Epsilon Energy Ltd. (“
Epsilon” or the
“
Company”) (NASDAQ: EPSN) today reported second
quarter 2022 financial and operating results and material
subsequent events following the end of the quarter through the date
of this release.
- Total net revenue interest (NRI)
production averaged 27.4 MMcfe/d (Working Interest of 31.4 MMcfe/d)
for the three months ended June 30, 2022.
- Realized natural gas prices of
$6.81/Mcf including hedges ($6.88/Mcf excluding hedges) for the
three months ended June 30, 2022.
- Total revenues of $19.9 million
($17.9 million from natural gas, oil, and NGL sales, $2.0 million
from gathering and compression fees through our ownership in the
Auburn Gas Gathering System)
- Adjusted EBITDA of $15.6 million
for the quarter
- Net cash provided by operations of
$8.1 million and $15.8 million for the three and six months ended
June 30, 2022
- Free cash flow (FCF) before changes
in working capital of $9.5 million and $13.7 million for the three
and six months ended June 30, 2022
- Cash at quarter end of $30.9
million ($31.5 million including restricted cash).
- For the quarter ended June 30,
2022, the Company returned a total of $6.1 million to shareholders
- $4.6 million through the repurchase of 697,100 shares,
representing a 3% reduction of outstanding shares as well as $1.5
million to shareholders through dividends.
Jason Stabell, CEO, commented, “The second
quarter results reflect the strong back drop for commodity prices,
particularly natural gas. Sequentially, revenues increased 46%,
driven largely by an increase of 68% on realized natural gas
prices. We remain largely unhedged with a pristine balance sheet
(no debt) and robust liquidity including $30.9 million of cash and
a $14.0 million undrawn line of credit.
During the quarter, we returned $6.1 million to our shareholders
in dividends and buybacks. Through August 9, 2022, under our
authorized NCIB, we have purchased 978,600 shares at an average
cost of $6.35 of which 281,500 shares have been purchased since
quarter end (avg. $5.88 per share). We have 204,810 shares
remaining in our authorized NCIB.
I have been with the Company for only a short time, but I am
very excited about the prospects ahead. We continue to maintain a
lean organization focused on disciplined capital allocation. At
current prices, we project our cash balances to continue to grow
this year. For 2H22, we are well positioned to opportunistically
invest in our project areas, purchase shares, and evaluate new
opportunities.”
Financial and Operating Results
|
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|
|
|
|
|
|
|
|
|
|
|
|
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Three months ended |
|
Six months ended |
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2022 |
|
2021 |
|
|
2022 |
|
2021 |
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas revenue |
|
$ |
|
15,984,348 |
|
$ |
5,106,922 |
|
|
$ |
|
26,687,432 |
|
$ |
11,439,021 |
|
|
|
Volume (MMcf) |
|
|
|
2,324 |
|
|
2,548 |
|
|
|
|
4,675 |
|
|
5,014 |
|
|
|
Avg. Price ($/Mcf) |
|
$ |
|
6.88 |
|
$ |
2.00 |
|
|
$ |
|
5.71 |
|
$ |
2.28 |
|
|
|
Oil and other liquids revenue |
|
$ |
|
1,931,488 |
|
$ |
131,832 |
|
|
$ |
|
2,707,729 |
|
$ |
238,888 |
|
|
|
Volume (MBO) |
|
|
|
27.6 |
|
|
3.2 |
|
|
|
|
42.5 |
|
|
6.9 |
|
|
|
Avg. Price ($/Bbl) |
|
$ |
|
69.92 |
|
$ |
41.68 |
|
|
$ |
|
63.73 |
|
$ |
34.58 |
|
|
|
Gathering system revenue |
|
$ |
|
1,987,168 |
|
$ |
1,851,095 |
|
|
$ |
|
4,107,941 |
|
$ |
3,853,252 |
|
|
|
Total Revenues |
|
$ |
|
19,903,004 |
|
$ |
7,089,849 |
|
|
$ |
|
33,503,102 |
|
$ |
15,531,161 |
|
|
|
Total Daily Production, Mcfe/d |
|
|
|
27.4 |
|
|
28.2 |
|
|
|
|
27.2 |
|
|
27.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
Epsilon’s capital expenditures were $1.5 million
for the three months ended June 30, 2022. This capital was mainly
related to the drilling of three gross (0.03 net to EPSN) wells in
Pennsylvania and the drilling of one gross (0.15 net to EPSN) and
completion of one gross (0.11 net to EPSN) wells in Oklahoma.
