Epsilon Energy Ltd. (NASDAQ:EPSN) Q1 2024 Earnings Call Transcript May 11, 2024

Epsilon Energy Ltd. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and welcome to the Epsilon Energy First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Andrew Williamson. Please go ahead.

Andrew Williamson : Thank you, operator. And on behalf of the management team, I would like to welcome all of you to today's conference call to review Epsilon's First Quarter 2024 Financial and Operational Results. Before we begin, I would like to remind you that our comments may include forward-looking statements. It should be noted that a variety of factors could cause Epsilon's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Today's call may also contain certain non-GAAP financial measures. Please refer to the earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. With that, I'd like to turn the call over to Jason Stabell, our Chief Executive Officer.

Jason Stabell: Thank you, Andrew. Good morning, and thank you for participating in our first quarter 2024 conference call. Joining me today are Andrew Williamson, our CFO; and Henry Clanton, our COO. We will be available to answer questions later in the call. Today, I'll keep my prepared remarks brief and let Andrew and Henry offer more detailed comments on our financial and operating results and forward plans. Our Permian assets continue to perform well. We expect to bring two additional gross wells online over the summer in the Pradera Fuego project in Ector County. We are also in discussions about the location and timing of a potential additional well in the second half of this year. This activity, combined with our recent acquisition won't be fully reflected in our results until the third quarter due to a several week shut-in in May of two producing wells during frac operations.

However, we still expect to see quarter-over-quarter liquids volume growth in the second quarter. In addition, a full core was taken in the deeper Woodford Bench in the well drilled in March to further evaluate the prospectivity of the interval, potentially adding a second development bench to our assets in Ector. We will keep you updated on the progress of this evaluation. In Pennsylvania, we support the actions of our operating partner to delay turn-in lines on wells completed last quarter and selectively curtail production. Currently, we have seven completed wells, 0.7 net that will likely not begin production until natural gas prices improve sustainably. Our current estimate for first production on the deferred TILs is early 2025 based on conversations with the operator.

In addition, the operator has curtailed some existing production in Auburn, representing approximately 4.5 million cubic feet a day of NRI production. These curtailments are in response to current pricing, and we anticipate this production to return as prices improve. Finally, we expect the combination of our more diverse revenue mix and defensive hedging program to result in flat to slightly down cash flow in 2024 versus 2023 at current strip prices, which, in combination with our strong balance sheet will allow us to continue to invest in our promising Permian project, pay our dividend and warehouse and material volume of gas for an improved pricing environment. All of this potentially sets us up for a material uplift in cash flow in 2025.

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