Epsilon Announces an Increased Borrowing Base and Permian Operations Update

Rhea-AI Summary

Epsilon Energy (NASDAQ: EPSN) announced an increase in its borrowing base to $45 million, following a redetermination by Frost Bank effective June 21, 2024. This increase includes new properties acquired and developed in Ector County, Texas. Additionally, Epsilon provided updates on its Permian Basin operations, highlighting the Ava well's performance, which averaged 1,290 BOEPD over 25 days, surpassing pre-drill estimates. Completion operations for the Katy well are underway, with flow-back expected next month. Epsilon holds a 25% working interest in the Pradera Fuego project.

Positive

• Borrowing base increased to $45 million.
• Ava well in Ector County averaged 1,290 BOEPD, surpassing pre-drill estimates.
• Epsilon's interest in Pradera Fuego project includes new properties in Ector County.

Negative

• None.

Insights

Financial Analyst

The increase in Epsilon's borrowing base from $35 million to $45 million boosts the company's liquidity, providing greater financial flexibility for ongoing and future projects. This adjustment reflects the value addition from the company's recently acquired and developed properties in Ector County, Texas. Such an enhanced borrowing capacity is important for funding development activities and can be seen as a vote of confidence from the lender, Frost Bank, in Epsilon's operational and financial health.

From a financial stability perspective, maintaining the same terms of the credit facility while increasing the borrowing base is positive. It suggests that the lender perceives the company's risk profile as unchanged despite the larger credit line. This stability is essential for investors as it indicates the company can continue its growth trajectory without incurring additional financial risks.

For short-term impacts, the increased liquidity is likely to support the company's operational activities and could lead to higher production outputs, thereby boosting quarterly earnings. Long-term, the confidence shown by Frost Bank and the acquisition of productive assets could enhance shareholder value.

Oil and Gas Industry Expert

The operational update on the Pradera Fuego project, particularly the performance of the Ava well, is significant. The well has averaged 1,290 BOEPD (barrels of oil equivalent per day), with 79% of that being oil, making it the best performer in the project to date. This performance not only surpasses the pre-drill estimates but also sets a promising precedent for the project. Such results can bolster investor confidence in the company's ability to execute its drilling program successfully.

The upcoming completion of the Katy well, extending into the large undeveloped Cowden leasehold, presents additional potential. Should this well also outperform expectations, it could lead to a revaluation of Epsilon’s assets in Texas, enhancing the company's reserve estimates and overall market valuation.

Investors should note that while the high initial production rates are promising, the long-term production sustainability will be important in determining the project's ultimate success. Furthermore, oil prices and market demand fluctuations could impact the revenue generated from these wells.

HOUSTON, June 25, 2024 (GLOBE NEWSWIRE) -- Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today reported the results of a borrowing base redetermination on the Company’s senior secured reserve-based revolving credit facility (the “Credit Facility”) with Frost Bank (the “Lender”).

Effective on June 21, 2024, the Lender redetermined the Company’s borrowing base at $45 million, which will remain until the next redetermination in the fourth quarter of 2024. The borrowing base now includes the recently acquired and developed properties in Ector County, Texas. The Lender’s total commitment is equal to the borrowing base amount. All other terms of the Credit Facility remain the same.

In Ector County, Texas, the recently completed Ava well, the sixth well drilled in the Pradera Fuego project, started flow-back in mid-May. Over the last twenty-five days, the well has averaged 1,290 BOEPD (gross, 79% oil) from a ~11,000’ lateral. The well is the best performer in the project so far, outperforming pre-drill estimates. Completion operations are now underway on the Katy well (7ᵗʰ well in the project), with flow-back expected next month. This well extends into the large undeveloped Cowden leasehold, in which the Company acquired an interest in June 2023. Epsilon holds a 25% working interest (18.75% NRI) in the Pradera Fuego project.

About Epsilon

Epsilon Energy Ltd. is a North American onshore natural gas and oil production and gathering company with assets in Pennsylvania, Texas, New Mexico, and Oklahoma.

Contact Information:

281-670-0002

Jason Stabell
Chief Executive Officer
Jason.Stabell@EpsilonEnergyLTD.com

Andrew Williamson
Chief Financial Officer
Andrew.Williamson@EpsilonEnergyLTD.com

FAQ

What was the result of Epsilon Energy's recent borrowing base redetermination?

Epsilon Energy's borrowing base was increased to $45 million following a redetermination by Frost Bank on June 21, 2024.

How did the Ava well in Ector County perform?

The Ava well in Ector County averaged 1,290 BOEPD over the last 25 days, outperforming pre-drill estimates.

When is the flow-back expected for the Katy well?

Flow-back for the Katy well is expected next month.

What is Epsilon Energy's working interest in the Pradera Fuego project?

Epsilon Energy holds a 25% working interest in the Pradera Fuego project.