Epsilon Energy Ltd. (NASDAQ:EPSN) Q4 2022 Earnings Call Transcript

Unidentified Analyst: Thanks. Could I also ask, I think, I was waiting, I don’t know if anybody else was to see whether new management would continue or change the dividend policy, and in your press release, you kind of, A, you did do that; and B, in the press release, you kind of you kind of trumpet it a little bit as if it was part of your — of a steady outlook in terms of the companies going forward in terms of your capital allocation. Is that a fair reading of the point you were trying to get across in the press release?

Jason Stabell: I’d say this, the Board is very comfortable with the dividend where it is, and obviously, that’s something we continue to evaluate, but we feel real strong about where we are on the dividend going forward.

Unidentified Analyst: Okay.

Andrew Williamson: That’s our imagination.

Unidentified Analyst: Thanks very much.

Andrew Williamson: Tom, this is Andrew. That dividend is underwritten by our earnings from the midstream system. That’s how we think about it.

Unidentified Analyst: Yeah. I just didn’t know

Andrew Williamson: It’s not affected where the price

Unidentified Analyst: would revisit the whole concept of a company like you folks paying a dividend, but so I was curious as to what you’re and then you trumped, like said in the press release, so I thought that put on sounder footing. But I just wanted to ask.

Andrew Williamson: Thanks.

Jason Stabell: Thank you.

Operator: The next question is from Nat Stewart from N.A.S. Capital. Please go ahead.

Nat Stewart: Good morning, guys.

Jason Stabell: Hi, Nat.

Nat Stewart: I just had a few questions. One is just a little accounting change, I noticed on the gathering system. I was curious why you did that. It looks like you allocated some of the kind of cost that nets out from the upstream to the gathering system, is that correct? I mean, I think, I saw that. I was just curious if there is a reason for that or what that was about?

Andrew Williamson: Yeah. Nat, thank you for the question. This is Andrew. Yeah. That’s correct. We changed the way we do that elimination for the gathering fees that we pay to Epsilon’s ownership and the gathering system. The appropriate way to do that is it’s a net of gathering system revenue and its upstream operating costs, because it’s a gathering fee…

Nat Stewart: Okay.

Andrew Williamson: Previously that had been netted out of upstream operating costs rather than gathering system operating costs, so.

Nat Stewart: Okay.

Andrew Williamson: This is a new mechanism.

Nat Stewart: So if I

Andrew Williamson: This is appropriate way to do it. Yeah.

Nat Stewart: Okay.

Andrew Williamson: Yeah.

Nat Stewart: So if I was just considering it, let’s say, you own, let’s say, you didn’t have the upstream, right? And it was just a partial ownership in this pipeline. How would I think about the revenue and costs attached to that absent kind of the various netting effects? Am I correct, it would be — the revenue would be $9.6 million and then you deduct I’m not sure some amount for the expenses attached to that?

Andrew Williamson: Yeah. There’s $1.5 million in additional gathering revenue.