What changed in this filing

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Item 1A. Risk Factors

2021-03-25 compared with 2020-03-18 · 50 added, 38 removed, 315 unchanged (22% of the section changed)

16 unchanged sentences

Without the continual addition of new reserves, any existing reserves that we may have at any particular time and the production from those reserves will decline over time as those reserves are exploited.

A future increase in our reserves will depend not only on our ability to explore and develop any

properties we may have from time to time, but also on our ability to select and acquire suitable producing properties or prospects.

We cannot assure you that we will be able to locate and continue to locate satisfactory properties for acquisition or participation.

A future increase in our reserves will depend not only on our ability to explore and develop any properties we may have from time to time, but also on our ability to select and acquire suitable producing properties or prospects.

We cannot assure you that we will be able to locate and continue to locate satisfactory properties for acquisition

or participation.

Moreover, if we do identify such acquisitions or participations, we may determine that current markets, terms of acquisition and participation or pricing conditions make such acquisitions or participations uneconomic.

21 unchanged sentences

The DeGolyer Reserve Report is based in part on the assumed success of activities that we intend to undertake in future years.

The oil and natural gas reserves and estimated cash flows to be derived

therefrom contained in the DeGolyer Reserve Report will be reduced to the extent that such activities do not achieve the level of success assumed in the DeGolyer Reserve Report.

The oil and natural gas reserves and estimated cash flows to be derived therefrom contained in the DeGolyer Reserve Report will be reduced to the extent that such activities do not achieve the level of success assumed in the DeGolyer Reserve Report.

Our future oil and natural gas reserves, production, and derived cash flows are highly dependent on our successfully acquiring or discovering and developing new reserves.

10 unchanged sentences

Our asset in Pennsylvania has not yet reached the mature stage, but at some point we may need to acquire and develop other producing assets to maintain our current level or to grow.

To this end, we have begun to acquire leases in the Anadarko basin and to expand our holdings in Pennsylvania.

To this end, we have begun to acquire leases and to expand our holdings in Pennsylvania.

Our future depends on being able to successfully fund and develop these assets.

2 unchanged sentences

We may be unable to obtain additional capital required to implement our business plan, which could restrict our ability to grow.

Operations could also be adversely affected by general economic downturns, changes in the political landscape or limitations on spending.

Operations could also be adversely affected by general economic downturns or limitations on spending.

An economic downturn and uncertainty may have a negative impact on our business.

15 unchanged sentences

Failure to obtain such financing on a timely basis could cause us to forfeit our interest in certain properties, miss certain acquisition opportunities, or reduce or terminate our operations.

If our revenues from our reserves decrease as a result of lower oil and natural gas prices or otherwise, it will affect our ability to expend the necessary capital to replace our reserves or to maintain our production.

If our revenues from our reserves

decrease as a result of lower oil and natural gas prices or otherwise, it will affect our ability to expend the necessary capital to replace our reserves or to maintain our production.

If our cash flow from operations is not sufficient to satisfy our capital expenditure requirements, there can be no assurance that additional debt, equity financing or the proceeds from the sale of a portion or all of our interest in one or more projects will be available to meet these requirements or available on terms acceptable to us.

21 unchanged sentences

Our potential lenders will likely require security over substantially all of our assets.

If we become unable to pay our debt service charges or otherwise commit an event of default, such as bankruptcy, these lenders may foreclose on or sell our properties.

If we become unable to pay our debt service charges or otherwise commit an event of default, such as bankruptcy, these lenders may foreclose on or

sell our properties.

The proceeds of any such sale would be applied to satisfy amounts owed to our lenders and other creditors, and only the remainder, if any, would be available to us.

25 unchanged sentences

Our operations are currently geographically concentrated and therefore subject to regional economic, regulatory and capacity risks.

Approximately 96% of our production during fiscal 2019 and 2018 was derived from our properties in the Marcellus region of Pennsylvania.

Approximately 97% and 96% of our production during fiscal 2020 and 2019, respectively was derived from our properties in the Marcellus region of Pennsylvania.

As a result of this geographic concentration, we may be disproportionately exposed to the effect of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, processing or transportation capacity constraints, market limitations, weather events or interruption of the processing or transportation of crude oil or natural gas.

16 unchanged sentences

The objectives and strategy of those operators may not always be consistent with ours, and we have a limited ability to exercise influence over, and control the risks associated with, operations of these properties.

