23 unchanged sentences
We believe that our audits provide a reasonable basis for our opinion.
+Added: Critical Audit Matter
+Added: The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:
+Added: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
+Added: The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
+Added: Estimation of Future Production Volumes Used to Estimate Proved Oil and Natural Gas Reserves and the Associated Effect on Depreciation, Depletion and Amortization (“DD&A”) Expense Related to Proved Oil and Natural Gas Properties
+Added: As described in Note 3 to the consolidated financial statements, the Company uses the successful efforts method of accounting for its oil and natural gas producing activities which involves management making significant estimates, including estimating the future production volumes of proved oil and natural gas reserves.
+Added: As disclosed in Note 5, the Company’s oil and natural gas properties, net balance as of December 31, 2024 was $97.0 million, which includes proved
+Added: oil and natural gas properties of $191.3 million and accumulated depletion, amortization and impairment of $122.8 million.
+Added: DD&A expense was $10.2 million for the year ended December 31, 2024.
+Added: We have identified the estimation of future production volumes used to estimate proved oil and natural gas reserves and the associated effect on DD&A expense related to proved oil and natural gas properties as a critical audit matter.
+Added: Estimating future production volumes involves a high degree of subjectivity from management and their independent petroleum engineer.
+Added: Changes in this estimate could have a significant effect on the measurement of DD&A expense.
+Added: Auditing the estimation of future production volumes required subjective and complex auditor judgment.
+Added: The primary procedures we performed to address this critical audit matter included:
+Added: Evaluating the professional qualifications and objectivity of the independent petroleum engineer, including their relationship to the Company.
+Added: Assessing the reasonableness of the future production volumes by comparing estimates of future production volumes against historical results of production volumes on a summary basis for all wells.
+Added: Performing a retrospective review over management estimates of future production volumes made in prior periods as compared to actual results.
/s/ BDO USA, P.C.
11 unchanged sentences
Other current assets
−Removed: Operating lease right-of-use assets
Total current assets
40 unchanged sentences
Preferred shares, no par value, unlimited shares authorized, none issued or outstanding
−Removed: Common shares, no par value, unlimited shares authorized and 22,222,722 shares issued and 22,151,848 shares outstanding at December 31, 2023 and 23,117,144 issued and outstanding at December 31, 2022
+Added: 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
Treasury shares, at cost, 0 at December 31, 2024 and 70,874 at December 31, 2023
17 unchanged sentences
Gathering system operating expenses
−Removed: Development geological and geophysical expenses
Depletion, depreciation, amortization, and accretion
−Removed: Loss (gain) on sale of oil and gas properties
+Added: Impairment expense
+Added: Loss on sale of oil and gas properties
General and administrative expenses:
6 unchanged sentences
Interest expense
−Removed: Gain on derivative contracts
−Removed: Other income (expense), net
+Added: (Loss) gain on derivative contracts
Other income, net
2 unchanged sentences
Currency translation adjustments
−Removed: Unrealized gain on securities
+Added: Unrealized (loss) gain on securities
NET COMPREHENSIVE INCOME
15 unchanged sentences
( 5,600,655 )
−Removed: ( 5,862,012 )
Stock-based compensation expense
2 unchanged sentences
( 6,055,601 )
+Added: ( 6,055,601 )
Retirement of treasury shares
12 unchanged sentences
( 1,831,208 )
−Removed: ( 6,055,601 )
Retirement of treasury shares
( 2,191,534 )
−Removed: ( 5,695,275 )
−Removed: Exercise of stock options
Vesting of shares of restricted stock
9 unchanged sentences
Depletion, depreciation, amortization, and accretion
+Added: Impairment expense
Accretion of discount on available for sale securities
−Removed: Loss (gain) on sale of oil and gas properties
−Removed: Gain on derivative contracts
−Removed: ( 3,130,055 )
−Removed: Settlement received (paid) on derivative contracts
+Added: Loss on sale of oil and gas properties
+Added: Gain (loss) on derivative contracts
( 3,130,055 )
+Added: Settlement received on derivative contracts
Settlement of asset retirement obligation
3 unchanged sentences
