Epsilon Energy .(US:EPSN)2025-11-05 21:07Financial Performance - Total revenue for Q3 2025 reached $8,981,459, a 23.3% increase from $7,287,941 in Q3 2024[19] - Net income for Q3 2025 was $1,072,295, compared to $366,021 in Q3 2024, representing a 194.5% increase[19] - Operating income for the nine months ended September 30, 2025, was $8,602,597, significantly higher than $2,813,088 for the same period in 2024[19] - Net income for the nine months ended September 30, 2025, was $6,639,790, compared to $2,688,577 for the same period in 2024, representing a significant increase[24] - Total operating revenue for the nine months ended September 30, 2025, was $36,769,332, a 62.7% increase compared to $22,582,502 for the same period in 2024[72] - The net income for the three months ended September 30, 2025, was $1,072,295, compared to $366,021 for the same period in 2024, indicating a significant increase of 194%[92] - For the nine months ended September 30, 2025, net income reached $6,639,790, up from $2,688,577 in 2024, reflecting a growth of 147%[92] Cash and Assets - Cash and cash equivalents increased to $12,766,167 as of September 30, 2025, up from $6,519,793 at December 31, 2024[17] - Total assets grew to $126,293,005 as of September 30, 2025, compared to $120,454,785 at December 31, 2024[17] - Total cash, cash equivalents, and restricted cash at the end of the period was $13,236,167, up from $8,774,971 at the end of the same period in 2024[24] - The company had a working capital surplus of $9.2 million as of September 30, 2025, up from $7.2 million at the end of 2024[171] Liabilities and Equity - Total current liabilities increased to $9,924,626 as of September 30, 2025, compared to $6,980,007 at December 31, 2024[17] - The accumulated deficit decreased to $(38,995,173) as of September 30, 2025, from $(41,505,076) at December 31, 2024[21] - Operating lease liabilities totaled $387,062 as of September 30, 2025, down from $476,911 at the end of 2024, a reduction of approximately 18.8%[88] - The company had commitments of $0.2 million for capital expenditures as of September 30, 2025[86] Revenue Breakdown - Gas, oil, NGL, and condensate revenue for Q3 2025 was $7,536,248, up from $6,203,953 in Q3 2024, marking a 21.5% increase[19] - Natural gas revenue for the three months ended September 30, 2025, was $4,758,578, up 150.5% from $1,903,946 in the same period of 2024[72] - Upstream natural gas revenue for the nine months ended September 30, 2025, increased by $15.5 million, or 226%, compared to the same period in 2024[148] - Upstream oil and condensate revenue for the nine months ended September 30, 2025, decreased by $1.7 million, or 17%, compared to the same period in 2024[150] Expenses and Impairments - Stock-based compensation expense for the nine months ended September 30, 2025, was $1,148,289, compared to $944,267 in 2024, reflecting increased compensation costs[24] - The company experienced an impairment expense of $2,676,669 in 2025, which was not present in 2024, indicating potential challenges in asset valuation[24] - The company recorded an impairment of $2.7 million for two wells in Alberta, Canada, due to lower than expected production and cost overruns[48] - General and administrative expenses for the three months ended September 30, 2025, increased by $1.1 million, or 62%, compared to the same period in 2024, primarily due to transaction expenses related to the pending Peak acquisition[162] Acquisitions and Investments - The company plans to acquire Peak Exploration and Production LLC and Peak BLM Lease LLC for a total consideration of 6 million common shares and the assumption of approximately $51.2 million in debt, expected to close in Q4 2025[28] - The acquisition will include 40,500 net acres producing 2.2 MBoepd in the Powder River Basin, enhancing the company's asset base[28] - Epsilon acquired a 25% interest in three producing wells and 3,620 gross undeveloped acres in Ector County, Texas, with total capital expenditures of $42 million through September 30, 2025[131] Derivative Contracts and Risk Management - The company engaged in price risk management activities to mitigate exposure to fluctuations in commodity prices for natural gas and oil through derivative contracts[102] - Epsilon Energy Ltd. recognized gains on commodity derivative contracts of $964,307 and $2,076,000 for the three and nine months ended September 30, 2025, respectively, compared to $440,712 and $245,095 for the same periods in 2024[106] - The net fair value of derivatives at September 30, 2025, was $889,187, an increase from a net liability of $487,548 at December 31, 2024[108] Tax and Compliance - The Company reported total current income tax expense of $473,344 for the three months ended September 30, 2025, compared to a tax benefit of $(270,426) in 2024[81] - The effective tax rate for the nine months ended September 30, 2025, was higher than the statutory federal rate due to state income taxes and valuation allowances against Canadian net operating losses[84] - Epsilon Energy Ltd. filed certifications under Sarbanes-Oxley Section 302 for both the Principal Executive Officer and Principal Financial Officer[204] Future Outlook - The company has focused recent investments in the Permian Basin in Texas and the Western Canadian Sedimentary Basin in Alberta, Canada[130] - Epsilon's business strategy includes disciplined capital allocation and maintaining a strong balance sheet to invest in existing and potential new projects[129]