Welcome!

News Feed Item

Epsilon Energy Ltd. Announces Full Year 2013 Results

HOUSTON, TEXAS -- (Marketwired) -- 03/20/14 -- Epsilon Energy Ltd. ("Epsilon") (TSX:EPS) today reported its financial results for the fourth quarter and full-year ended December 31, 2013. Highlights for the year include:


--  Increased exit rate from 40 MMcf/d to 47 MMcf/d; 
    
--  Increased total estimated proved and probable reserves by 10% from 168
    Bcf (per NI 51-101) at the 2012 year end less 2013 production of 13Bcf
    (Net 155Bcf) compared to 172 Bcf (per NI 51-101) as of December 31,
    2013; 
    
--  Reduced operating costs 4% from $.91 per Mcf in 2012 to $0.87 per Mcf in
    2013; 
    
--  Increased Net Cash Flows from operations from $28.6 MM in 2012 to $32.2
    MM in 2013; 
    
--  Reduced Normalized Overhead from $3.6 MM/yr to less than $1.9 MM/yr; 
    
--  Engineering study indicates greater than 50% increase in reserve
    potential, or 42 Bcf more than currently booked for Lower Marcellus
    undeveloped locations utilizing Short Stage Length (SSL) completions; 
    
--  Agreed to Canadian Asset Sales; 
    
--  Initiated Compression at the Auburn Facility and exited 2013 at capacity
    of 330 MMcf/d; 
    
--  Secured $20 MM line of credit with only $9 MM drawn 

We are pleased with the progress that has been made within the company on a number of fronts. First, as discussed in prior press releases, our operating cost structure has been substantially reduced. We anticipate that the company's G&A costs will be less than $1.9 MM in 2014, versus a normalized (before extraordinary items) $3.6 MM in 2013. Second, we have devoted significant efforts to the evaluation of the company's proven reserves and reserve potential. Our operating partner is now implementing a new design on the Lower Marcellus completions which should materially enhance recovery from all of our PUD locations. Accordingly, we anticipate that the company's true reserve potential for its Lower Marcellus assets will become more apparent in 2014 and should meaningfully exceed our current bookings assuming gas prices remain constructive. Additionally, we believe that there is significant untapped potential from the Upper Marcellus as we have one well currently producing from this interval and offset operators are producing several more in adjacent areas. Third, we are encouraged by the growth potential in our Midstream Asset. We are currently in discussions with our operating partners to meaningfully expand the system capacity from current levels of 330 MMcf/d to 550 MMcf/d, in response to demand for incremental gathering and compression services in our operating area. Based on current expressions of interest from third parties, we anticipate throughput volumes to grow meaningfully through 2014 and 2015. If these volumes become committed to our system we would add compression during 2014 and expand the current system capacity. The sale of our Canadian assets would largely complete the restructuring initiatives undertaken by the current Management and Board of Epsilon to focus the company's efforts on its core Pennsylvania assets. We now have a significantly streamlined and aligned management team and Board of Directors focused on maximizing the value of our Midstream and Upstream Marcellus Shale assets. Further, the company is now in a very solid financial position with ample liquidity to fund its operations going forward and to further support the share buyback program started in 2013.


                                    Quarter Ended            Year Ended     
                                     December 31,           December 31,    
                                    2013          2012       2013       2012
                               ---------  ------------  ---------  ---------
                               ---------  ------------  ---------  ---------
                                                                            
Natural gas sales ($000)       $  10,022  $     12,068  $  37,651  $  32,887
  Volume (Mmcf)                    3,838         4,284     13,062     13,925
  Avg. Price ($/Mcf)           $    2.61  $       2.82  $    2.88  $    2.36
  Exit Rate (Mmcf/day)              46.8          39.7       46.8       39.7
                                                                            
Oil sales ($000)               $     380  $        147  $   1,231  $     962
  Volume (MBbl)                        5             2         15         12
  Avg. Price ($/Bbl)           $   76.00  $      73.07  $   82.08  $   81.32
                                                                            
Midstream revenue ($000)       $   2,242  $      2,288  $   7,632  $   9,228
                               ---------  ------------  ---------  ---------
                                                                            
Total revenue                  $  12,644  $     14,503  $  46,514  $  43,077
                               ---------  ------------  ---------  ---------
                               ---------  ------------  ---------  ---------

In 2013, revenues increased 8% compared to 2012. The increase in revenues was driven by an increase in natural gas prices year-over-year. However, during 2013 realized prices were negatively impacted by a differential to NYMEX that averaged ($0.71) for the year. Exiting 2013, Epsilon had four wells that were drilled and completed waiting on tie-in to the gathering lines. These wells were brought online during February of 2014.

Proved and probable reserves as of December 31, 2013 increased to 172 Bcf, a 10% increase over the 168 Bcf (less 13 Bcf of 2013 production) of proved and probable reserves reported as of December 31, 2012. The 10% increase in proved reserves was based upon an evaluation performed by Epsilon's independent reserve engineering firm, DeGolyer and MacNaughton. The five (5) year average prices utilized to value the Company's estimated proved natural gas reserves at December 31, 2013 were $4.40 per Mcf, compared to $4.04 per Mcf for natural gas at December 31, 2012.

