Epsilon Energy enters province of Alberta through two joint ventures

Epsilon Energy (EPSN) reported the signing of definitive agreements to form a joint venture in the Garrington and Harmattan areas of Alberta, Canada, in the Western Canadian Sedimentary Basin. In partnership with a Calgary-based private operator, Epsilon will earn a 25% 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, and approximately 130,000 gross acres in the Harmattan area, targeting horizontal development of the liquids-focused Upper Viking formation. The company estimates the joint venture area holds over 25 2-mile locations in the Mannville. Offset wells exhibit attractive economics, driven by mid-teens effective royalty rates and drilling and completion costs per well estimated at $600-700 CAD per completed lateral foot. 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. Consideration will be in the form of up to a C$12M development carry, with C$10M to be deployed over a minimum of four gross horizontal wells, drilled and completed over a 12-month period from December 1 with the operator’s option for two additional gross horizontal wells, drilled and completed over a 12-month period from December 1, 2025. The operator will maintain a minimum 20% working interest during the carry period. Additionally, the company entered a joint venture in the Killam area of Alberta, Canada, in the Western Canadian Sedimentary Basin in April. In partnership with a different Calgary-based private operator, Epsilon acquired a 50% working interest in undeveloped lands, covering 14,000 gross acres, targeting development of the liquids-focused Mannville formation. Consideration was C$1.4M and the company committed to participate in two wells during 2024. The project is a proof of application of multi-leg open hole horizontal wells which have proven successful in other parts of Alberta. The drilling of the initial two wells in August and September has yielded one commercial discovery currently on production and a second prospect unable to be properly evaluated due to mechanical issues. Gross drilling and completion costs are approximately C$2M per well.