Second Quarter Results
Epsilon generated revenues of $19.9 million for
the three months ended June 30, 2022 compared to $7.1 million for
the three months ended June 30, 2021.
Realized natural gas prices averaged $6.88/Mcf
(excluding hedges) for Upstream operations in the second quarter of
2022. Operating expenses for Upstream operations in the second
quarter were $2.6 million.
Epsilon reported a net after tax income of $10.6
million attributable to common shareholders or $0.45 per basic and
$0.44 per diluted common share outstanding for the three months
ended June 30, 2022, compared to net after tax loss of $0.5
million, and $0.02 per basic and diluted common share outstanding
for the three months ended June 30, 2021.
For the three months ended June 30, 2022,
Epsilon's Adjusted Earnings Before Interest, Taxes, Depreciation,
Amortization ("Adjusted EBITDA") was $15.6 million as compared to
$3.0 million for the three months ended June 30, 2021.
The Auburn Gas Gathering System gathered and
delivered 16.7 Bcf gross of natural gas during the quarter as
compared to 18.3 Bcf during the first quarter of 2022. Primary
gathering volumes decreased 2.4% quarter over quarter to 11.3 Bcf.
Imported cross-flow volumes decreased 22.1% to 5.4 Bcf as a result
of the normal decrease in gas demand following the peak winter
season.
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$)
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|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenues from contracts with customers: |
|
|
|
|
|
|
|
|
|
|
|
|
Gas, oil, NGL, and condensate revenue |
|
$ |
17,915,836 |
|
|
$ |
5,238,754 |
|
|
$ |
29,395,161 |
|
|
$ |
11,677,909 |
|
Gas gathering and compression revenue |
|
|
1,987,168 |
|
|
|
1,851,095 |
|
|
|
4,107,941 |
|
|
|
3,853,252 |
|
Total revenue |
|
|
19,903,004 |
|
|
|
7,089,849 |
|
|
|
33,503,102 |
|
|
|
15,531,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
|
2,621,750 |
|
|
|
1,784,138 |
|
|
|
4,392,404 |
|
|
|
3,378,327 |
|
Gathering system operating expenses |
|
|
171,495 |
|
|
|
173,547 |
|
|
|
330,706 |
|
|
|
364,494 |
|
Development geological and geophysical expenses |
|
|
2,386 |
|
|
|
11,451 |
|
|
|
4,772 |
|
|
|
22,990 |
|
Depletion, depreciation, amortization, and accretion |
|
|
1,803,739 |
|
|
|
1,646,094 |
|
|
|
3,192,958 |
|
|
|
3,328,954 |
|
Gain on sale of oil and gas properties |
|
|
(221,642 |
) |
|
|
– |
|
|
|
(221,642 |
) |
|
|
– |
|
General and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense |
|
|
194,050 |
|
|
|
236,041 |
|
|
|
336,352 |
|
|
|
438,540 |
|
Other general and administrative expenses |
|
|
1,465,143 |
|
|
|
2,048,300 |
|
|
|
2,636,275 |
|
|
|
3,375,461 |
|
Total operating costs and expenses |
|
|
6,036,921 |
|
|
|
5,899,571 |
|
|
|
10,671,825 |
|
|
|
10,908,766 |
|
Operating income |
|
|
13,866,083 |
|
|
|
1,190,278 |
|
|
|
22,831,277 |
|
|
|
4,622,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
21,945 |
|
|
|
8,904 |
|
|
|
37,166 |
|
|
|
16,717 |
|
Interest expense |
|
|
(745 |
) |
|
|
(22,345 |
) |
|
|
(16,064 |
) |
|
|
(49,418 |
) |
Gain (loss) on derivative contracts |
|
|
776,994 |
|
|
|
(1,827,334 |
) |
|
|
(194,910 |
) |
|
|
(1,361,993 |
) |
Other (expense) income |
|
|
(61,713 |
) |
|
