Epsilon Announces Entry Into the Province of Alberta Through Two Joint Ventures
Epsilon Energy has announced two strategic joint ventures in Alberta, Canada. The first partnership covers 30,000 gross acres in Garrington and 130,000 gross acres in Harmattan areas, with Epsilon earning a 25% working interest. The investment involves up to $12 million CAD development carry, targeting liquids-focused formations with over 25 2-mile locations in the Mannville.
The second joint venture in the Killam area includes a 50% working interest in 14,000 gross acres for $1.4 million CAD, with commitment to participate in two wells during 2024. One well has yielded a commercial discovery, while the second faced mechanical issues.
Epsilon Energy ha annunciato due joint venture strategiche in Alberta, Canada. La prima partnership copre 30.000 acri lordi a Garrington e 130.000 acri lordi nelle aree di Harmattan, con Epsilon che guadagna un interesse lavorativo del 25%. L'investimento prevede fino a 12 milioni di dollari CAD di spese di sviluppo, mirando a formazioni concentrate sui liquidi con oltre 25 posizioni di 2 miglia nella Mannville.
La seconda joint venture nell'area di Killam include un interesse lavorativo del 50% su 14.000 acri lordi per 1,4 milioni di dollari CAD, con l'impegno a partecipare in due pozzi nel 2024. Un pozzo ha dato un ritrovamento commerciale, mentre il secondo ha affrontato problemi meccanici.
Epsilon Energy ha anunciado dos alianzas estratégicas en Alberta, Canadá. La primera asociación cubre 30,000 acres brutos en Garrington y 130,000 acres brutos en las áreas de Harmattan, con Epsilon obteniendo un interés de trabajo del 25%. La inversión incluye hasta 12 millones de dólares canadienses en gastos de desarrollo, enfocándose en formaciones centradas en líquidos con más de 25 localidades de 2 millas en Mannville.
La segunda alianza en el área de Killam incluye un interés de trabajo del 50% en 14,000 acres brutos por 1.4 millones de dólares canadienses, con el compromiso de participar en dos pozos durante 2024. Un pozo ha resultadon en un descubrimiento comercial, mientras que el segundo enfrentó problemas mecánicos.
Epsilon Energy는 캐나다 앨버타에서 두 개의 전략적 합작 투자를 발표했습니다. 첫 번째 파트너십은 가링턴에서 30,000 에이커 및 하마탄 지역에서 130,000 에이커의 총 면적을 포함하며, Epsilon은 25%의 운영 지분을 확보합니다. 이 투자에는 1,200만 캐나다 달러의 개발 비용이 포함되며, 매너빌에서 2마일 위치 이상을 목표로 하는 액체 중심의 형성을 겨냥하고 있습니다.
킬람 지역의 두 번째 합작 투자는 14,000 에이커의 총 면적에 대해 50%의 운영 지분을 포함하고 있으며, 140만 캐나다 달러를 투자하며 2024년 동안 두 개의 우물에 참여할 것을 약속합니다. 한 우물은 상업적 발견이 되었고, 다른 하나는 기계적 문제에 직면했습니다.
Epsilon Energy a annoncé deux partenariats stratégiques en Alberta, au Canada. Le premier partenariat couvre 30 000 acres bruts à Garrington et 130 000 acres bruts dans les zones de Harmattan, avec Epsilon obtenant un intérêt de travail de 25 %. L'investissement concerne jusqu'à 12 millions de dollars CAD pour le développement, visant des formations axées sur les liquides avec plus de 25 sites de 2 miles dans la Mannville.
Le second partenariat dans la région de Killam comprend un intérêt de travail de 50 % sur 14 000 acres bruts pour 1,4 million de dollars CAD, avec un engagement à participer à deux puits en 2024. Un puits a donné lieu à une découverte commerciale, tandis que le second a rencontré des problèmes mécaniques.
Epsilon Energy hat zwei strategische Joint Ventures in Alberta, Kanada, angekündigt. Die erste Partnerschaft umfasst 30.000 Brutto acres in Garrington und 130.000 Brutto acres in den Bereichen Harmattan, wobei Epsilon einen Anteil von 25% an den Arbeitsinteressen erhält. Die Investition umfasst bis zu 12 Millionen CAD Entwicklungskosten und zielt auf flüssigkeitsfokussierte Formationen mit über 25 2-Meilen-Standorten in der Mannville ab.
