Epsilon Energy .(US:EPSN)2026-03-27 14:03Reserves and Acquisitions - As of December 31, 2025, Epsilon Energy Ltd. reported total estimated net proved reserves of 156,037 MMcfe, an 86% increase from December 31, 2024, primarily due to reserves acquired from the Peak acquisition[219] - Total estimated net proved developed reserves were 109,444 MMcfe as of December 31, 2025, reflecting a 69% increase from the previous year[218] - Epsilon Energy Ltd. acquired Peak Exploration and Production LLC, adding 284 gross (60 net) wells and 60,945 gross (39,566 net) acres in Wyoming[216] - The company divested Dewey Energy Holdings, LLC, which included approximately 964 Mcfe/d of production and 8,600 net acres of leasehold in Oklahoma[217] Financial Performance - Revenues for the year ended December 31, 2025, increased by $20.1 million, or 64%, reaching $51.6 million compared to $31.5 million in 2024[221] - The company realized a net loss of $5.8 million in 2025, compared to a net income of $1.9 million in 2024, which included a $19.3 million loss in Q4 2025 from the sale of Anadarko Basin assets[218] - The standardized measure of discounted future net cash flows increased to $156.1 million as of December 31, 2025, up from $50.7 million in 2024[219] - Adjusted EBITDA for the year ended December 31, 2025 was $30.7 million, compared to $17.6 million in 2024[249] Revenue Breakdown - Natural gas revenue for the year ended December 31, 2025, was $28.01 billion, a significant increase from $10.24 billion in 2024, reflecting a growth of approximately 174%[223] - Total PA revenue reached $34.69 billion, up from $15.77 billion in the previous year, indicating a growth of about 120%[223] - Oil and condensate revenue was reported at $9.61 billion, compared to $12.77 billion in the prior year, showing a decrease of around 24%[223] - Upstream natural gas revenue for the year ended December 31, 2025 increased by $18.3 million, or 170%, from 2024[224] - Upstream natural gas liquids revenue for the year ended December 31, 2025 increased by $0.5 million, or 34% from 2024[225] - Upstream oil and condensate revenue for the year ended December 31, 2025 increased by $0.1 million, or 1% over 2024[226] - Gathering system revenue for the year ended December 31, 2025 increased by $1.2 million, or 21% over 2024[227] Costs and Expenses - Upstream operating costs increased by $5.3 million, or 72% from 2024, primarily due to increased gas production[229] - General and administrative expenses for the year ended December 31, 2025 increased by $2 million, or 29%, compared to 2024[241] - Interest expense increased by $0.6 million, or 1245%, during the year ended December 31, 2025 from 2024[244] - The Company recorded an impairment of $3.2 million on Canadian wells and $0.7 million on New Mexico wells for the year ended December 31, 2025[237] Cash Flow and Investments - For the year ended December 31, 2025, operating activities generated $20.6 million, a 23% increase from $16.8 million in 2024, primarily due to higher production and throughput volumes in Pennsylvania[254] - The company used $61.6 million for investing activities in 2025, a 270% increase from $16.7 million in 2024, mainly due to a $49.8 million payment for the Peak acquisition[255] - Financing activities provided $43.7 million in 2025, compared to a $7.3 million outflow in 2024, reflecting a $51 million decrease primarily due to a $50.5 million draw on the credit facility for the Peak acquisition[256] Capital Structure and Commitments - As of December 31, 2025, the company had a working capital surplus of $7.6 million, up from $7.1 million at the end of 2024, due to an increase in current assets[253] - The company closed a new senior secured revolving credit facility with a borrowing base of $80 million, maturing on October 10, 2029, with interest charged at the 3-month Term SOFR rate plus a margin of 3-4%[257] - The company is required to hedge 50% of its forecasted Proved Developed Producing production over an 18-month period under the terms of the new credit facility[258] - The company authorized a new share repurchase program on February 18, 2026, for up to 3,014,986 common shares at a maximum purchase price of $15.0 million[259][260] - As of December 31, 2025, total future commitments amounted to $24.1 million, including $18.8 million in asset retirement obligations and $3.8 million in capital expenditure commitments[268] Risk Management and Hedging - The company has entered into hedging arrangements to mitigate the impact of natural gas and oil price volatility, which may limit potential benefits from price increases[264] - The company employs a hedging strategy to manage risks associated with commodity price fluctuations, stabilizing cash flows and supporting capital spending[288] Regulatory and Accounting Considerations - Changes in tax regulations in the U.S. and Canada may impact the company's income tax provision, which is computed using the asset-and-liability method[280] - The company accounts for business combinations using the acquisition method, recognizing identifiable assets and liabilities at their estimated fair values at the acquisition date[282] - Estimated fair values assigned to acquired assets significantly impact future operations, with higher fair values leading to increased depreciation, depletion, and amortization (DD&A) expenses[284] - The company's earnings and cash flow are significantly affected by fluctuations in commodity prices, which can impact asset values and future exploration activities[286] Operational Focus - The company is focusing on expanding its market presence and enhancing its product offerings in the natural gas sector[223] - Future guidance indicates a continued emphasis on operational efficiency and strategic investments in new technologies[223] - The Auburn GGS gathering system benefits from historically high recoverable reserves and low production costs, with short-term low commodity prices expected to have minimal impact on revenue[287]