Epsilon Energy .(US:EPSN)2025-08-13 20:02PART I-FINANCIAL INFORMATION Financial Statements Epsilon Energy reported significant financial growth for the six months ended June 30, 2025, with total revenues rising 82% to $27.8 million and net income increasing 140% to $5.6 million Unaudited Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $123.6 million, with shareholders' equity rising to $100.2 million from $96.7 million at year-end 2024 Consolidated Balance Sheet Highlights (in thousands USD) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $9,907.7 | $6,519.8 | | Total current assets | $16,533.3 | $14,131.5 | | Total property and equipment, net | $106,037.5 | $104,526.0 | | Total assets | $123,613.7 | $120,454.8 | | Liabilities & Equity | | | | Total current liabilities | $7,403.4 | $6,980.0 | | Total liabilities | $23,423.4 | $23,726.7 | | Total shareholders' equity | $100,190.3 | $96,728.1 | | Total liabilities and shareholders' equity | $123,613.7 | $120,454.8 | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income For Q2 2025, revenue increased 59% to $11.6 million and net income nearly doubled to $1.6 million, while six-month revenue surged 82% to $27.8 million and net income jumped 140% to $5.6 million Statement of Operations Summary (in thousands USD) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $11,624.7 | $7,307.8 | $27,787.9 | $15,294.6 | | Operating Income | $828.8 | $1,167.8 | $7,996.6 | $2,572.5 | | Net Income | $1,551.5 | $815.7 | $5,567.5 | $2,322.6 | | Diluted EPS | $0.07 | $0.04 | $0.25 | $0.11 | - A notable event in Q2 2025 was a $2.7 million impairment expense, which impacted operating income for the quarter, however, a $2.6 million gain on derivative contracts offset this, contributing to strong net income19 Unaudited Condensed Consolidated Statements of Cash Flows For the first six months of 2025, net cash from operating activities increased 87% to $16.9 million, while cash used in investing and financing activities totaled $10.7 million and $2.8 million respectively Cash Flow Summary (Six Months Ended June 30, in thousands USD) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $16,930.8 | $9,075.5 | | Net cash used in investing activities | ($10,665.9) | ($9,544.2) | | Net cash used in financing activities | ($2,751.4) | ($3,946.1) | | Increase (Decrease) in cash | $3,387.9 | ($4,392.1) | Notes to the Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, a $2.7 million impairment, the undrawn $45 million credit facility, shareholder equity activities, and the subsequent acquisition of Peak Exploration and Production LLC - During Q2 2025, Epsilon recorded a $2.7 million impairment charge for two wells in Alberta, Canada, due to lower than expected production, cost overruns, and lower forward commodity prices45 - The company maintains a senior secured revolving credit facility with a borrowing base of $45 million, which remained undrawn as of June 30, 20254750 - The Board declared quarterly dividends of $0.0625 per share, totaling approximately $2.8 million paid during the first six months of 202562 - Subsequent to the quarter end, on August 11, 2025, Epsilon signed a definitive agreement to acquire Peak Exploration and Production LLC, with consideration including 6 million Epsilon common shares and the assumption of approximately $49 million in debt119 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 82% revenue growth to increased natural gas revenue, with Adjusted EBITDA more than doubling to $18.0 million, supported by strong liquidity and disciplined capital allocation - The company's business strategy is focused on disciplined capital allocation, shareholder returns (dividends and buybacks), and maintaining a strong balance sheet to fund investments in existing areas (Marcellus) and new projects (Permian, Canada)125126 Adjusted EBITDA Reconciliation (in thousands USD) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net Income | $5,567.5 | $2,322.6 | | Adjustments | $12,437.5 | $6,176.0 | | Adjusted EBITDA | $18,005.0 | $8,498.6 | - For the six months ended June 30, 2025, revenues increased 82% to $27.8 million, primarily due to a $12.6 million (256%) increase in upstream natural gas revenue from higher prices and volumes140141 - The company's liquidity is strong, with a working capital surplus of $9.1 million as of June 30, 2025, and an undrawn $45 million revolving credit facility164168 Quantitative and Qualitative Disclosures About Market Risk The company faces significant commodity price risk for natural gas and oil, which it mitigates using derivative contracts, and also has exposure to interest rate risk - The company's primary market risk is the fluctuation in commodity prices for natural gas and oil178 - Epsilon utilizes a hedging strategy with derivative financial instruments to manage commodity price risk and stabilize cash flows182 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025183 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025184 PART II OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - None187 Risk Factors No material changes occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024188 Unregistered Sale of Equity Securities and Use of Proceeds The company did not repurchase any of its equity securities during the six months ended June 30, 2025 - For the six months ended June 30, 2025, no shares were repurchased190 Defaults Upon Senior Securities Not applicable Mine Safety Disclosures Not applicable Other Information Not applicable Exhibits This section lists the exhibits filed with the report, including Sarbanes-Oxley certifications and Inline XBRL data files