Epsilon Announces Full Year 2024 Results

HOUSTON, March 19, 2025 (GLOBE NEWSWIRE) -- Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today reported financial results for the fourth quarter and full-year ended December 31, 2024. Full Year and Q4 2024 Highlights: Epsilon - Full Year 2024 & Q4 2024 20242023Q4 2024Q3 2024YoY%QoQ%NRI Production GasMMcf6,1428,3401,7651,304-26%35%OilMbbl187655253186%-3%NGLMbbl6939171778%-2%TotalMmcfe7,6768,9652,1761,727-14%26% Revenues$M Gas 10,78614,8643,9581,904-27%108%Oil 13,7315,0913,5373,965170%-11%NGL 1,48298438533551%15%Midstream1 5,5249,7911,0601,084-44%-2%Total 31,52330,7308,9407,2883%23% Realized Prices2 Gas$/Mcf1.761.782.241.46-1%54%Oil$/Bbl73.6177.9668.3874.27-6%-8%NGL$/Bbl21.4125.2922.9819.56-15%17% Adj. EBITDA$M17,57818,8285,3353,744-7%43% Cash + STI3$M6,99032,6496,9908,775-79%-20% Capex4$M34,88722,0383,8043,90858%-3% 1) Net of elimination entry for fees paid by Epsilon2) Excludes impact of hedge realizations3) Includes restricted cash balance 4) Includes acquisitions The Company returned $7.3 million to shareholders during the year ended December 31, 2024. $5.5 million through the quarterly dividends$1.8 million through the repurchase of 373,700 shares at an average price of $4.88 per share Jason Stabell, Epsilon’s Chief Executive Officer, commented, “As we expected, the challenging natural gas environment continued in 2024, Marcellus net wellhead prices were below $2 per Mcf for the year and a meaningful portion (est. 20-25%) of our production for the year was curtailed. This also impacted our midstream business and led to lower throughput volumes for the Auburn Gas Gathering System. We were fully aligned with the operator to hold these reserves back for a better pricing environment, and we are now seeing curtailed volumes, alongside delayed volumes from new wells, back online in the first quarter of 2025. These volumes started to ramp in the fourth quarter, but we are now producing 75% more natural gas in the Marcellus than our 2024 average net daily volumes, into a much improved gas price environment. We continued to invest in our Texas assets during the year, where we now have 7 gross producing wells, all performing better than or as expected, and approximately 14,000 gross undeveloped acres holding up to 40 gross undeveloped 2-mile locations, in the heart of the ascendant Barnett play. We expect development activity to resume there in the second half of 2025. As mentioned last year, this project successfully diversified our commodity mix and provides optionality for multi-year capital allocation. In the fourth quarter, we entered into a JV in Alberta with a reputable US sponsor-backed operator. This met our criteria of low entry cost, drill-bit focused, large inventory runway, capable operator and attractive well economics. We are excited about the opportunity as it covers over 30,000 gross acres where the well returns screen attractive on productivity, drilling and completion cost structure, and royalty regime. We have drilled and completed the first two wells and expect to discuss those initial results soon. During the year we continued our track record of shareholder returns with the fixed quarterly dividend and opportunistic share repurchases. With growing cash flows and over $50 million in available liquidity, the Company is in a strong position to continue to execute on drilling activity and opportunistic deal-making while still returning cash to shareholders. We are setup for a strong year in 2025, and we expect material growth in production and cash flows.” 2024 Operations: Epsilon’s capital expenditures were $34.9 million for the year ended December 31, 2024, a 58% increase year over year. Texas accounted for approximately 70% of the total, related to the acquisition of 3 gross (0.75 net) wells and 3,246 undeveloped acres in Q1 2024, and the development of 2 gross (0.5 net) wells in Q2 & Q3 2024. Pennsylvania accounted for 15% of the total, primarily related to the completion of 10 gross (0.8 net) wells during the year. The remainder was primarily related to the drilling of 4 gross (1.5 net) wells in Alberta. The Auburn Gas Gathering System (Epsilon is a 35% owner) gathered and delivered 36.9 Bcf gross natural gas volumes during the year, or 101 MMcf/d. Reserves: The Company has received the year-end 2024 third party reserves report completed by the engineering firm DeGolyer & MacNaughton. The table below summarizes the report. Epsilon Net Year End Reserves 12/31/2023 12/31/2024 YoY Change OilNGLGasTotal OilNGLGasTotal