|
(279 |
) |
|
|
(67,119 |
) |
|
|
1,663 |
|
Other income (expense), net |
|
|
736,481 |
|
|
|
(1,841,054 |
) |
|
|
(240,927 |
) |
|
|
(1,393,031 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before income tax expense |
|
|
14,602,564 |
|
|
|
(650,776 |
) |
|
|
22,590,350 |
|
|
|
3,229,364 |
|
Income tax expense (benefit) |
|
|
4,019,576 |
|
|
|
(165,751 |
) |
|
|
6,201,474 |
|
|
|
978,822 |
|
NET INCOME (LOSS) |
|
$ |
10,582,988 |
|
|
$ |
(485,025 |
) |
|
$ |
16,388,876 |
|
|
$ |
2,250,542 |
|
Currency translation adjustments |
|
|
(19,150 |
) |
|
|
242 |
|
|
|
(13,748 |
) |
|
|
(1,242 |
) |
NET COMPREHENSIVE INCOME (LOSS) |
|
$ |
10,563,838 |
|
|
$ |
(484,783 |
) |
|
$ |
16,375,128 |
|
|
$ |
2,249,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share, basic |
|
$ |
0.45 |
|
|
$ |
(0.02 |
) |
|
$ |
0.69 |
|
|
$ |
0.09 |
|
Net income (loss) per share, diluted |
|
$ |
0.44 |
|
|
$ |
(0.02 |
) |
|
$ |
0.69 |
|
|
$ |
0.09 |
|
Weighted average number of shares outstanding,
basic |
|
|
23,576,746 |
|
|
|
23,779,205 |
|
|
|
23,627,015 |
|
|
|
23,862,749 |
|
Weighted average number of shares outstanding,
diluted |
|
23,822,123 |
|
|
|
23,779,205 |
|
|
|
23,796,166 |
|
|
|
23,941,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPSILON ENERGY
LTD.Unaudited Condensed Consolidated Balance
Sheets(All amounts stated in US$)
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2022 |
|
2021 |
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
30,945,605 |
|
|
$ |
26,497,305 |
|
Accounts receivable |
|
|
9,930,891 |
|
|
|
4,596,931 |
|
Fair value of derivatives |
|
|
940,553 |
|
|
|
– |
|
Other current assets |
|
|
240,998 |
|
|
|
569,870 |
|
Total current assets |
|
|
42,058,047 |
|
|
|
31,664,106 |
|
Non-current assets |
|
|
|
|
|
|
Property and equipment: |
|
|
|
|
|
|
Oil and gas properties, successful efforts method |
|
|
|
|
|
|
Proved properties |
|
|
145,697,537 |
|
|
|
138,032,413 |
|
Unproved properties |
|
|
18,021,391 |
|
|
|
21,700,926 |
|
Accumulated depletion, depreciation, amortization and
impairment |
|
|
(105,047,754 |
) |
|
|
(102,480,972 |
) |
Total oil and gas properties, net |
|
|
58,671,174 |
|
|
|
57,252,367 |
|
Gathering system |
|
|
42,566,495 |
|
|
|
42,475,086 |
|
Accumulated depletion, depreciation, amortization and
impairment |
|
|
(33,995,327 |
) |
|
|
(33,443,949 |
) |
Total gathering system, net |
|
|
8,571,168 |
|
|
|
9,031,137 |
|
Land |
|
|
637,764 |
|
|
|
637,764 |
|
Buildings and other property and equipment, net |
|
|
292,727 |
|
|
|
309,102 |
|
Total property and equipment, net |
|
|
68,172,833 |
|
|
|
67,230,370 |
|
Other assets: |
|
|
|
|
|
|
Restricted cash |
|
|
569,407 |
|
|
|
568,118 |
|
Total non-current assets |
|
|
68,742,240 |
|
|
|
67,798,488 |
|
Total assets |
|
$ |
110,800,287 |
|
|
$ |
99,462,594 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable trade |
|
$ |
1,786,570 |
|
|
$ |
1,189,905 |
|
Gathering fees payable |
|
|
1,052,168 |
|
|
|
963,546 |
|
Royalties payable |
|
|
2,471,969 |
|
|
|
1,853,508 |
|
Income taxes payable |
|
|
2,410,790 |
|
|
|
1,098,425 |
|
Accrued capital expenditures |
|
|
224,179 |
|
|
|
1,016,830 |
|
Other accrued liabilities |
|
|
834,779 |
|
|
|
1,098,127 |
|
Fair value of derivatives |
|
