|
(686,347 |
) |
Free cash flow before Changes in Working
Capital |
|
$ |
11,220,837 |
|
|
$ |
3,944,748 |
|
|
$ |
26,044,861 |
|
|
$ |
9,015,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Epsilon defines Free Cash Flow (“FCF”) as net
cash provided by operating activities in the period minus payments
for property and equipment made in the period, adjusted to exclude
changes in working capital. FCF is considered a non-GAAP financial
measure under the SEC’s rules. Management believes, however, that
FCF is an important financial measure for use in evaluating the
Company’s financial performance, as it measures our ability to
generate additional cash from our business operations. FCF should
be considered in addition to, rather than as a substitute for, net
income as a measure of our performance or net cash provided by
operating activities as a measure of our liquidity. Additionally,
our definition of FCF is limited and does not represent residual
cash flows available for discretionary expenditures due to the fact
that the measure does not deduct the payments required for debt
service and other obligations, payments made for business
acquisitions, amounts spent to buy back shares, or pay dividends.
Therefore, we believe it is important to view FCF as supplemental
to our entire statement of cash flows.
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