OilNGLGasTotalTotal MbblMbblMMcfMmcfe MbblMbblMMcfMmcfe MbblMbblMMcfMmcfe%Proved Developed 272 249 47,555 50,681 847 490 56,851 64,872 575 241 9,296 14,191 28%Proved Undeveloped 69 134 18,361 19,581 725 387 12,550 19,225 656 253 (5,811)(356)-2%Total Proved 341 383 65,916 70,262 1,572 877 69,401 84,097 1,231 494 3,485 13,835 20% Total Probable 354 437 156,730 161,474 380 384 137,906 142,487 26 (53)(18,824)(18,987)-12% Total Proved + Probable 695 820 222,646 231,736 1,952 1,261 207,307 226,584 1,257 441 (15,339)(5,152)-2% As shown in the table above, Company Proved reserves increased 20% year over year. Produced volumes accounted for an 11% decrease, offset by revisions to prior estimates (+14%) and acquisitions and development activity during the year (+16%). Company Probable reserves decreased 12% year over year. The primary drivers for the positive revisions were (1) changes to the development plan in PA (as provided by the operator), moving Probable reserves to Proved, (2) Proved reserves acquisitions in Texas, and (3) development activity in Texas adding Proved undeveloped reserves. The majority of the Company’s inventory in Texas is not included in the reserve report, due to no offset producing wells. The Company believes the unaccounted-for inventory is comparable to the existing wells in the project and expects to add meaningful reserves in Texas with incremental development. Current Hedge Book: Hedge Book Trade DateProduct StructureRefContract Start Contract End Price / StrikeOutstanding Metric 01/14/2025Crude OilSwapNYMEX WTI CMA04/01/2025 09/30/2025 $72.35 (14,900.00)BBL01/07/2025Crude OilSwapNYMEX WTI CMA04/01/2025 12/31/2025 $70.20 (24,600.00)BBL12/30/2024Natural GasSwapNYMEX Henry Hub (LD)04/01/2025 10/31/2025 $3.49 (214,000.00)MMBTU12/30/2024Natural GasSwapTenn Z4 300L Basis04/01/2025 10/31/2025 -$0.94 (214,000.00)MMBTU11/21/2024Natural GasSwapNYMEX Henry Hub (LD)04/01/2025 10/31/2025 $3.23 (321,000.00)MMBTU11/21/2024Natural GasSwapTenn Z4 300L Basis04/01/2025 10/31/2025 -$0.93 (321,000.00)MMBTU11/20/2024Natural GasSwapNYMEX Henry Hub (LD)04/01/2025 10/31/2025 $3.16 (214,000.00)MMBTU11/20/2024Natural GasSwapTenn Z4 300L Basis04/01/2025 10/31/2025 -$0.89 (214,000.00)MMBTU11/13/2024Natural GasSwapNYMEX Henry Hub (LD)04/01/2025 10/31/2025 $3.08 (535,000.00)MMBTU11/13/2024Natural GasSwapTenn Z4 300L Basis04/01/2025 10/31/2025 -$0.89 (535,000.00)MMBTU10/07/2024Crude OilSwapNYMEX WTI CMA04/01/2025 06/30/2025 $72.00 (7,500.00)BBL10/02/2024Natural GasSwapNYMEX Henry Hub (LD)04/01/2025 10/31/2025 $3.23 (535,000.00)MMBTU10/02/2024Natural GasSwapTenn Z4 300L Basis04/01/2025 10/31/2025 -$1.04 (535,000.00)MMBTU02/26/2024Crude OilSwapNYMEX WTI CMA03/01/2025 03/01/2025 $74.34 (4,389.00)BBL Earning’s Call: The Company will host a conference call to discuss its results on Thursday, March 20, 2025, at 10:30 a.m. Central Time (11:30 a.m. Eastern Time). Interested parties in the United States and Canada may participate toll-free by dialing (833) 816-1385. International parties may participate by dialing (412) 317-0478. Participants should ask to be joined to the “Epsilon Energy 2024 Year End Earnings Conference Call.” A webcast can be viewed at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=lEJXH1I5. A webcast replay will be available on the Company’s website (www.epsilonenergyltd.com) following the call. About Epsilon Epsilon Energy Ltd. is a North American onshore natural gas and oil production and gathering company with assets in Pennsylvania, Texas, Alberta CA, New Mexico, and Oklahoma. Forward-Looking Statements Certain statements contained in this news release constitute forward looking statements. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, ‘may”, “will”, “project”, “should”, ‘believe”, and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated. Forward-looking statements are based on reasonable assumptions, but no assurance can be given that these expectations will prove to be correct and the forward-looking statements included in this news release should not be unduly relied upon. Contact Information: 281-670-0002 Jason StabellChief Executive OfficerJason.Stabell@EpsilonEnergyLTD.com Andrew Williamson Chief Financial Officer Andrew.Williamson@EpsilonEnergyLTD.com EPSILON ENERGY LTD.Unaudited Consolidated Statements of Operations(All amounts stated in US$) Year ended December 31, 2024 2023Revenues from contracts with customers: Gas, oil, NGL, and condensate revenue $25,998,712 $20,939,221 Gas gathering and compression revenue 5,524,063 9,790,531 Total revenue 31,522,775 30,729,752 