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Epsilon Energy's Q1 2025: Navigating Contradictions in Alberta Production, Hedging Strategies, and Capital Plans
Generated by AI AgentEarnings Decrypt
Wednesday, May 21, 2025 3:05 am ET1min read
Production and operational strategy in Alberta, hedging strategy and market conditions, production and capital expenditure plans in Alberta, Alberta well performance and development plans, hedging strategy for oil and gas production are the key contradictions discussed in Energy's latest 2025Q1 earnings call.
Strong Financial Performance in Marcellus:
- reported a 58% increase in production and a 70% increase in realized pricing in the Marcellus region, leading to an over 200% increase in upstream cash flows.
- Growth was driven by strong performance in both upstream and midstream cash flows due to increased production and favorable pricing conditions.
Capital Expenditure Reduction:
- The company is planning 0.5 net wells each in Texas and Alberta for capital expenditures of $9 million to $12 million, excluding Pennsylvania.
- This reduction is attributed to minimizing near-term activity in response to oil price volatility, as discussed with operators.
Diversified Portfolio and Strong Balance Sheet:
- Epsilon's diversified portfolio has performed well in the current volatile environment.
- The company's strong balance sheet and projected cash flows enable it to capitalize on attractive opportunities while maintaining its dividend.
Hedge Strategy and Gas Market:
- As of May, Epsilon is approximately 45% hedged on forecasted PDP oil production at just over $71 WTI and 30% hedged on gas production at $3.33 NYMEX.
- The company aims to add to gas hedges up to 40% of PDP production for winter 2026 and summer 2027, depending on market conditions.
Texas and Canada Operations:
- In Texas, Epsilon plans to drill 2 wells for leasehold obligations, while in Canada, Mannville wells in the Garrington area commenced production in April.
- These activities are aimed at satisfying leasehold obligations and optimizing production with artificial lift, subject to market conditions and operator plans.
Strong Financial Performance in Marcellus:
- reported a 58% increase in production and a 70% increase in realized pricing in the Marcellus region, leading to an over 200% increase in upstream cash flows.
- Growth was driven by strong performance in both upstream and midstream cash flows due to increased production and favorable pricing conditions.
Capital Expenditure Reduction:
- The company is planning 0.5 net wells each in Texas and Alberta for capital expenditures of $9 million to $12 million, excluding Pennsylvania.
- This reduction is attributed to minimizing near-term activity in response to oil price volatility, as discussed with operators.
Diversified Portfolio and Strong Balance Sheet:
- Epsilon's diversified portfolio has performed well in the current volatile environment.
- The company's strong balance sheet and projected cash flows enable it to capitalize on attractive opportunities while maintaining its dividend.
Hedge Strategy and Gas Market:
- As of May, Epsilon is approximately 45% hedged on forecasted PDP oil production at just over $71 WTI and 30% hedged on gas production at $3.33 NYMEX.
- The company aims to add to gas hedges up to 40% of PDP production for winter 2026 and summer 2027, depending on market conditions.
Texas and Canada Operations:
- In Texas, Epsilon plans to drill 2 wells for leasehold obligations, while in Canada, Mannville wells in the Garrington area commenced production in April.
- These activities are aimed at satisfying leasehold obligations and optimizing production with artificial lift, subject to market conditions and operator plans.
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