Accounts receivable
−Removed: ( 2,604,455 )
Prepaid income taxes
1 unchanged sentence
Accounts payable, royalties payable and other accrued liabilities
−Removed: Income taxes payable
−Removed: ( 2,238,519 )
Net cash provided by operating activities
2 unchanged sentences
( 4,507,280 )
+Added: ( 8,136,442 )
Additions to proved oil and gas properties
7 unchanged sentences
( 4,045,785 )
−Removed: Proceeds from sales and maturities of short term investments
+Added: ( 11,988,982 )
+Added: Proceeds from short term investments - held to maturity
+Added: Proceeds from short term investments - available for sale
Proceeds from sale of oil and gas properties
17 unchanged sentences
Effect of currency rates on cash, cash equivalents, and restricted cash
−Removed: (Decrease) increase in cash, cash equivalents, and restricted cash
+Added: Decrease in cash, cash equivalents, and restricted cash
( 6,883,835 )
+Added: ( 31,933,319 )
Cash, cash equivalents, and restricted cash, beginning of period
1 unchanged sentence
Supplemental cash flow disclosures:
−Removed: Income taxes paid
+Added: Income tax paid - federal
+Added: Income tax paid - state (PA)
+Added: Income tax (refund) paid - state (other)
Interest paid
1 unchanged sentence
Change in proved properties accrued in accounts payable and accrued liabilities
−Removed: ( 1,100,041 )
Change in gathering system accrued in accounts payable and accrued liabilities
21 unchanged sentences
Cash, Cash Equivalents and Restricted Cash
−Removed: Cash and cash equivalents include cash on hand and short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
−Removed: Restricted cash consists of amounts deposited to back bonds or letters of credit for potential well liabilities.
+Added: Cash and cash equivalents includes cash on hand and short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
+Added: Restricted cash consists of amounts deposited to back bonds or letters of credit.
The Company presents restricted cash with cash and cash equivalents in the Consolidated Statements of Cash Flows.
33 unchanged sentences
Revenue Recognition
−Removed: Revenues are comprised primarily of sales of natural gas and to a much lesser degree crude oil and NGLs, along with the revenue generated from the Company’s ownership interest in the gas gathering system in the Auburn field in Northeastern Pennsylvania.
+Added: Revenues are comprised primarily of sales of natural gas, crude oil and NGLs, along with the revenue generated from the Company’s ownership interest in the gas gathering system in the Auburn field in Northeastern Pennsylvania.
Revenue recognition is evaluated through the following five steps:
10 unchanged sentences
The Company recognizes upstream revenue at the point in time when control has been transferred to the customer, generally at the time natural gas reaches an agreed-upon delivery point and collectability is reasonably assured.
−Removed: Upstream revenue is generally based upon a fixed price, based on a market index, and is measured as the amount of consideration the Company expects to receive in exchange for the transferring of the natural gas.
+Added: Upstream revenue is based upon a fixed price, based on market pricing, and is measured as the amount of consideration the Company expects to receive in exchange for the transferring of the natural gas.
The services provided by the gas gathering system take place continuously and as a practical expedient, the revenues are recognized monthly for the volumes that are processed and transported for the upstream producers during that period of time.
−Removed: Revenue for the services performed are based on the rates outlined in the cost of service agreement that governs all volumes gathered and processed by the system.
−Removed: The gathering rates are adjusted, and fixed annually.
+Added: Revenue for the services performed are based on the rates outlined in the Anchor Shipper Gas Gathering Agreement for Northern Pennsylvania (the “ASGGA”) effective January 1, 2024 that governs all volumes gathered and processed by the system.
+Added: The gathering rate is fixed, but is adjusted annually by the Consumer Price Index for All Urban Consumers (“CPI-U”) as published by US Bureau of Labor Statistics.
Typically, the Company sells its natural gas directly to customers, under agreements with payment terms less than 30 days after delivery and 60 days on the revenue generated by the gas gathering system.
1 unchanged sentence
The Company’s natural gas purchase contracts are generally structured such that Epsilon commits and dedicates for sale its proportionate share of natural gas production per day to a purchaser.