Operating costs and expenses: Lease operating expenses 7,264,824 6,405,281 Gathering system operating expenses 2,265,190 2,459,694 Depletion, depreciation, amortization, and accretion 10,185,119 7,685,084 Impairment expense 1,450,076 — Loss on sale of oil and gas properties — 1,449,871 General and administrative expenses: Stock based compensation expense 1,244,416 1,018,262 Other general and administrative expenses 5,688,714 6,293,234 Total operating costs and expenses 28,098,339 25,311,426 Operating income 3,424,436 5,418,326 Other income (expense): Interest income 493,277 1,673,241 Interest expense (46,400) (80,379)(Loss) gain on derivative contracts (391,147) 3,130,055 Other income 76,727 4,357 Other income, net 132,457 4,727,274 Net income before income tax expense 3,556,893 10,145,600 Income tax expense 1,629,093 3,200,447 NET INCOME $1,927,800 $6,945,153 Currency translation adjustments 262,588 (3,872)Unrealized (loss) gain on securities (1,598) 1,598 NET COMPREHENSIVE INCOME $2,188,790 $6,942,879 Net income per share, basic $0.09 $0.31 Net income per share, diluted $0.09 $0.31 Weighted average number of shares outstanding, basic 21,930,277 22,496,772 Weighted average number of shares outstanding, diluted 21,930,277 22,511,647 EPSILON ENERGY LTD.Unaudited Consolidated Balance Sheets(All amounts stated in US$) December 31, December 31, 2024 2023ASSETS Current assets Cash and cash equivalents $6,519,793 $13,403,628 Accounts receivable 5,843,722 6,015,448 Short term investments — 18,775,106 Fair value of derivatives — 1,219,025 Prepaid income taxes 975,963 952,301 Other current assets 792,041 763,288 Total current assets 14,131,519 41,128,796 Non-current assets Property and equipment: Oil and gas properties, successful efforts method Proved properties 191,349,210 160,263,511 Unproved properties 28,364,186 25,504,873 Accumulated depletion, depreciation, amortization and impairment (122,751,395) (113,708,210) Total oil and gas properties, net 96,962,001 72,060,174 Gathering system 43,116,371 42,738,273 Accumulated depletion, depreciation, amortization and impairment (36,449,511) (35,539,996) Total gathering system, net 6,666,860 7,198,277 Land 637,764 637,764 Buildings and other property and equipment, net 259,335 291,807 Total property and equipment, net 104,525,960 80,188,022 Other assets: Operating lease right-of-use assets, long term 344,589 441,987 Restricted cash 470,000 470,000 Prepaid drilling costs 982,717 1,813,808 Total non-current assets 106,323,266 82,913,817 Total assets $120,454,785 $124,042,613 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable trade $2,334,732 $3,149,371 Gathering fees payable 997,016 1,136,237 Royalties payable 1,400,976 1,422,898 Accrued capital expenditures 572,079 696,761 Accrued compensation 695,018 636,295 Other accrued liabilities 371,503 649,037 Fair value of derivatives 487,548 118,770 Operating lease liabilities 121,135 86,473 Total current liabilities 6,980,007 7,895,842 Non-current liabilities Asset retirement obligations 3,652,296 3,502,952 Deferred income taxes 12,738,577 11,553,943 Operating lease liabilities, long term 355,776 476,911 Total non-current liabilities 16,746,649 15,533,806 Total liabilities 23,726,656 23,429,648 Commitments and contingencies (Note 11) Shareholders' equity Preferred shares, no par value, unlimited shares authorized, none issued or outstanding — — Common shares, no par value, unlimited shares authorized and 22,008,766 shares issued and outstanding at December 31, 2024 and 22,222,722 issued and 22,151,848 shares outstanding at December 31, 2023 116,081,031 118,272,565 Treasury shares, at cost, 0 at December 31, 2024 and 70,874 at December 31, 2023 — (360,326)Additional paid-in capital 12,118,907 10,874,491 Accumulated deficit (41,505,076) (37,946,042)Accumulated other comprehensive income 10,033,267 9,772,277 Total shareholders' equity 96,728,129 100,612,965 Total liabilities and shareholders' equity $120,454,785 $124,042,613 EPSILON ENERGY LTD.Unaudited Consolidated Statements of Cash Flows(All amounts stated in US$) Year ended December 31, 2024 2023Cash flows from operating activities: Net income $1,927,800 $6,945,153 Adjustments to reconcile net income to net cash provided by operating activities: Depletion, depreciation, amortization, and accretion 10,185,119 7,685,084 Impairment expense 1,450,076 — Accretion of discount on available for sale securities (297,637) (836,528)Loss on sale of oil and gas properties — 1,449,871 Gain (loss) on derivative contracts 391,147 (3,130,055)Settlement received