Q1 2025 Epsilon Energy Ltd Earnings Call
Operator: Good morning, everyone, and welcome to the Epsilon Energy first quarter 2025 earnings conference call. All participants will be in a listen-only mode. Systems, please signal a conference specialist by pressing the star key followed by zero.
Good morning, everyone and welcome to the Epsilon Energy first quarter 2025 earnings Conference call.
All participants will be in a listen only mode should you need assistance. Please see no a conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touch-down phones. To draw your questions, you may press star.
After todays presentation, there will be an opportunity to ask questions.
You asked a question you May press Star and then one on your Touchtone phone draw. Your questions you May press star into.
Speaker Change: At this time I'd like to turn the floor over to you Andrew Williamson Chief Financial Officer, Sir. Please go ahead.
Andrew Williamson: At this time, I'd like to turn the floor over to Andrew Williamson, Chief Financial Officer. Sir, please go ahead. Thank you, operator. And on behalf of the management team, I would like to welcome all of you to today's conference call to review Epsilon's first quarter 2025 financial and operational results. Before we begin, I would like to remind you that our comments may include forward-looking statements. It should be noted that a variety of factors could cause Epsilon's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Today's call may also contain certain non-GAAP financial measures.
Yeah.
Speaker Change: Thank you operator and on behalf of the management team I would like to welcome all of you to today's conference call to review Epsilon first quarter 2025 financial and operational results.
Speaker Change: Four we begin I would like to remind you that our comments may include forward looking statements. It.
Speaker Change: It should be noted that a variety of factors could cause epsilon <unk> actual results to differ materially from the anticipated results or expectations expressed in these forward looking statements.
Speaker Change: Today's call May also contain certain non-GAAP financial measures.
Andrew Williamson: Please refer to the earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures.
Speaker Change: Please refer to the earnings release that we issued yesterday for disclosures on forward looking statements and reconciliations of non-GAAP measures.
Jason Stabell: With that, I'd like to turn the call over to Jason Stabell, our Chief Executive Officer. Thank you, Andrew. Good morning and thank you for participating in our 2025 first quarter conference call. Joining me today are Andrew Williamson, our CFO, and Henry Clanton, our COO. We will be available to answer questions later in the call. Company delivered strong results this quarter, primarily attributed to the performance of our Pennsylvania business. Marcellus upstream cash flows were up sequentially over 200% due to a 58% increase in production and a 70% increase in realized prices. In addition, midstream cash flows increased 140% sequentially on higher throughput volumes.
Speaker Change: With that I'd like to turn the call over to Jason to Bell, our Chief Executive Officer.
Jason Bell: Thank you Andrew.
Jason Bell: Morning, and thank you for participating in our 2025 first quarter conference call.
Speaker Change: Joining me today are Andrew Williamson, our CFO, and Henry Clinton or C O L.
Jason Bell: We will be available to answer questions later in the call.
Jason Bell: The company delivered strong results this quarter, primarily attributed to the performance of our Pennsylvania business.
Jason Bell: Marcellus upstream cash flows were up sequentially over 200%.
Jason Bell: Due to a 58% increase in production and a 70% increase in realized pricing.
Jason Bell: In addition, midstream cash flows increased 140% sequentially on higher throughput volumes.
Jason Stabell: In light of the current oil price volatility, we have been working with our operators to minimize near-term activity. Based on these discussions, we are planning 0.5 net wells in both Texas and Alberta for total capital expenditures of $9 to $12 million over the balance of this year, including a $1.5 million drilling carry in favor of our operator in Alberta. We don't expect additional investments this year in Pennsylvania. Our diversified portfolio has performed well in the current volatile environment. Our strong balance sheet and projected cash flows leave us well-positioned to capitalize on attractive opportunities while maintaining our dividends.
Jason Bell: In light of the current oil price volatility, we have been working with our operators to minimize near term activity based on these discussions we are planning 0.5 net wells in both Texas and Alberta for total capital expenditures of $9 million to $12 million over the balance of this year, including a 1.5 million drill.
Speaker Change: Gary in favor of our operator in Alberta, we.
Jason Bell: We don't expect additional investments this year in Pennsylvania.
Jason Bell: Our diversified portfolio has performed well in the current volatile environment, our strong balance sheet and projected cash flows leave us well positioned to capitalize on attractive opportunities, while maintaining our dividend.