The increase in reserves was driven by successful drilling results, favorable production rates and better than anticipated decline rates in the Marcellus. Based upon production results in 2013, proved and probable EUR's for Lower Marcellus producing wells averaged 8.2 Bcf per gross well with a median of 7.6 Bcf per gross well. The reserve estimates did not include any proved undeveloped or probable locations for the Upper Marcellus, Purcell Limestone or Utica Shale which are being drilled and tested by various operators in the region.

The gas gathering system generated $8 million in revenue during 2013 exiting the year at a rate of 303 Mmcf/day. The midstream system began operating in September 2011 and construction of the compression facility was completed in July 2012 which allowed the system to reach compression capacity of 330 Mmcf/day with pipeline gathering capacity of 550 Mmcf/day.


                                                   Years ended December 31, 
                                       Notes           2013            2012 
                                            ---------------- ---------------
                                                                            
Revenues:                                                                   
  Oil & gas revenue                         $    38,881,902  $   33,848,783 
  Gas gathering & compression revenue             7,632,463       9,228,001 
                                            ---------------- ---------------
                                                                            
    Total revenue                                46,514,365      43,076,784 
                                            ---------------- ---------------
                                                                            
Operating costs and expenses:                                               
  Project operating costs                        11,400,285      12,608,814 
  Depletion, depreciation, amortization                                     
   and decomissioning accretion          6       16,991,304      23,712,504 
  Impairment expense (recovery)        5 & 6     13,312,358      (2,834,810)
  Stock based compensation expense                                          
   (recovery)                                      (121,392)        682,252 
  General and administrative                      7,189,389       2,930,057 
                                            ---------------- ---------------
                                                                            
    Total operating costs and expenses           48,771,944      37,098,817 
                                            ---------------- ---------------
                                                                            
Operating income (loss)                          (2,257,579)      5,977,967 
                                            ---------------- ---------------
                                                                            
Other income and expense:                                                   
  Interest income                                    13,864          95,552 
  Finance expense                                (4,444,897)     (3,613,487)
  Realized gain on commodity contracts   13       1,533,906         410,091 
  Net change in unrealized gain (loss)                                      
   on commodity contracts                13      (3,558,053)      1,988,065 
  Other income                                        1,842             194 
                                            ---------------- ---------------
                                                                            
    Net other income (expense)                   (6,453,338)     (1,119,585)
                                            ---------------- ---------------
                                                                            
Income tax recovery - current            9                -               - 
Income tax expense - deferred            9        4,811,364       8,988,046 
                                            ---------------- ---------------
NET LOSS                                    $   (13,522,281) $   (4,129,664)
                                            ---------------- ---------------
                                            ---------------- ---------------
                                                                            
                                                                            
Net loss per share, basic                   $         (0.27)         ($0.08)
Net loss per share, diluted                 $         (0.27)         ($0.08)
Weighted average number of shares                                           
 outstanding, basic                              50,258,559      49,848,772 
Weighted average number of shares                                           
 outstanding, diluted                            50,350,417      50,037,086 

The Company generated a net loss of $13.5 million for the year ended December 31, 2013 as compared to net loss of $4 million in 2012. During 2013 Epsilon recorded impairments of $13 million on Canadian and US (New York) properties while in 2012 Epsilon had a net impairment recovery of $3 million. Epsilon also recorded a $3.5 million change in unrealized loss on commodity contracts while in 2012, a $2 million gain was recorded. Adjusted EBITDA, which excludes these items, increased to $29.5 million from $28 million in 2012.

The term Adjusted EBITDA consists of net income plus interest, taxes, depreciation and amortization. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles 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 our ability to service debt and to fund capital expenditures and provides investors a helpful measure for comparing its operating performance with the performance of other companies that have different financing and capital structures or tax rates. The following table sets forth a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable measure of financial performance calculated under generally accepted accounting principles.


                                                Years ended December 31,    
                                                       2013            2012 
                                             --------------- ---------------
                                             --------------- ---------------
                                                                            
Net income (loss)                            $      (13,522) $       (4,130)
Add Back:                                                                   
  Net interest expense                                4,431           3,517 
  Deferred income tax (recovery) provision            4,811           8,988 
  Depreciation, depletion, amortization, and                                
   accretion                                         16,991          23,713 
  Stock based compensation expense (recovery)          (121)            682 
  Net change in unrealized (gain) loss on                                   
   commodity co                                       3,558          (1,988)
  Impairment expense (recovery)                      13,312          (2,835)
  Other income                                           (2)              - 
                                             --------------- ---------------
Adjusted EBITDA                              $       29,458  $       27,947 
                                             --------------- ---------------
                                             --------------- ---------------

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 in such forward-looking statements are based on reasonable assumption 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.

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.