on derivative contracts 1,196,656 3,251,890 Settlement of asset retirement obligation (88,992) (509,802)Stock-based compensation expense 1,244,416 1,018,262 Deferred income tax expense 1,184,634 936,549 Changes in assets and liabilities: Accounts receivable 171,726 1,185,938 Prepaid income taxes (23,662) 187,793 Other assets and liabilities (17,828) 126,347 Accounts payable, royalties payable and other accrued liabilities (493,176) (122,203)Net cash provided by operating activities 16,830,279 18,188,299 Cash flows from investing activities: Additions to unproved oil and gas properties (4,507,280) (8,136,442)Additions to proved oil and gas properties (31,695,651) (10,377,642)Additions to gathering system properties (341,452) (82,302)Additions to land, buildings and property and equipment (16,513) (49,689)Purchases of short term investments - held to maturity — (32,812,974)Purchases of short term investments - available for sale (4,045,785) (11,988,982)Proceeds from short term investments - held to maturity 6,743,178 26,864,976 Proceeds from short term investments - available for sale 16,373,752 — Proceeds from sale of oil and gas properties — 12,498 Prepaid drilling costs 831,091 (1,813,808)Net cash used in investing activities (16,658,660) (38,384,365)Cash flows from financing activities: Buyback of common shares (1,831,208) (6,055,601)Exercise of stock options — 62,875 Dividends paid (5,486,834) (5,600,655)Debt issuance costs — (140,000)Net cash used in financing activities (7,318,042) (11,733,381)Effect of currency rates on cash, cash equivalents, and restricted cash 262,588 (3,872)Decrease in cash, cash equivalents, and restricted cash (6,883,835) (31,933,319)Cash, cash equivalents, and restricted cash, beginning of period 13,873,628 45,806,947 Cash, cash equivalents, and restricted cash, end of period $6,989,793 $13,873,628 Supplemental cash flow disclosures: Income tax paid - federal $414,250 $1,250,000 Income tax paid - state (PA) $— $182,000 Income tax (refund) paid - state (other) $(2,071) $7,583 Interest paid $16,832 $97,595 Non-cash investing activities: Change in proved properties accrued in accounts payable and accrued liabilities $(862,744) $1,611,724 Change in gathering system accrued in accounts payable and accrued liabilities $36,645 $16,969 Asset retirement obligation asset additions and adjustments $54,902 $1,190,579 Year ended December 31, 2024 2023Net income $1,927,800 $6,945,153 Add Back: Interest income, net (446,877) (1,592,862)Income tax expense 1,629,093 3,200,447 Depreciation, depletion, amortization, and accretion 10,185,119 7,685,084 Impairment expense 1,450,076 — Stock based compensation expense 1,244,416 1,018,262 Loss on sale of assets — 1,449,871 Loss on derivative contracts net of cash received or paid on settlement 1,587,803 121,835 Foreign currency translation loss 570 (278)Adjusted EBITDA $17,578,000 $18,827,512 Epsilon defines Adjusted EBITDA as earnings before (1) net interest expense, (2) taxes, (3) depreciation, depletion, amortization and accretion expense, (4) impairments of natural gas and oil properties, (5) non-cash stock compensation expense, (6) gain or loss on derivative contracts net of cash received or paid on settlement, (7) gain or loss on derivative contracts net of cash received or paid on settlement, and (8) other income. Adjusted EBITDA is not a measure of financial performance as determined under U.S. GAAP and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with U.S. GAAP or as a measure of profitability or liquidity. Additionally, Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Epsilon has included Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA provides useful information regarding its ability to service debt and to fund capital expenditures. It further provides investors a helpful measure for comparing operating performance on a "normalized" or recurring basis with the performance of other companies, without giving effect to certain non-cash expenses and other items. This provides management, investors and analysts with comparative information for evaluating the Company in relation to other natural gas and oil companies providing corresponding non-U.S. GAAP financial measures or that have different financing and capital structures or tax rates. These non-U.S. GAAP financial measures should be considered in addition to, but not as a substitute for, measures for financial performance prepared in accordance with U.S. GAAP.

Epsilon Announces Full Year 2024 Results

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