The failure of an operator of our wells to adequately perform operations, an operator’s breach of the applicable agreements or an operator’s failure to act in ways that are in our best interests could reduce our production and revenues from our conventional assets or could increase costs or create liability for the operator’s failure to properly maintain the well and facilities and to adhere to applicable safety and environmental standards.

In addition to the operator, our success will depend in large measure on certain key personnel.

7 unchanged sentences

Our leasehold interests are subject to termination or expiration under certain conditions.

Our properties are held in the form of leases and working interests in leases, collectively referred to as “

leasehold interests .”

If we or the holder of our leasehold interests fails to meet the specific requirement(s) of a particular leasehold interest, the leasehold interest may terminate or expire.

Our properties are held in the form of leases and working interests in leases, collectively referred to as “ leasehold interests .” If we or our joint venture partner fails to meet the specific requirement(s) of a particular leasehold interest, the leasehold interest may terminate or expire.

There can be no assurance that any of the obligations required to maintain each leasehold interest will be met.

1 unchanged sentence

We may incur losses as a result of title deficiencies.

Although title reviews will be done according to industry standards before the purchase of most oil‑ and natural gas—producing properties or the commencement of drilling wells, such reviews do not guarantee or certify that an unforeseen defect in the chain of title will not arise to defeat our claim, which could result in a reduction in our ownership interest or of the revenue that we receive.

Although title reviews will be done according to industry standards before the purchase of most oil- and natural gas—producing properties or the commencement of drilling wells, such reviews do not guarantee or certify that an unforeseen defect in the chain of title will not arise to defeat our claim, which could result in a reduction in our ownership interest or of the revenue that we receive.

We may be exposed to third-party credit risk, and defaults by third parties could adversely affect us.

70 unchanged sentences

Risks Related to Internal Controls

For as long as we are an “emerging growth company,”

we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to some other public companies.

As an “emerging growth company”

as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

For as long as we are an “emerging growth company,” we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to some other public companies.

As an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

We are an emerging growth company until the earliest of:

2 unchanged sentences

● the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt;

the date on which we are deemed a “large accelerated filer”

as defined under the federal securities laws.

For so long as we remain an “emerging growth company,”

we will not be required to:

● the date on which we are deemed a “large accelerated filer” as defined under the federal securities laws.

For so long as we remain an “emerging growth company,” we will not be required to:

● have an auditor report on our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;

comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis);

submit certain executive compensation matters to shareholders parachute provisions (requiring a non‑binding shareholder vote to approve golden parachute arrangements for certain executive advisory votes pursuant to the “say on frequency”

and “say on pay”

provisions (requiring a non‑binding shareholder vote to approve compensation of certain executive officers) and the “say on golden officers in connection with mergers and certain other business combinations) of the Dodd‑Frank Wall Street Reform and Consumer Protection Act of 2010;

● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis);

● submit certain executive compensation matters to shareholders parachute provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010;

● include detailed compensation discussion and analysis in our filings under the Exchange Act and instead may provide a reduced level of disclosure concerning executive compensation.

In addition, the JOBS Act provides that an “emerging growth company”

can take advantage of the extended transition period for complying with new or revised accounting standards.

In addition, the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period for complying with new or revised accounting standards.

We have elected to take advantage of the extended transition period, which allows us to delay the adoption of new or revised accounting standards until those standards apply to private companies.

8 unchanged sentences

Risks Related to Gathering System

Because of the natural decline in production from existing wells, our success depends on the Anchor Shippers’

economically developing the remaining Marcellus reserves.

Because of the natural decline in production from existing wells, our success depends on the Anchor Shippers’ economically developing the remaining Marcellus reserves.

Our natural gas gathering system is dependent upon the level of production from natural gas wells, from which production will naturally decline over time.

3 unchanged sentences

The gathering rate on the Auburn Gas Gathering System is subject to a cost of service model which could result in a non-competitive gathering rate and reduced throughput.

The gathering rate charged by the Auburn gas gathering system (“Auburn GGS”) is determined by a cost of service model whereby the Anchor Shippers in the system, of which Epsilon is one, dedicate acreage and reserves to the gas gathering system in exchange for the Auburn GGS owners agreeing to a contractual rate of return on invested capital.

The term of this arrangement is 15 years commencing in 2012 and expiring in 2026 with an 18% rate of return.

