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Epsilon Energy .(EPSN) - 2024 Q4 - Annual Report
EPSNEpsilon Energy .(EPSN)2025-03-19 20:28
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Reserves and Production - As of December 31, 2024, Epsilon Energy Ltd. reported total estimated net proved reserves of 84,097 MMcfe, a 20% increase from December 31, 2023[211]. - The company estimates proved natural gas and oil reserves, which directly impact financial accounting estimates such as depreciation and impairments[262]. - Significant uncertainties exist in estimating proved reserves, including geological and engineering data interpretation, which may lead to material revisions in reserve estimates over time[262]. Financial Performance - Revenues for the year ended December 31, 2024, increased by 0.8million,or30.8 million, or 3%, to 31.5 million compared to 30.7millionin2023[215].−NetincomefortheyearendedDecember31,2024,was30.7 million in 2023[215]. - Net income for the year ended December 31, 2024, was 1,927,800, a decrease of 5,017,353,or725,017,353, or 72%, from 6,945,153 in 2023[239]. - Adjusted EBITDA for the year ended December 31, 2024, was 17,578,000,adecreaseof17,578,000, a decrease of 1,249,512, or 7%, from 18,827,512in2023[239].−Cashflowfromoperatingactivitiesprovided18,827,512 in 2023[239]. - Cash flow from operating activities provided 16.8 million in 2024, compared to 18.2millionin2023,reflectingadecreaseof18.2 million in 2023, reflecting a decrease of 1.4 million, or 7%[245]. Revenue Sources - Upstream oil and condensate revenue for the year ended December 31, 2024, increased by 8.6million,or1708.6 million, or 170%, over 2023, primarily due to increased production from new wells in the Permian Basin[219]. - The Auburn Gas Gathering System, located in the Marcellus Shale, is expected to maintain revenue levels despite short-term low commodity prices due to historically high recoverable reserves[275]. Expenses and Costs - General and administrative expenses for the year ended December 31, 2024, decreased by 0.3 million, or 5%, compared to the same period in 2023, primarily due to a reduction in legal expenses[231]. - Operating costs for the year ended December 31, 2024, increased by 0.9million,or13.40.9 million, or 13.4%, from the same period in 2023, primarily due to acquired and developed wells in the Permian Basin[222]. - Interest income for the year ended December 31, 2024, decreased by 1.2 million, or 71%, from the same period in 2023, primarily due to a reduction in the balance of cash and short-term investments[232]. - Interest expense decreased by 0.03million,or420.03 million, or 42%, during the year ended December 31, 2024, compared to 2023, due to higher fees in 2023 associated with a new credit facility[233]. - Income tax expense decreased by 1.6 million, or 49%, to 1,629,093fortheyearendedDecember31,2024,primarilyduetoadecreaseintaxableincomefromlossesonderivativecontracts[238].CapitalExpendituresandInvestments−Totalcapitalexpenditures(nettoEpsilon)throughyear−end2024intheEctorCounty,Texasprojectamountedto1,629,093 for the year ended December 31, 2024, primarily due to a decrease in taxable income from losses on derivative contracts[238]. Capital Expenditures and Investments - Total capital expenditures (net to Epsilon) through year-end 2024 in the Ector County, Texas project amounted to 38.6 million[206]. - The company used 16.7millionforinvestingactivitiesin2024,adecreaseof16.7 million for investing activities in 2024, a decrease of 21.7 million, or 57%, from 38.4millionin2023[246].−CapitalcommitmentsasofDecember31,2024,were38.4 million in 2023[246]. - Capital commitments as of December 31, 2024, were 7.8 million, related to the first two wells of a joint venture in Alberta[260]. Impairments and Asset Management - Epsilon recorded an impairment of 1.45millionfortheyearendedDecember31,2024,relatedtotheKillamprojectinAlberta,Canada[229].−Thecompanyreviewsthecarryingvalueofoilandnaturalgaspropertiesforimpairmentbasedonexpectedfuturecashflows,whichmayresultinreductionstofairvalueifcashflowsarelowerthancarryingvalues[265].−Assetretirementobligations(ARO)arerecognizedatfairvalue,requiringmanagementtomakeassumptionsaboutfuturecostsandtimingrelatedtotheretirementoflong−livedassets[268].FinancingandCreditFacilities−Thecompanyclosedaseniorsecuredrevolvingcreditfacilitywithacurrentborrowingbaseof1.45 million for the year ended December 31, 2024, related to the Killam project in Alberta, Canada[229]. - The company reviews the carrying value of oil and natural gas properties for impairment based on expected future cash flows, which may result in reductions to fair value if cash flows are lower than carrying values[265]. - Asset retirement obligations (ARO) are recognized at fair value, requiring management to make assumptions about future costs and timing related to the retirement of long-lived assets[268]. Financing and Credit Facilities - The company closed a senior secured revolving credit facility with a current borrowing base of 45 million, maturing on June 28, 2027[248]. - The company repurchased 125,000 common shares for 627,500atanaveragepriceof627,500 at an average price of 5.00 per share during the year ended December 31, 2024[251]. Risk Management - Changes in commodity prices significantly affect the company's earnings and cash flow, with potential impacts on asset values and exploration activities[274]. - The company employs a hedging strategy to manage risks associated with commodity price fluctuations, stabilizing cash flows and supporting capital spending[276].