|
– |
|
|
|
239,824 |
|
Asset retirement obligations |
|
|
– |
|
|
|
85,207 |
|
Total current liabilities |
|
|
8,780,455 |
|
|
|
7,545,372 |
|
Non-current liabilities |
|
|
|
|
|
|
Asset retirement obligations |
|
|
2,735,965 |
|
|
|
2,748,449 |
|
Deferred income taxes |
|
|
10,224,766 |
|
|
|
9,905,440 |
|
Total non-current liabilities |
|
|
12,960,731 |
|
|
|
12,653,889 |
|
Total liabilities |
|
|
21,741,186 |
|
|
|
20,199,261 |
|
Commitments and contingencies (Note 9) |
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
Common shares, no par value, unlimited shares authorized and
23,356,453 issued and 23,082,353 outstanding at June 30, 2022 and
24,202,218 issued and 23,668,203 shares outstanding at December 31,
2021 |
|
|
127,093,520 |
|
|
|
131,815,739 |
|
Treasury shares, 274,100 at June 30, 2022 and 534,015 at December
31, 2021 |
|
|
(1,646,823 |
) |
|
|
(2,423,007 |
) |
Additional paid-in capital |
|
|
9,171,555 |
|
|
|
8,835,203 |
|
Accumulated deficit |
|
|
(55,364,008 |
) |
|
|
(68,783,207 |
) |
Accumulated other comprehensive income |
|
|
9,804,857 |
|
|
|
9,818,605 |
|
Total shareholders' equity |
|
|
89,059,101 |
|
|
|
79,263,333 |
|
Total liabilities and shareholders' equity |
|
$ |
110,800,287 |
|
|
$ |
99,462,594 |
|
|
|
|
|
|
|
|
EPSILON ENERGY
LTD.Unaudited Condensed Consolidated Statements of
Cash Flows(All amounts stated in US$)
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income |
|
$ |
16,388,876 |
|
|
$ |
2,250,542 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
Depletion, depreciation, amortization, and accretion |
|
|
3,192,958 |
|
|
|
3,328,954 |
|
|
Loss on derivative contracts |
|
|
194,910 |
|
|
|
1,361,993 |
|
|
Gain on sale of oil and gas properties |
|
|
(221,642 |
) |
|
|
– |
|
|
Settlement paid on derivative contracts |
|
|
(1,375,287 |
) |
|
|
(27,460 |
) |
|
Settlement of asset retirement obligation |
|
|
(118,259 |
) |
|
|
(3,483 |
) |
|
Stock-based compensation expense |
|
|
336,352 |
|
|
|
438,540 |
|
|
Deferred income tax expense |
|
|
319,326 |
|
|
|
230,863 |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
(5,333,960 |
) |
|
|
388,912 |
|
|
Prepaid income taxes and other current assets |
|
|
328,872 |
|
|
|
(12,476 |
) |
|
Accounts payable, royalties payable and other accrued
liabilities |
|
|
738,023 |
|
|
|
77,248 |
|
|
Income taxes payable |
|
|
1,312,365 |
|
|
|
– |
|
|
Net cash provided by operating activities |
|
|
15,762,534 |
|
|
|
8,033,633 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Additions to unproved oil and gas properties |
|
|
(162,445 |
) |
|
|
(70,058 |
) |
|
Additions to proved oil and gas properties |
|
|
(4,935,370 |
) |
|
|
(1,557,869 |
) |
|
Additions to gathering system properties |
|
|
(82,855 |
) |
|
|
(79,419 |
) |
|
Additions to land, buildings and property and equipment |
|
|
(1,234 |
) |
|
|
(5,745 |
) |
|
Proceeds from sale of oil and gas properties |
|
|
200,000 |
|
|
|
– |
|
|
Prepaid drilling costs |
|
|
– |
|
|
|
273 |
|
|
Net cash used in investing activities |
|
|
(4,981,904 |
) |
|
|
(1,712,818 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Buyback of common shares |
|
|
(3,956,403 |
) |
|
|
(1,061,468 |
) |
|
Exercise of stock options |
|
|
608,787 |
|
|
|
– |
|
|
