Epsilon Energy (EPSN) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $7.3M, up 12% year-over-year, with oil growth offsetting lower gas revenue; net income was $0.8M, up from $0.4M in Q2 2023.

• Permian assets contributed about 50% of quarterly revenue and 75% of cash flow, with production volume surging 342% year-over-year due to new wells.

• Marcellus operations saw decreased revenues and volumes due to natural declines, curtailments, and operator shut-ins.

• Company maintains disciplined capital allocation, strong balance sheet, and returns value via dividends and share buybacks.

• Positioned for significant volume and cash flow growth in 2025, with catalysts including an operator sale process in Ector County and ongoing business development.

Financial highlights

• Net income for Q2 2024 was $0.8M, with total revenue of $7.3M; Adjusted EBITDA was $3.9M, and operating income was $1.2M.

• Cash flow from operations for H1 2024 was $9.1M, down from $10.2M prior year; working capital surplus at June 30, 2024 was $9.3M.

• Borrowing base increased to $45M, with no outstanding borrowings under the revolving credit facility.

• Capex for H1 2024 totaled $28.1M, focused on property acquisitions and drilling.

• Dividends of $0.0625/share paid quarterly, totaling $2.7M for H1 2024.

Outlook and guidance

• Permian volumes expected to increase sequentially for the sixth consecutive quarter in Q3 2024, with further oil growth from new wells.

• Marcellus wells completed in Q1 2024 remain offline, awaiting improved gas prices; production curtailments continue in PA.

• Company remains highly leveraged to a rebound in natural gas prices, with potential for more than 100% uplift in net production if prices recover.

• Management expects current cash, investments, borrowings, and operating cash flows to be sufficient for at least the next twelve months.

• Uncertainty on further Permian development until operator sale process concludes, expected by year-end.