CONCORD, ONTARIO -- (Marketwired) -- 07/16/13 -- Epsilon Energy Ltd. ("Epsilon" or the "Company") (TSX: EPS) is pleased to announce its newly reconstituted board of directors, appointed yesterday, being Matthew W. Dougherty, John V. Lovoi, Adrian Montgomery, Ryan Roebuck and Ramik Arandjelovic (the "Board"). Biographies of the newly appointed directors are set out below.
Mr. Lovoi has been named the Chairman of the Board and the Interim Chief Executive Officer, until a search for a new CEO is concluded by the Board. Mr. Arandjelovic remains in the position of President of the Company, and Mr. Lane Bond remains as Chief Financial Officer.
The Board has appointed Mr. Roebuck as Chairman of the Audit Committee of the Board. The Board has also combined the functions of the Compensation Committee and the Nominating and Corporate Governance Committee into one Board committee for efficiency purposes. Mr. Dougherty has been appointed the Chairman of the Compensation, Nominating and Corporate Governance Committee.
The newly reconstituted Board is excited about the opportunity to harvest Epsilon's meaningful value on behalf of all of its shareholders. The Company owns an upstream asset and a midstream asset in the heart of the Marcellus Shale, the premier natural gas development area in North America. These two integrated assets will be the singular focus of the new Board and senior management team of Epsilon going forward. To this end, the Board and management will immediately begin to consider paths to realizing maximum value for its non-Marcellus assets. The results of these non-core assets, which are primarily located in the Canadian provinces of Alberta and Saskatchewan, have been largely disappointing and, in the opinion of the Board, a distraction to Epsilon's employees and investors.
The Board intends to continue to encourage the development of Epsilon's non-operated position in the heart of the Marcellus Shale. As this valuable asset matures, the Board will explore opportunities to return the free cash flow from the Marcellus to shareholders in the most tax efficient manner possible, on a time frame to be determined depending on a number of factors, including the operator's pace of development at the field level.
The Company's upstream Marcellus asset consists of a 50% non-operated interest in 11,500 gross acres (5,750 net acres) located in Susquehanna County, Pennsylvania. Epsilon's net production from this asset was approximately 41 mmcf/d on July 15th, 2013. As previously disclosed, the Company's net proved reserves for this asset as at December 31st, 2012 was 146.2 Bcf with net present value of future net revenue discounted at 10% of approximately $180 mm, consisting of 54.6 Bcf of proved developed producing reserves (PDP), 7.6 Bcf of proved developed non-producing reserves (PDNP) and 84.1 Bcf of proven undeveloped reserves (PUD). Using offset operator spacing and per well recovery assumptions for analog leases, the Board and management believes there is significant potential for Epsilon's reserves to increase as the asset is developed.
Epsilon also owns a 35% interest in a gathering system that surrounds and services its upstream asset. This system is strategically located in a core area of the Marcellus and the Board and management believe that it is capable of gathering gas from a wider area than the area underlying the leases of the Company. The system has a gross gathering capacity of 550 mmcf/d, with current gross compression capacity of 300 mmcf/d. The system is currently gathering approximately 160 mmcf/d with the ability to increase the gathering capacity as volumes warrant.
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