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
SYS-CON Events announced today that Alert Logic, Inc., the leading provider of Security-as-a-Service solutions for the cloud, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Alert Logic, Inc., provides Security-as-a-Service for on-premises, cloud, and hybrid infrastructures, delivering deep security insight and continuous protection for customers at a lower cost than traditional security solutions. Ful...
DevOps is not just last year’s buzzword. Companies with DevOps practices are 2.5x more likely to exceed profitability, market share, and productivity goals. But how do you enable high performance? What can you do right now to start? Find out from DevOps experts including Gene Kim, co-author of "The Phoenix Project," and the Dynatrace Center of Excellence.
SYS-CON Events announced today that iDevices®, the preeminent brand in the connected home industry, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. iDevices, the preeminent brand in the connected home industry, has a growing line of HomeKit-enabled products available at the largest retailers worldwide. Through the “Designed with iDevices” co-development program and its custom-built IoT Cloud Infrastruc...
In most cases, it is convenient to have some human interaction with a web (micro-)service, no matter how small it is. A traditional approach would be to create an HTTP interface, where user requests will be dispatched and HTML/CSS pages must be served. This approach is indeed very traditional for a web site, but not really convenient for a web service, which is not intended to be good looking, 24x7 up and running and UX-optimized. Instead, talking to a web service in a chat-bot mode would be muc...
SYS-CON Events announced today that Men & Mice, the leading global provider of DNS, DHCP and IP address management overlay solutions, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. The Men & Mice Suite overlay solution is already known for its powerful application in heterogeneous operating environments, enabling enterprises to scale without fuss. Building on a solid range of diverse platform support,...
The cloud competition for database hosts is fierce. How do you evaluate a cloud provider for your database platform? In his session at 18th Cloud Expo, Chris Presley, a Solutions Architect at Pythian, will give users a checklist of considerations when choosing a provider. Chris Presley is a Solutions Architect at Pythian. He loves order – making him a premier Microsoft SQL Server expert. Not only has he programmed and administered SQL Server, but he has also shared his expertise and passion w...
SYS-CON Events announced today that AppNeta, the leader in performance insight for business-critical web applications, will exhibit and present at SYS-CON's @DevOpsSummit at Cloud Expo New York, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. AppNeta is the only application performance monitoring (APM) company to provide solutions for all applications – applications you develop internally, business-critical SaaS applications you use and the networks that deli...
Fortunately, meaningful and tangible business cases for IoT are plentiful in a broad array of industries and vertical markets. These range from simple warranty cost reduction for capital intensive assets, to minimizing downtime for vital business tools, to creating feedback loops improving product design, to improving and enhancing enterprise customer experiences. All of these business cases, which will be briefly explored in this session, hinge on cost effectively extracting relevant data from ...
SYS-CON Events announced today that Column Technologies will exhibit at SYS-CON's @DevOpsSummit at Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Established in 1998, Column Technologies is a global technology solutions provider with over 400 employees, headquartered in the United States with offices in Canada, India, and the United Kingdom. Column Technologies provides “Best of Breed” technology solutions that automate the key DevOps principal...
The Art of DevOps provides a fun overview to help teams understand DevOps. Written in the style of the famous 6th century Chinese manuscript “The Art of War,” this eBook describes DevOps in the form of a mission to continuously deliver assets to the operational battlegrounds safely, securely, and quickly. It’s a fun read with valuable insights.
More and more companies are looking to microservices as an architectural pattern for breaking apart applications into more manageable pieces so that agile teams can deliver new features quicker and more effectively. What this pattern has done more than anything to date is spark organizational transformations, setting the foundation for future application development. In practice, however, there are a number of considerations to make that go beyond simply “build, ship, and run,” which changes ho...
Companies can harness IoT and predictive analytics to sustain business continuity; predict and manage site performance during emergencies; minimize expensive reactive maintenance; and forecast equipment and maintenance budgets and expenditures. Providing cost-effective, uninterrupted service is challenging, particularly for organizations with geographically dispersed operations.
Advances in technology and ubiquitous connectivity have made the utilization of a dispersed workforce more common. Whether that remote team is located across the street or country, management styles/ approaches will have to be adjusted to accommodate this new dynamic. In his session at 17th Cloud Expo, Sagi Brody, Chief Technology Officer at Webair Internet Development Inc., focused on the challenges of managing remote teams, providing real-world examples that demonstrate what works and what do...
As enterprises work to take advantage of Big Data technologies, they frequently become distracted by product-level decisions. In most new Big Data builds this approach is completely counter-productive: it presupposes tools that may not be a fit for development teams, forces IT to take on the burden of evaluating and maintaining unfamiliar technology, and represents a major up-front expense. In his session at @BigDataExpo at @ThingsExpo, Andrew Warfield, CTO and Co-Founder of Coho Data, will dis...
When building large, cloud-based applications that operate at a high scale, it’s important to maintain a high availability and resilience to failures. In order to do that, you must be tolerant of failures, even in light of failures in other areas of your application. “Fly two mistakes high” is an old adage in the radio control airplane hobby. It means, fly high enough so that if you make a mistake, you can continue flying with room to still make mistakes. In his session at 18th Cloud Expo, Lee...