Andrew Williamson: I will now pass the call to Andrew and Henry for further details on our finances and operations. Thanks, Jason. The performance in the Marcellus this quarter demonstrates our assets leveraged to incremental development there in a strong pricing environment, both on the upstream and midstream side of the business. As Jason mentioned, we don't expect incremental development there this year, but we have substantial remaining undeveloped inventory, roughly 500,000 completed lateral length feet gross, which we expect to be developed starting late next year, early in 2027. I will caveat that by saying the operator's stated plans are of course subject to change based on gas market conditions and other factors.
Speaker Change: I will now pass the call to Andrew and Henry for further details on our finances and operations.
Speaker Change: Thanks, Jason the performance in the Marcellus this quarter demonstrates our assets leverage to incremental development, there and a strong pricing environment, both on the upstream and midstream side of the business as Jason mentioned, we don't expect incremental development. There this year, but we have substantial remaining undeveloped inventory roughly 500000.
Speaker Change: Completed lateral length beat gross which we expect to be developed starting late next year early in 2027.
Speaker Change: I will caveat that by saying the operator stated plans are of course subject to change based on gas market conditions and other factors.
Andrew Williamson: In Texas, our Barnett type curve is economic, and then it delivers above a 15% rate of return down to $55 WTI. We are aligned with the operator in limiting capital spending there to our leasehold obligations. which includes two gross wells over the remainder of the year. Incremental activity will warrant sustained oil prices above $65 WTI. On the hedge book, we're approximately 45% hedged on forecasted PDP oil production for the remainder of the year from May at just over $71 WTI. For gas, we're approximately 30% hedged on forecasted PDP production for the same period at $3.33 9x.
Speaker Change: In Texas, our Barnett type curve is economic and that it delivers above a 15% rate of return.
Speaker Change: Down to $55 W. G I.
Speaker Change: We are aligned with the operator and limiting capital spending there to our leasehold obligations.
Speaker Change: Which includes two gross wells over the remainder of the year.
Speaker Change: Incremental activity will warrant sustained oil prices above $65 at UTI.
Speaker Change: On the hedge book for approximately 45% hedged on forecasted PDP oil production for the remainder of the year for May at just over 71 dollar Debbie T I.
Speaker Change: For gas, where approximately 30% hedged on forecasted PDP production for the same period at $3 33 set an IMAX, we will look to add to gas hedges, assuming attractive prices for this winter and summer 2026 key being at 30% to 40% of PDP production target in this environment.
Andrew Williamson: We will look to add to gas hedges, assuming attractive prices for this winter and summer of 2026, keeping a 30-40% of PDP production target in this environment. Of course, that target can change with market conditions, capital plans, and other factors.
Speaker Change: Of course that target can change with market conditions capital plans and other factors.
Henry Clanton: Now to Henry. Thank you, Jason and Andrew. To add further to Jason's comments regarding development this year, in Texas, the current plan calls for two wells to be drilled to satisfy the lease development obligation. Both of these wells are expected to be two mile laterals or longer.
Speaker Change: Henry.
Henry: Thank you, Jason and Andrew.
Henry: To add further to Jason's comments regarding development. This year in Texas. The current plan calls for two wells to be drilled to satisfy the lease development obligations.
Henry: Both of these wells are expected to be two mile laterals are longer.
Henry Clanton: The first well is planned to spud in late May with the completion planned for the third quarter.
Henry: The first well is planned to spud in late May and with the completion of planned for the third quarter.
Henry Clanton: In Canada, our first two horizontal manville wells in the Gerrington area were completed in the first quarter. The initial well was completed as a 1-mile lateral, and the second well was completed as a mile-and-a-half lateral. Both wells are currently on production with sales commencing in April. Efforts to optimize production with artificial lift are in progress. Additionally, we continue to work with the operator about the location and timing of the next two wells in the project, which are planned for this year.
Henry: In Canada, our first two horizontal manville wells and again scenario were completed in the first quarter.
Henry: The initial well was completed as a one mile lateral and the second well was completed as a mile and a half lateral.
Henry: Both wells are currently on production with sales commencing in April.
Henry: Efforts to optimize production with artificial lift are in progress.