Das zweite Joint Venture im Gebiet Killam umfasst einen Arbeitsanteil von 50% an 14.000 Brutto acres für 1,4 Millionen CAD, mit der Verpflichtung, 2024 an zwei Bohrungen teilzunehmen. Ein Bohrloch hat einen kommerziellen Fund erbracht, während das zweite mechanische Probleme hatte.
- Expansion into new territory with majority held-by-production acreage
- Strategic partnership with established Calgary-based operators
- Attractive economics with mid-teens effective royalty rates
- Large net operating loss position in Canada enabling high margin after-tax cash flows
- Commercial discovery in Killam area already on production
- Minimal upfront capital requirement for significant acreage acquisition
- Second well in Killam area faced mechanical issues and couldn't be properly evaluated
- $12 million CAD development carry commitment required
- Harmattan acreage described as speculative due to varied historical results
Insights
This joint venture expansion into Alberta represents a significant strategic move for Epsilon Energy. The deal structure includes
The company's strategic positioning in multiple areas (Garrington, Harmattan and Killam) diversifies their portfolio while increasing liquids exposure. The deal structure, requiring minimal upfront capital while securing significant acreage positions, is particularly advantageous. The corporate tax benefits from Canadian domiciliation, including the elimination of US federal withholding taxes and utilization of Canadian net operating losses, enhance the financial efficiency of this expansion.
The financial structure of these joint ventures is strategically sound. The primary agreement's
The tax efficiency gains from Canadian operations add significant value, potentially improving shareholder returns through more efficient dividend and share repurchase mechanisms. The existing net operating loss position in Canada creates a tax shield for future earnings, enhancing potential returns. This expansion effectively doubles the company's leasehold position while maintaining financial flexibility.
HOUSTON, Oct. 24, 2024 (GLOBE NEWSWIRE) -- Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today reported the signing of definitive agreements to form a joint venture in the Garrington and Harmattan areas of Alberta, Canada, in the Western Canadian Sedimentary Basin.
In partnership with a leading Calgary-based private operator, Epsilon will earn a
The Company estimates the joint venture area holds over 25 2-mile locations in the Mannville. Offset wells exhibit attractive economics, driven by mid-teens effective royalty rates and drilling and completion costs per well estimated at
Consideration will be in the form of up to a
Additionally, the Company entered a joint venture in the Killam area of Alberta, Canada, in the Western Canadian Sedimentary Basin in April of 2024. In partnership with a different Calgary-based private operator, Epsilon acquired a
The project is a proof of application of multi-leg open hole horizontal wells which have proven successful in other parts of Alberta. The drilling of the initial two wells in August and September 2024 has yielded one commercial discovery currently on production and a second prospect unable to be properly evaluated due to mechanical issues. Gross drilling and completion costs are approximately
Epsilon is a Canadian domiciled company and there are several corporate advantages to establishing a Canadian business. Among these are the substitution of cash transfers from Epsilon’s US subsidiaries to the Canadian parent to fund dividends and share repurchases, removing the levy of US federal withholding taxes on such transfers. Also, Epsilon holds a large net operating loss position in Canada, allowing for high margin after-tax future cash-flows.
Jason Stabell, Epsilon’s Chief Executive Officer, commented, “As previously communicated, we have been evaluating potential Canadian projects over the last year. We are excited to announce a new project area in Alberta that fits our strategic focus of drill bit weighted investments with attractive full cycle returns and meaningful follow-on investment runway (inventory). For a small amount of up-front capital, we will establish a third primary area to deploy capital in a proven hydrocarbon system and more than double our company leasehold (after the carry is satisfied), while also increasing our liquids exposure. With the deal signed this week, we are partnered with a well-capitalized leading private player in the basin. Importantly, this acreage is largely held by production, affording the ability to opportunistically develop these resources as market conditions warrant.”
About Epsilon
Epsilon Energy Ltd. is a North American onshore focused independent exploration and production company engaged in the acquisition, development, gathering and production of oil and gas reserves. Our primary areas of operation are the Marcellus basin in Northeast Pennsylvania and the Central Basin Platform in the Permian basin. For more information, please visit www.epsilonenergyltd.com, where we routinely post announcements, updates, events, investor information, presentations, and recent news releases.
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.
Contact Information:
281-670-0002
Jason Stabell
Chief Executive Officer
Jason.Stabell@EpsilonEnergyLTD.com
Andrew Williamson
Chief Financial Officer
Andrew.Williamson@EpsilonEnergyLTD.com
FAQ
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