Epsilon Energy Ltd. Announces New Share Repurchase Program and Borrowing Base Redetermination

Rhea-AI Summary

Epsilon Energy (NASDAQ: EPSN) has announced a new one-year share repurchase program following the termination of its previous March 2024 program. The new initiative authorizes the repurchase of up to 2,200,876 common shares, representing 10% of outstanding shares, with a maximum aggregate purchase price of US $13.0 million.

The program runs from February 12, 2025, to February 11, 2026, with purchases to be made through NASDAQ Global Market at prevailing market prices. The company plans to fund the repurchases through available cash without incurring debt. The Board believes the current share price may not reflect underlying value, viewing the buyback as an appropriate use of funds to create shareholder value.

Additionally, Epsilon announced its borrowing base redetermination with Frost Bank, which has been set at $45 million effective February 10, 2025, until the next redetermination later in the year.

Positive

• Authorization to repurchase 10% of outstanding shares worth up to $13M
• Buyback to be funded through available cash without incurring debt
• Strong borrowing base of $45M maintained with Frost Bank

Negative

• Board's indication that shares may be undervalued at current market price

Insights

Financial Analyst

The newly announced share repurchase program represents a significant capital allocation decision for Epsilon Energy, with authorization to repurchase up to 10% of outstanding shares for a maximum of $13 million. This program size is notable relative to the company's market cap of approximately $133 million, indicating a substantial commitment to shareholder returns.

The decision to fund the buyback through available cash rather than debt demonstrates strong balance sheet management and financial discipline. This approach is particularly prudent given the cyclical nature of the energy sector and the importance of maintaining financial flexibility. The maintenance of a $45 million borrowing base through the redetermination process provides additional financial security and operational flexibility.

Several key implications emerge from this announcement:

• The buyback program's size relative to daily trading volume could provide meaningful support for the stock while reducing float
• The company's choice to replace rather than extend the previous program suggests a strategic review of capital allocation priorities
• The cash-funded approach preserves debt capacity for potential operational needs or opportunistic acquisitions
• The borrowing base maintenance indicates lender confidence in the company's reserve base and operational stability

This balanced approach to capital return and balance sheet management aligns with current industry trends, where energy companies are increasingly focusing on shareholder returns while maintaining financial strength. The program's one-year duration provides flexibility to adjust to market conditions while demonstrating commitment to long-term value creation.

HOUSTON, Feb. 13, 2025 (GLOBE NEWSWIRE) -- Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today announced that its Board of Directors terminated and revoked authority under the normal course issuer bid program which commenced on March 27, 2024. At the same time, the Board of Directors approved a new one-year share repurchase program, under which the Company is authorized to repurchase up to 2,200,876 common shares, representing 10% of the outstanding common shares of Epsilon, for an aggregate purchase price of not more than US $13.0 million, pursuant to a normal course issuer bid. The one-year period commenced on February 12, 2025. The program will end on February 11, 2026, unless the maximum amount of common shares is purchased before then or Epsilon provides earlier notice of termination.

The Company believes that the market price of its common shares may not reflect their underlying value and the Board of Directors has authorized this initiative because, in the Board’s opinion, the proposed repurchase of common shares constitutes an appropriate use of Epsilon’s funds, and the repurchase of its common shares is one way of creating shareholder value.

Repurchases will be made from time to time through the facilities of the NASDAQ Global Market. The price paid for the common shares will be, subject to applicable securities laws, the prevailing market price of such common shares on the NASDAQ Global Market at the time of such purchase. The Company intends to fund the purchase out of available cash and does not expect to incur debt to fund the share repurchase program.

The Company also announced the results of a borrowing base redetermination on the Company’s senior secured reserve-based lending revolving credit facility (the “Credit Facility”) with Frost Bank (the “Lender”). Effective on February 10, 2025, the Lender redetermined the borrowing base at $45 million, which will remain until the next redetermination later in the year.

About Epsilon

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

How many shares can Epsilon Energy (EPSN) repurchase under its new 2025 buyback program?

Epsilon Energy can repurchase up to 2,200,876 common shares, representing 10% of its outstanding shares, with a maximum aggregate purchase price of US $13.0 million.

When does EPSN's new share repurchase program begin and end?

The program began on February 12, 2025, and will end on February 11, 2026, unless the maximum amount of shares is purchased before then or the company terminates it earlier.

How will Epsilon Energy (EPSN) fund its 2025 share buyback program?

Epsilon Energy plans to fund the share repurchases through available cash and does not expect to incur any debt to fund the program.

What is EPSN's new borrowing base amount with Frost Bank as of February 2025?

Epsilon Energy's borrowing base was redetermined at $45 million effective February 10, 2025, and will remain at this level until the next redetermination later in the year.

Where will EPSN conduct its share repurchases?

Epsilon Energy will make share repurchases through the facilities of the NASDAQ Global Market at prevailing market prices.