Epsilon Energy Forms JV Targeting Alberta Assets
Houston-based Epsilon Energy Ltd. is forming a joint venture (JV) focused on the Garrington and Harmattan areas of Alberta, Canada, in the Western Canadian Sedimentary Basin.
Epsilon said in a news release it signed agreements with a “leading Calgary-based private operator” to form the JV.
Epsilon will earn a 25 percent working interest in undeveloped lands, covering approximately 30,000 gross acres in the Garrington area, targeting horizontal development of the liquids-focused Glauconitic and Ellerslie formations (Mannville), and approximately 130,000 gross acres (majority held by production) in the Harmattan area, targeting horizontal development of the liquids-focused Upper Viking formation, according to the release.
The company estimates that the joint venture area holds over 25 two-mile locations in the Mannville. “The large contiguous Harmattan acreage is more speculative due to varied historical results but represents a large upside opportunity through multiple targets and potential completion optimization,” it added.
Epsilon stated that consideration will be in the form of up to an $8.64 million (CAD 12 million) development carry, with $7.2 million (CAD 10 million) to be deployed over a minimum of four gross horizontal wells (minimum 1.5-mile laterals), drilled and completed over a 12-month period from December 1, 2024, with the operator's option for two additional gross horizontal wells (minimum 1.5 mile laterals), drilled and completed over a 12-month period from December 1, 2025. The operator will maintain a minimum 20 percent working interest during the carry period.
In April, Epsilon entered into a JV in the Killam area of Alberta, in the Western Canadian Sedimentary Basin. In partnership with a different Calgary-based private operator, Epsilon acquired a 50 percent working interest in undeveloped lands, covering 14,000 gross acres, targeting development of the liquids-focused Mannville formation. Consideration was $1 million (CAD 1.4 million), and the company committed to participate in two wells during 2024.
Epsilon, a Canadian domiciled company, stated that there are several corporate advantages to establishing a Canadian business. Among these are the "substitution of cash transfers from Epsilon's U.S. subsidiaries to the Canadian parent to fund dividends and share repurchases, removing the levy of U.S. federal withholding taxes on such transfers".
Epsilon CEO Jason Stabell said, "As previously communicated, we have been evaluating potential Canadian projects over the last year. We are excited to announce a new project area in Alberta that fits our strategic focus of drill bit weighted investments with attractive full cycle returns and meaningful follow-on investment runway (inventory). For a small amount of up-front capital, we will establish a third primary area to deploy capital in a proven hydrocarbon system and more than double our company leasehold (after the carry is satisfied), while also increasing our liquids exposure. With the deal signed this week, we are partnered with a well-capitalized leading private player in the basin. Importantly, this acreage is largely held by production, affording the ability to opportunistically develop these resources as market conditions warrant”.
Epsilon Energy describes itself as a North American onshore-focused independent exploration and production company engaged in the acquisition, development, gathering and production of oil and gas reserves. Its primary areas of operation are the Marcellus basin in Northeast Pennsylvania and the Central Basin Platform in the Permian basin.
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