Dividends |
|
|
(2,969,677 |
) |
|
|
– |
|
|
Net cash used in financing activities |
|
|
(6,317,293 |
) |
|
|
(1,061,468 |
) |
|
Effect of currency rates on cash, cash equivalents and restricted
cash |
|
|
(13,748 |
) |
|
|
(1,242 |
) |
|
Increase in cash, cash equivalents and restricted cash |
|
|
4,449,589 |
|
|
|
5,258,105 |
|
|
Cash, cash equivalents and restricted cash, beginning of
period |
|
|
27,065,423 |
|
|
|
13,836,771 |
|
|
Cash, cash equivalents and restricted cash, end of
period |
|
$ |
31,515,012 |
|
|
$ |
19,094,876 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
4,566,000 |
|
|
$ |
1,074,025 |
|
|
Interest paid |
|
$ |
33,885 |
|
|
$ |
27,073 |
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
(1,097,247 |
) |
|
$ |
805,443 |
|
|
Change in gathering system accrued in accounts payable and accrued
liabilities |
|
$ |
8,554 |
|
|
$ |
(8,915 |
) |
|
Change in prepaid drilling costs |
|
$ |
– |
|
|
$ |
979,358 |
|
|
Asset retirement obligation asset additions and adjustments |
|
$ |
7,666 |
|
|
$ |
(29,853 |
) |
|
|
|
|
|
|
|
|
|
Non-cash financing activities: |
|
|
|
|
|
|
|
Change in share buybacks accrued in accounts payable and accrued
liabilities |
|
$ |
598,419 |
|
|
$ |
– |
|
|
|
|
|
|
|
|
|
|
EPSILON ENERGY
LTD.Adjusted EBITDA
Reconciliation(All amounts stated in
US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
Six months ended June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Net income |
|
$ |
10,582,988 |
|
|
$ |
(485,025 |
) |
|
$ |
16,388,876 |
|
|
$ |
2,250,541 |
|
|
Add Back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
(21,200 |
) |
|
|
13,441 |
|
|
|
(21,102 |
) |
|
|
32,701 |
|
|
Income tax expense |
|
|
4,019,576 |
|
|
|
(165,751 |
) |
|
|
6,201,474 |
|
|
|
978,822 |
|
|
Depreciation, depletion, amortization, and accretion |
|
|
1,803,739 |
|
|
|
1,646,094 |
|
|
|
3,192,958 |
|
|
|
3,328,954 |
|
|
Stock based compensation expense |
|
|
194,050 |
|
|
|
236,041 |
|
|
|
336,352 |
|
|
|
438,540 |
|
|
Loss on derivative contracts net of cash received or paid on
settlement |
|
|
(940,553 |
) |
|
|
1,735,674 |
|
|
|
(1,180,377 |
) |
|
|
1,334,533 |
|
|
Foreign currency translation loss |
|
|
(1,071 |
) |
|
|
279 |
|
|
|
4,331 |
|
|
|
611 |
|
|
Adjusted EBITDA |
|
$ |
15,637,529 |
|
|
$ |
2,980,753 |
|
|
$ |
24,922,512 |
|
|
$ |
8,364,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 ended June 30 |
|
Six months ended June 30 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net cash provided by operating activities |
|
$ |
8,059,064 |
|
|
$ |
2,408,765 |
|
|
$ |
15,762,534 |
|
|
$ |
8,033,633 |
|
Less: Net cash used in investing activities (Capital
Expenditures) |
|
|
(2,120,991 |
) |
|
|
(1,161,543 |
) |
|
|
(4,981,904 |
) |
|
|
(1,712,818 |
) |
Free cash flow |
|
$ |
5,938,073 |
|
|
$ |
1,247,222 |
|
|
$ |
10,780,630 |
|
|
$ |
6,320,815 |
|
Changes in working capital |
|
|
3,611,896 |
|
|
|
149,524 |
|
|
|
2,954,700 |
|
|
|
(453,685 |
) |
Free cash flow before Changes in Working
Capital |
|
$ |
9,549,969 |
|
|
$ |
1,396,746 |
|
|
$ |
13,735,330 |
|
|
$ |
5,867,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. 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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