From time to time we check in on Epsilon Energy, which concentrates most of its effort on the Marcellus in Susquehanna County, PA. The former Canadian company decided to “domesticate” itself, moving headquarters from Canada to Houston, TX last summer (see Epsilon Energy Becoming “Domesticated” – Moving from Canada to U.S.). The company reports it will spend a total of $20-$25 million on various drilling activities in 2019, with 60% of that ($12-$15 million) in the Marcellus.
Does Epsilon actually do any of its own drilling? No. They partner with (give money to) other companies and the other companies do the actual drilling. Epsilon, according to their website, owns 5,750 net acres in the PA Marcellus. As you can see on the following map, their acreage is located in southwest Susquehanna County and (according to the website), is operated by Chesapeake Energy. As you can see, the majority of their acreage is located in Rush Township.
We also like this zoomed out map, showing the location of acreage owned by other Epsilon in relation to several other drillers in northeastern PA:
Yesterday Epsilon issued production and capital spending “guidance” for 2019:
Epsilon Energy Ltd. (NASDAQ: EPSN; TSX: EPS) (“Epsilon” or the “Company”) today announced that its board of directors has approved a $20 to $25 million capital budget for 2019 which is expected to be fully funded from operational cash flow. The Company forecasts this capital program to generate 30% growth in production. The Company has liquidity of $35MM and does not anticipate utilizing funds from its undrawn credit facility.
In the Marcellus Shale, the operator expects to turn four gross wells (2,600 net lateral feet to Epsilon’s interests) to sales during Q1. The initial forecast of 4 to 6 MMcf/d net production from these wells is expected to increase Marcellus production to 26 Mcf/d at the end of Q1. The performance of the Upper Marcellus wells in this group of new producers will be carefully monitored as few wells to date have targeted this section of the Marcellus in our leasehold. The Company expects to participate in the drilling and completing of an additional 8,000 to 10,000 net lateral feet to its interests in the lower Marcellus during 2019. According to information from the operator, the wells are expected to be turned to sales in Q4.
In the NW Stack, an appraisal program of three single mile laterals (5,740 net lateral feet to Epsilon’s interests) is planned to test the Meramec interval during 2019. The first well is expected to spud during Q1. Following an assessment of the early performance of this group of wells, the Company will determine the feasibility of a continuous one rig drilling program throughout the remainder of 2019.
With the development plans referenced above, the Company anticipates production growth of 27 – 33% year over year to a range of 9.7 – 10.2 Bcfe. For 2019, natural gas is expected to comprise approximately 95% of total production. The Company has hedged 4.8 Bcf of its expected natural gas volumes for the year at an average NYMEX price of $2.83 and realized price of $2.30 net of basis.
The capital program is subject to quarterly review by the Company’s management and board of directors which provides flexibility to deploy additional capital. This program directs more than 60% of the current budget for development to the Marcellus Shale assets in Susquehanna Co., Pennsylvania. Epsilon’s technical team continues to evaluate additional leasehold interests in our existing area of interest as well as attractive projects in other areas.
Epsilon Energy Ltd. is a North American on-shore 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 Anadarko basin in Oklahoma. Our assets are concentrated in areas with known hydrocarbon resources, which are conducive to multi-well, repeatable drilling programs. For more information, please visit www.epsilonenergyltd.com, where we routinely post announcements, updates, events, investor information, presentations and recent news releases. (1)
We also spotted news on the company website that their shares of common stock began trading on the Nasdaq Global Market exchange this past Tuesday:
Epsilon Energy Ltd. (TSX: EPS; OTCQB: EPSEF) (“Epsilon” or the “Company”) announced that its common shares have been approved for listing on the Nasdaq Global Market (“NASDAQ”). The common shares are expected to begin trading on the NASDAQ under the ticker symbol “EPSN” today, February 19, 2019. Upon commencement of trading on the NASDAQ, the Company’s common shares will cease trading on the OTCQB market.
“This marks an important milestone for Epsilon and its shareholders,” said Michael Raleigh, Epsilon’s Chief Executive Officer. “We have begun trading on the Nasdaq Global Market, which has been our goal for several months. We look forward to the visibility that comes with trading on this premier exchange. (2)
(1) Epsilon Energy (Feb 21, 2019) – Epsilon Energy Provides 2019 Capital and Production Guidance
(2) Epsilon Energy (Feb 19, 2019) – Epsilon Energy to Begin Trading on the Nasdaq Global Market
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