Henry: Additionally, we continue to work with the operator about the location and timing of the next two wells in the projects, which are planned for this year.
Jason Stabell: Thank you, now back to Jason. Thanks guys.
Jason Bell: Thank you and now back to Jason.
Jason Bell: Thanks, guys operator, we can now open the lines for questions.
Operator: Operator, we can now open the lines for questions. Ladies and gentlemen, at this time, if you would like to ask a question, please press star and then one using a touch-tone telephone. For all your questions, you may press star and... Again, that is star and then one to join. This applies momentarily to some of the rest.
Speaker Change: Ladies and gentlemen at this time, if you would like to ask a question. Please press star and then one using a touchtone telephone to withdraw your question you May press star and two.
Jason Bell: Once again that is star and then one to join the question queue.
Speaker Change: We'll pause momentarily to assemble the roster.
Operator: in our first question today.
Speaker Change: And our first question today comes from John White from Roth Capital. Please go ahead with your question.
John White: John White from Roth Capital, please go ahead with your question. Good morning and congratulations on the very strong production results out of your Marcello Pathette. I'm sure you're glad to get these curtailments behind you. had to endure for most of the last year.
John White: Good morning.
Speaker Change: And congratulation on a very strong production results out of your Marcel will pass it.
John White: I'm sure you're glad to get.
John White: These curtailments are behind you do you use.
John White: Had to endure for most of the last year.
John White: You said, there's not going to be any more development drilling in the Marcellus this year.
Jason Stabell: You said there's not gonna be any more development drilling in the Marcellus this year. Do you want to offer any additional details on the first two wells in Alberta and how those are doing?
John White: Do you want to offer any additional details on the first two wells in Alberta, and how those are doing.
Jason Stabell: Hey, John, it's Jason. Thanks for the question. a little early to offer too much there, other than to say we've got oil and gas, started flowing that to sales in early April. So we're kind of in that first 30 days working with the operator to get artificial lift installed and get some facilities tied down. So I think probably the most helpful thing is, yeah, we're producing cash flow up right now, but we're really going to have more definitive comments as we march through the second quarter into the third quarter. So either if there's something meaningful on an interim basis, obviously we'll communicate that with the market, but certainly I'd expect a fulsome update on that for our next quarterly report.
Jason Bell: Hey, John it's Jason Thanks for the question.
Jason Bell: A little early to offer too much there other than to say, we've got oil and gas started flowing that to sales in the in early April. So we're kind of in that first 30 days.
Jason Bell: Working with the operator to get artificial lift installed and get some facilities.
Jason Bell: Tied down so I think probably the most helpful thing is yeah, where we're producing cash flow up there right now.
Jason Bell: But we're really going to have more definitive comments as we as we March through the second quarter into the third quarter. So either if there's something meaningful on an interim basis, obviously, we will communicate that with the market.
Jason Bell: But certainly I'd expect a fulsome update on that for for our next quarterly report.
John White: Okay, given the timing, that's understandable. And thanks for taking my question. I'll turn it back to the Great, thanks. Thanks, John. Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and one.
Speaker Change: Okay. It was given the timing that's understandable and thanks for taking my question I'll turn it back to the operator.
Speaker Change: Great. Thanks, John.
Jason Bell: Yes.
Speaker Change: Once again, if he would like to ask a question. Please press star and then one so withdraw your question you May press star and two.
Jason Bell: Okay.
Jason Bell: Okay.
Operator: And at this time, I'm showing no additional questions.
Jason Bell: And at this time in showing no additional questions I'd like to turn the floor back over to management for any closing remarks.
Jason Stabell: I'd like to turn the floor back over to management for any.
Jason Stabell: Thank you, operator. Appreciate everybody's continued interest and support of Epsilon. As always, we're here to answer questions, if any, come to you after we conclude this meeting. And everybody have a great day, and look forward to speaking to you in the future. Thank you.
Jason Bell: Thank you operator.
Jason Bell: I appreciate everybody's continued interest and support of Epsilon as always we're here to answer questions. If if any come to you. After after we conclude this meeting and everybody have a great day and look forward to to speaking to you in the future. Thank you.
Operator: And with that, ladies and gentlemen, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect.
Speaker Change: And with that ladies and gentlemen, we will conclude today's conference. Following the presentation. We thank you for joining you may now disconnect your lines.