11 unchanged sentences

Despite substantial increases in local demand for natural gas coupled with pipeline expansions, optimizations, and new pipelines that have been brought into service, the natural gas differential in Northeast Pennsylvania remains significant.

There is no guarantee that future demand or pipeline transportation projects will eliminate this differential, and it will therefore remain a significant risk to demand for transportation service on the Auburn GGS, and therefore Epsilon’s revenues and cash flows.

We compete with other operators in our gas gathering energy businesses.

50 unchanged sentences

Accidents or other operating risks could further result in loss of service available to our customers.

The COVID-19 pandemic and recent developments in the global crude oil markets have had, and may continue to have, material adverse consequences for the global economy, which have impacted our planned operational activities, and may have a material adverse impact on our financial condition, results of operations and cash flows.

The responses of governmental authorities and companies across the world to reduce the spread of the COVID-19 pandemic have significantly reduced global economic activity.

Various containment measures, which have included business closures, work stoppages, shuttering of public spaces and events and/or severe restrictions of global and regional travel, among others, while aiding in the prevention of further spread of the virus, have resulted in the slowing of economic growth, reduced demand for crude oil and natural gas and the disruption of global manufacturing supply chains.

The longevity and severity of the impact of COVID-19 on the oil and gas industry, including the reduced demand for crude oil and natural gas commodities and its resulting impact on commodity prices, may continue until a vaccine or alternative treatment is made widely available across the globe.

We are unable to predict when, and if, an effective vaccine for COVID-19 will become available.

Additionally, in March 2020, OPEC and non-OPEC producers failed to agree to production cuts, causing a significant drop in crude oil prices.

Also, Saudi Arabia recently reduced its export prices to certain markets, while increasing its prices in others.

Subsequently, in April 2020, members of OPEC and certain non-OPEC producers agreed to production cuts through first quarter 2022.

While these production cuts are expected to reduce excess global crude oil inventories in 2021, they are unlikely to be sufficient to offset the sharp demand decreases caused by COVID-19 in the near-term.

Collectively, these factors have contributed to significant negative global economic impacts, including a significant drop in demand for hydrocarbon products, potentially causing the US and other global economies to fall into a recession that could extend throughout 2020 and beyond.

A recession could likely extend the time for the current crude oil markets to absorb excess supplies, resulting in suppressed crude oil prices for a number of future quarters.

Our profitability could be significantly affected by this decreased demand and lower commodity price environment.

The decline in commodity prices and our future estimated production levels could lead to additional material impairments of our long-lived assets, intangible assets, equity method investments and right-of-use assets.

It is likely additional impairments could be triggered if the COVID-19 pandemic leads to a continued and sustained reduction in global economic activity and demand for energy.

The COVID-19 pandemic could potentially further impact our global workforce and operations.

The infection of key personnel, and/or the infection of a significant portion of our workforce, could result in business continuity and productivity disruptions.

Further, containment measures have been implemented to mitigate the spread of COVID-19, there is the risk that reduced demand could continue should there be wide-spread and sustained adoption of certain behavioral changes, such as reduced travel and work from home policies, among others.

Such behavioral changes, and perceived benefits to the environment, have recently been cited by groups opposing the oil and gas industry as cause for future long-term global adoption.

We could be negatively impacted should there be wide-spread and sustained changes in consumer behavioral patterns that result in reduced demand for and consumption of energy commodities.

The impacts of COVID-19 and the significant drop in commodity prices have had an unprecedented impact on the global economy.

Impacts of the COVID-19 pandemic and/or any worsening of the global business and economic environment, may heighten or exacerbate many of the other risks disclosed.

We are unable to predict all potential impacts to our business, the severity of such impacts or the duration.

These risks could have a material adverse impact on our financial position, results of operations and cash flows.

UNRESOLVED STAFF COMMENTS.

The information required by Item 2 is contained in ‘

‘Item 1.

Business.’

The information required by Item 2 is contained in ‘ ‘Item 1.

LEGAL PROCEEDINGS.

We are not a party to any pending or threatened legal proceedings.

From time to time, we may become involved in litigation related to claims arising from the ordinary course of our business.

At December 31, 2020, we did not have any legal proceedings to which we were a party.

However, please see Note 15, Subsequent Events, for current litigation.

MINE SAFETY DISCLOSURES.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors