Epsilon Energy (NASDAQ:EPSN) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.
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The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=vCctDJ0X
Summary
Epsilon Energy reported strong financial performance for Q1 2026, driven by robust gas pricing and full contributions from Powder River Basin assets.
The company is executing its development plan, with significant production growth expected from oil-weighted projects in the Permian and Powder River Basins.
Earnings were impacted by unrealized hedge losses due to oil price fluctuations, but adjusted earnings were $0.29 per share.
The company has reduced debt by $10 million and sold non-core assets to strengthen its balance sheet.
Operational updates highlighted new well activities in the Permian and Powder River Basins, with future projects planned to drive production growth into 2027.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Epsilon Energy first quarter 2026 earnings conference call. Today all participants will be in a listen only mode. Should you need assistance during today’s call, please signal for a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question at that time you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note that today’s event is being recorded. I would now like to turn the conference over to Andrew Williamson, the company’s cfo. Please go ahead.
Andrew Williamson (Chief Financial Officer)
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 2026 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 press release that we issued yesterday for disclosures on forward looking statements and reconciliations of non GAAP measures. With that, I would like to turn the call over to Jason Stabell, our Chief Executive Officer.
Jason Stabell (Chief Executive Officer)
Thank you Andrew and good morning everyone. Joining me today are Andrew Williamson, our cfo, and Henry Clanton, coo. We’ll be available for questions after our remarks. We’re off to a solid start in 2026 and remain firmly on track with the development plan we outlined earlier this year. The key message today is simple. We are in execution mode and we expect to deliver meaningful production growth year over year with the oil weighted ramp in the Permian and Powder river basins beginning in the second quarter and building through the back half of the year across the portfolio. Activity is progressing as planned in the Permian. Our ninth well in the project and our first three plus mile Barnett well is expected online in the second quarter. In the Powder River Basin, two Niobrara ducts which we acquired in last year’s acquisition will be completed in June and turned to sales in the third quarter, followed by a three well Parkman development in the fourth quarter. This activity sets up material oil weighted production growth in both basins starting in the second half of the year and carrying into 2027. These new volumes will have full exposure will have full exposure to higher oil prices. From a financial standpoint, the first quarter reflects a combination of strong gas pricing and a full quarter of contribution from our Powder River Basin assets. We have also recently taken steps during the second quarter to strengthen the balance sheet, including further debt reduction and monetizing non core assets at attractive values. Looking ahead, the path forward is clear a focus on production growth in our oily assets while maintaining a strong balance sheet. We believe we are well positioned to deliver a strong year. I’ll now turn it over to Andrew and Henry for additional comments.
Andrew Williamson (Chief Financial Officer)
Thanks Jason. I’ll provide more commentary on the quarter starting with CapEx. We spent just under 5 million through March primarily through our participation in the drilling of the three mile Barnett well in Hector county and some facilities work preparing for Parkman Drilling this summer on our Campbell county position in the prb. We plan to invest at a higher clip over the next three quarters of the year, driving the oil-weighted growth Jason mentioned those full year investment plans are right sized to maintain our Target leverage profile of 1 to 1.5x net debt to adjusted EBITDA. We expect unit operating costs and G and A to trend down over the remainder of the year as we add incremental volumes and roll off some of the integration costs associated with last year’s peak acquisition. I provided some additional color there in the press release issued yesterday. Earnings for the quarter were materially impacted by unrealized or non cash hedge losses driven by the dramatic move in oil prices during the quarter. The revenue impact of higher pricing will primarily fall in subsequent quarters, so a bit of a mismatch on the P and L. Adjusting for that item, we earned $0.29 per share for the quarter. Since closing the acquisition in November of last year, we’ve paid down the outstanding debt balance by 10 million to 40.5 million. Currently, as mentioned, we have a disciplined approach to the balance sheet. We’ve made several moves to help fund our investment plans by selling non core assets. Earlier this month we sold an overriding royalty interest package and PA for 3.9 million to a private buyer which was approximately 6 times expected next 12 months. Cash flow from those assets. The overrides accounted for just 1.5% of the company’s upstream revenue over the last four quarters. We also have the office building we acquired from peak under contract for 3 million with closing expected in the next 30 days. Now to Henry to provide more detail on the operations side.
Henry Clanton (Chief Operating Officer)
Thank you Andrew and good morning to everyone. Exciting times for Epsilon as we continue the integration of our newly acquired operating assets in the Powder River …
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