Epsilon Energy Ltd. · NASDAQ:EPSN
Epsilon Energy — Investor Presentation (November 2019)
23 slides from Epsilon Energy's investor presentation, November 2019
Slide 1: Epsilon Energy
Epsilon Energy November 2019
Slide 2: Forward Looking Information and Cautionary Statement
Forward Looking Information and Cautionary Statement Certain statements contained in this presentation constitute forward-looking statements. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended
Slide 3: EPSN Introduction
EPSN Introduction EPSILON Energy
Slide 4: Epsilon Energy – Executive Summary
Epsilon Energy – Executive Summary • Primary assets located in Marcellus sweet spot ( Susquehanna Co. Pennsylvania ) » Material existing baseline production with low declines » Highly productive remaining inventory of dry gas horizontal well locations » Gathering and Midstream infrastructure provide
Slide 5: Epsilon Energy - Introduction
Epsilon Energy - Introduction Epsilon Energy (NASDAQ: EPSN) is a North American oil and natural gas development and midstream company with a current focus on the dry gas area of the Marcellus Shale of Pennsylvania. • Assets are located within the highest quality area of the Marcellus gas resource in
Slide 6: EPSN – 3 Yr Quarterly Marcellus Growth Option
EPSN – 3 Yr Quarterly Marcellus Growth Option 100% Growth 2020-2022 Yearly Cum EBITDA* & Cum Free Cash* • For 2019, EPSN proposed 11,000 net feet of lateral (to EPSN interests) be developed and brought on production by the operator • Options for development @ $2.00 flat net realized gas price » No G
Slide 7: EPSN Financial Performance
EPSN Financial Performance EPSILON Energy
Slide 8: EPSN - Financial Performance 2013 - 2019
EPSN - Financial Performance 2013 - 2019 2019 • Prolific Marcellus production and 2013 2014 2015 2016 2017 2018 Estimate infrastructure constraints caused depressed net back prices in 2015 and 2016, which have since recovered Average Gas Price $2.96 $2.66 $1.21 $1.39 $2.13 $2.57 $2.33 Volume (Bcfe)
Slide 9: EPSN Q1 – Q3/2019 Financial Performance
EPSN Q1 – Q3/2019 Financial Performance Q3 2019 Q2 2019 Q1 2019 ($000's) ($000's) ($000's) Total Equivalent Production (WI) (Mmcfe/d) 22.6 24.7 23.6 PA Equivalent Production (WI) (Mmcfe/d) 21.9 22.7 22.8 • Net after tax income of $0.24 per basic and diluted common share outstanding for the Gathering
Slide 10: Macro Natural Gas Supply/Demand
Macro Natural Gas Supply/Demand
Slide 11: Epsilon Energy – 3 yr Regional Supply Growth
Epsilon Energy – 3 yr Regional Supply Growth Gulf of Mid Total Year East East Texas Gulf Coast Permian Rockies San Juan South Texas West Mexico Continent MMcf/d 2017 24,338 5,188 6,143 2,678 9,711 6,738 9,956 2,252 5,766 442 73,212 2018 28,509 5,338 8,098 2,481 10,176 8,973 10,440 2,262 5,998 416 82
Slide 12: Supply/Demand – End Use Seasonal Demand Forecasts
Supply/Demand – End Use Seasonal Demand Forecasts • Incremental demand outpacing incremental supply should provide upward pressure to prices • Mexican Exports • LNG Export capacity growth • Coal power de-commissioning • Industrial Demand growth • Methanol plant expansions • LNG is the single largest
Slide 13: Epsilon Energy – Futures Price Expectations
Epsilon Energy – Futures Price Expectations • Internal planning assumes a 5 year average (volume) net back price of slightly less than $2.00/Mcf * Source : ARM Energy Management, LLC 13
Slide 14: Marcellus Upstream Asset
Marcellus Upstream Asset EPSILON Energy
Slide 15: Epsilon Energy - NE Pennsylvania Marcellus Operators
Epsilon Energy - NE Pennsylvania Marcellus Operators • Purcell interval between Upper and Lower Marcellus provides an effective frac barrier which offers separate development inventory • Majority of Development to date are Lower Marcellus • Demonstrated Commerciality of Upper Marcellus with wells co
Slide 16: End of 2019 Undev Inventory – 390,000 of Upper and 180,000’ of Lower
End of 2019 Undev Inventory – 390,000 of Upper and 180,000’ of Lower • During 2019 developed 19% of Lower Marcellus and 6 % of Upper Marcellus inventory • March/2019 Units in Auburn Gas Gathering System • ~26,000’ gross lateral in the Upper Marcellus • ~11,800’ gross lateral in the Lower Marcellus •
Slide 17: Epsilon Energy - Upper Marcellus Completions – 2000#’s/ft
Epsilon Energy - EpsilonMarcellus Upper Southwest IDEAS Energy - Completions Southwest IDEAS Conference – 2000#’s/ft Conference Drill & Comp ($MM) 9.0 Drill & Comp ($MM) 9.0 Drill & Comp ($MM) 9.0 8 Month Cum (Bcf) 3.40 8 Month Cum (Bcf) 3.40 8 Month Cum (Bcf) 3.40 5 yr Strip $1.97 5 yr Strip $2.15
Slide 18: Upper Marcellus Completion – 3000#’s/ft
Upper Marcellus Completion – 3000#’s/ft Drill & Comp ($MM) 11.2 Drill & Comp ($MM) 11.2 Drill & Comp ($MM) 11.2 8 Month Cum (Bcf) 4.50 8 Month Cum (Bcf) 4.50 8 Month Cum (Bcf) 4.50 5 yr Strip $1.97 5 yr Strip $2.15 5 yr Strip $2.30 IRR 40% IRR 52% IRR 62% PV10 ($MM) 7.6 PV10 ($MM) 10.0 PV10 ($MM) 12
Slide 19: Why EPSILON
Why EPSILON • Economically attractive growth opportunities in Marcellus » NW STACK – HBP pending more constructive NGL pricing • Growth within Cash Flow* » positive FCF* yield • Cash Flowing Assets in Marcellus Sweet Spot » Upstream and Midstream Assets • Developed a Strong Operating Team • No Debt
Slide 20: Appendix
Appendix EPSILON Energy
Slide 21: Appendix – Free Cash Flow
Appendix • Free Cash Flow (FCF) We define FCF as net cash provided by operating activities in the period minus payments for property and equipment made in the period. FCF is considered a non-GAAP financial measure under the SEC’s rules. Management believes, however, that FCF is an important financia
Slide 22: Appendix – EBITDA
Appendix • EBITDA Epsilon defines Adjusted EBITDA as earnings before (1) net interest expense, (2) taxes, (3) depreciation, depletion, amortization and accretion expense, (4) impairments of oil and gas, and gathering system properties, (5) non-cash stock compensation expense, and (6) unrealized gain
Slide 23: Appendix – Internal Rate of Return (IRR)
Appendix • Internal Rate of Return (IRR) Epsilon defines IRR as the internal rate of return on the Company’s well development considering the timing and amounts of capital contributions paid, and all revenue received. Management believes that the IRR achieved during the period a project produces is
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