Good day, and welcome to the Epsilon Energy Q1 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal 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, you may press star then one on your touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Andrew Williamson, Chief Financial Officer. Please go ahead, sir.
Thank you, operator. On behalf of the management team, I'd like to welcome all of you to today's conference call to review Epsilon's Q1 2023 financial and operational results. Before we begin, I'd 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 earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. With that, I'd like to turn the call over to Jason Stabell, our Chief Executive Officer.
Thank you, Andrew. Good morning to everyone, and thank you for participating in our Q1 2023 conference call. Joining me today are Andrew Williamson, our CFO, and Henry Clanton, our COO. We will be available to answer questions later in the call. I am pleased to report that we delivered a good Q1 in a challenging natural gas market, and the company remains in a very solid position. Unlike our recent earnings calls, today, I will not rehash the information contained in our press release in 10-Q filing. Instead, I'd like to focus on what we see as the key elements of the company's value proposition and spend some time discussing the small investment announced in yesterday's release. At present, we see four key attributes to the Epsilon story. One, our strong legacy asset base. Two, our robust balance sheet and liquidity position.
Three, our commitment to shareholder returns. Four, our ongoing business development activities focused to achieve accretive growth. Let me go into each of these four attributes in more detail. One, our legacy asset base. Our mix of assets provides a diversified revenue stream. The midstream assets provide fee-based, steady, and predictable cash flow in a variety of commodity price environments. While our upstream position provides our shareholders exposure to low-cost natural gas. The power of this combination was on display in our 2022 results, where we saw explosive year-over-year growth in upstream cash flows in a rising natural gas price environment. The Q1 2023 results demonstrate our resiliency in a depressed natural gas market as we were able to build cash and return money to our shareholders.
In the Q1 , 28% of our revenue was generated by our midstream asset, as compared to only 12% in full year 2022. Number two, balance sheet and liquidity. Our strong financial position and zero debt allow us to manage commodity exposure opportunistically, as demonstrated by the hedge position we put on for 2023. It also allows for our flexible and opportunistic capital allocation approach, including acquisitions. Number three, shareholder returns. We are committed to the return of capital to our shareholders. Our regular dividend offers an annual yield of 5% at the current stock price. Our board reviews the policy quarterly, but remains very comfortable with the current payout, given it can be funded from the steady midstream cash flow. Also, our liquidity position allows us to opportunistically repurchase shares.
This is evidenced by our approved annual buyback program for up to 10% of shares outstanding. Over the last three years, shares outstanding have been reduced by 15%. Four, business development. Yesterday, we announced a small investment in a new project area in Eddy County, New Mexico. This investment delivers immediate cash flow at attractive rates of return and establishes a relationship with a high quality basin-focused operator. This is a first step in our effort to diversify our commodity, basin, and operator mix. This deal can serve as a blueprint for our continued business development efforts. Attractive, unlevered rates of return, operator alignment with an opportunity for expanded partnership, all without stressing our balance sheet and liquidity. We believe the combination of these attributes makes our equity an attractive investment at a compelling valuation.
We currently have over $2 per share in cash, a diversified revenue stream, a commitment to shareholder returns, and an active but disciplined business development effort across multiple basins. The company is well positioned to capitalize on attractive opportunities in a variety of environments. This all makes us excited about our future. Operator, we can now open the line for questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. The first question will come from Nat Stewart with N.A.S. Capital. Please go ahead.
Hey, thanks for taking my question. Is there any more detail you can give us about your first investment? you know, is this an operator you could do follow-on investments down the road? Is there any detail you can provide on the kind of return you're expecting on this?
Hey, Nat, this is Jason. Thanks for joining, and thanks for the question. A couple elements that you had in there. Yes, we look at this relationship as a stepping stone to potential more investments alongside them. As we mentioned, they're a basin-focused operator. They've got a large project, so we believe there'll be other opportunities for us to partner up. On the returns, not gonna get into returns, but I might turn it to Henry Clanton. He can talk a little bit about the wells.
Great. Thank you.
Thank you, Jason, and thank you, Nat. This is Henry Clanton. We're participating in this non-operated wellbore-only participation agreement in two wells completed in the Wolfcamp in different intervals. It's an opportunity for us to appraise the opportunity set in the area and get to know better this operator. We're looking forward.
I'll add, Nat. I mean, we like the opportunity. It's immediate cash flow, so these wells are already on flowback. In subsequent quarters, we're gonna have some real information to put out there.
Sure.
Around the opportunity.
Okay.
I'd also add, I think this, as we mentioned, in the opening remarks, we think this is a blueprint. You've asked in previous quarters kinda what the deal market looks like. I think right now.
Sure.
For us, this is an interesting space to be chasing things. Drill bit focused, small to medium-sized operators with attractive projects where we think over time, the relationship can expand, that give us the diversity away from just the Marcellus Natural Gas assets that we have.
Sure.
We still like that. But clearly right now, natural gas investments are not where we're gonna be likely deploying a lot of capital at this gas tape.
Sure. That makes sense. Now is this basin or this area an area that you particularly decide to focus in or are you still kinda looking kinda broadly and thinking about further diversification?
The area, it's the northern Delaware.
Yep.
Quite attractive from a technical and resource standpoint, infrastructure standpoint, we liked all the elements. Yes, we're looking at areas beyond just this small area for similar kind of deals.
Great. Okay, that sounds good. I look forward to seeing how it goes. Thanks, guys.
All right, Nat. Thanks for joining.
If you have a question, please press star then one. This concludes our question and answer session. I would like to turn the conference back over to Mr. Jason Stabell, Chief Executive Officer, for any closing remarks. Please go ahead, sir.
Thank you, operator. I'll just close with saying thanks for tuning in today. Hopefully, we're gonna have more to talk about as we move through the year. We're excited about where we sit, and, look forward to talking with you later this year. Thanks again for joining.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.