Equus Announces Fourth Quarter Net Asset Value
- Equus Total Return, Inc. reports a positive increase in net assets to $48.3 million and net asset value per share to $3.55 as of December 31, 2023.
- Morgan E&P's fair value increased by $7.6 million in the fourth quarter of 2023, driven by successful drilling and production activities in North Dakota's Williston Basin.
- Equus Energy experienced a decrease in fair value by $5.5 million in the same period, attributed to changes in natural gas pricing affecting certain gas reserves.
- None.
Insights
The recent update on Equus Total Return, Inc.'s net assets, particularly focusing on the fair value increase of Morgan E&P, holds substantial implications for the energy sector and its investors. The acquisition and successful commencement of hydrocarbon production in the Bakken/Three Forks formation signify a strategic expansion in a prolific oil and gas region. The reclassification of reserves to 'proved developed producing' status typically indicates a higher degree of certainty regarding the recoverability and commercial viability of those reserves, which can be a positive signal to investors about the company's operational effectiveness and potential for cash flow generation.
However, the decrease in fair value of Equus Energy due to the exclusion of uneconomic gas reserves underscores the volatility and risks associated with commodity price fluctuations. The forward pricing curve for natural gas can be influenced by a myriad of factors, including market supply and demand dynamics, geopolitical events and changes in energy policy. This development highlights the importance of portfolio diversification and the need for energy companies to maintain operational flexibility to adapt to changing market conditions.
From a valuation perspective, the involvement of a third-party firm in determining the fair value of Equus Total Return's investments adds a layer of credibility to the reported figures. This external validation is important for investor confidence, especially in light of the $7.6 million increase in the fair value of Morgan E&P. An increase of this magnitude can be reflective of underlying asset quality and operational successes, potentially leading to a reassessment of the company's intrinsic value.
The reported net assets per share growth from $3.49 to $3.55 over the quarter, although modest, indicates a positive trajectory for shareholder equity. For investors, these metrics are key indicators of a company's financial health and can influence investment decisions. It is important to note that while fair value adjustments can provide a snapshot of potential value creation, they are based on estimates and assumptions that may not always align with market prices or realized future cash flows.
Looking at the broader market implications, Equus Total Return's report may signal a broader trend of energy companies reaping the benefits of strategic acquisitions and efficient resource management. The increased net asset value per share is a positive indicator for the company's stakeholders, suggesting a strengthened financial position. However, the contrasting fortunes of Morgan E&P and Equus Energy within the same portfolio demonstrate the sector's inherent unpredictability, with varying asset performances that can affect investor sentiment.
Investors may also view the reported increase in fair value as a microcosm of the larger energy market, where technological advancements and strategic site acquisitions are playing pivotal roles in shaping company valuations. As the energy sector continues to evolve, especially with the ongoing energy transition, the ability to quickly capitalize on emerging opportunities while managing risks associated with commodity prices will be increasingly important for companies like Equus Total Return, Inc.
Morgan E&P’s Fair Value Increases
HOUSTON, April 03, 2024 (GLOBE NEWSWIRE) -- Equus Total Return, Inc. (NYSE: EQS) (“Equus” or the “Company”) reports net assets as of December 31, 2023, of
| As of the Quarter Ended | 12/31/2023 | 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | ||||||||||
| Net assets | |||||||||||||||
| Shares outstanding | 13,586 | 13,518 | 13,518 | 13,518 | 13,518 | ||||||||||
| Net assets per share | |||||||||||||||
The following were the principal contributors to the changes in fair value of the Company’s portfolio holdings in the fourth quarter of 2023:
Increase in Fair Value of Morgan E&P. On May 22, 2023, Morgan E&P, LLC (“Morgan”), a wholly-owned subsidiary of the Company, completed the acquisition of 4,747.52 net acres in the Bakken/Three Forks formation in the Williston Basin of North Dakota and subsequently acquired an additional 1,150 net acres in the third quarter of 2023. During the fourth quarter of 2023, Morgan successfully completed the drilling of two horizontal wells and commenced production of hydrocarbons from these wells, resulting in a significant portion of Morgan’s proved reserves being reclassified as proved developed producing. As of December 31, 2023, we recorded the fair value of Morgan’s equity at approximately
Decrease in Fair Value of Equus Energy. During the fourth quarter of 2023, the fair value of the Company’s holding in Equus Energy, LLC (“Equus Energy”) decreased
The Company received advice and assistance from a third-party valuation firm to support its determination of the fair value of its investments in Morgan and Equus Energy.
About Equus
The Company is a business development company that trades as a closed-end fund on the New York Stock Exchange under the symbol “EQS”. Additional information on the Company may be obtained from the Company’s website at www.equuscap.com.
This press release may contain certain forward-looking statements regarding future circumstances. These forward-looking statements are based upon the Company’s current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements including, in particular, the performance of the Company, including our ability to achieve our expected financial and business objectives, and the other risks and uncertainties described in the Company’s filings with the SEC. Actual results, events, and performance may differ. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date hereof. Except as required by law, the Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The inclusion of any statement in this release does not constitute an admission by the Company or any other person that the events or circumstances described in such statements are material.
Contact:
Patricia Baronowski
Pristine Advisers, LLC
(631) 756-2486
FAQ
What is Equus Total Return, Inc.'s net assets as of December 31, 2023?
How much did Morgan E&P's fair value increase in the fourth quarter of 2023?
Why did Equus Energy's fair value decrease in the fourth quarter of 2023?