−Removed: Natural gas is sold at a percentage of index prices of each component, less any stated deductions.
+Added: Natural gas is sold at market prices.
Control transfers at the delivery point specified in the contract, which typically is stated as the inlet of the third-party sales transportation pipeline.
The Company recognizes revenue proportionate to its entitled share of volumes sold.
−Removed: Currently, the vast majority of Epsilon’s natural gas production comes from the Marcellus Field in Northeastern Pennsylvania.
+Added: Currently, the vast majority of Epsilon’s natural gas production comes from the Marcellus in Northeastern Pennsylvania.
Epsilon uses a third-party service for its natural gas marketing.
8 unchanged sentences
Oil and Other Liquids Revenue
−Removed: The source of the Company’s oil and other liquids revenue is its ownership interest in wells in the Permian Basin and Oklahoma.
+Added: The source of the Company’s oil and other liquids revenue is its ownership in wells in the Permian Basin, Oklahoma, and Alberta, Canada.
The Company does not operate the wells and has elected not to receive its proportionate share of the production.
2 unchanged sentences
Accounts Receivable and Other
−Removed: Oil, natural gas liquid and natural gas receivables consist of amounts due from purchasers for commodity sales from our revenue interest in the leases in Northeastern Pennsylvania, the Permian Basin, and Oklahoma.
+Added: Oil, natural gas liquid and natural gas receivables consist of amounts due from purchasers or operators for commodity sales from our revenue interest in the leases in Northeastern Pennsylvania, the Permian Basin, Oklahoma, and Alberta, Canada.
Payments from purchasers are typically due by the last day of the month following the month of delivery.
19 unchanged sentences
The Company makes its own assumptions about how market participants would price the assets and liabilities.
−Removed: Cash and cash equivalents, restricted cash, accounts receivable, and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments.
+Added: Cash, restricted cash, accounts receivable, and accounts payable are carried at cost, which approximates fair value because of the short-term maturity of these instruments.
+Added: Cash equivalents are carried at fair value.
The Company’s revolving line of credit has a recorded value that approximates its fair value since its variable interest rate is tied to current market rates and the applicable margins represent market rates.
The revolving line of credit is classified within Level 2 of the fair value hierarchy.
−Removed: The Company has investments in U.S.
+Added: The Company had investments in U.S.
Treasury Bills, which mature over a period between 3 and 12 months and are classified as short term investments.
6 unchanged sentences
Derivative Instruments
−Removed: The Company enters into derivative contracts to hedge price risk associated with a portion of natural gas production.
+Added: The Company enters into derivative contracts to hedge price risk associated with a portion of natural gas and oil production.
While it is never management’s intention to hold or issue derivative instruments for speculative trading purposes, conditions sometimes arise where actual production is less than estimated, which has, and could, result in over-hedged volumes.
10 unchanged sentences
Derivative instruments are recorded on the consolidated balance sheets at fair value as either current or non-current assets or liabilities based on their anticipated settlement date.
−Removed: Gains or losses on derivative contracts are recorded as gain (loss) on commodity contracts in the consolidated statements of operations and comprehensive income.
+Added: Gains or losses on derivative contracts are recorded as gain (loss) on derivative contracts in the consolidated statements of operations and comprehensive income.
Hedge accounting is not used for our derivative assets and liabilities.
10 unchanged sentences
Exposure to credit risk associated with these instruments is controlled by (i) placing assets and other financial interests with credit-worthy financial institutions, (ii) maintaining policies over credit extension that include the evaluation of customers’ financial condition and monitoring paying history, although the Company does not have collateral requirements and (iii) netting derivative assets and liabilities for counterparties with a legal right of offset.
−Removed: At December 31, 2023 and 2022, the cash and cash equivalents and short term investments were primarily concentrated in one financial institution the U.S.
+Added: At December 31, 2024, cash and cash equivalents was primarily concentrated in one financial institution the U.S.
+Added: At December 31, 2023, cash and cash equivalents and short term investments were primarily concentrated in one financial institution the U.S.
We currently have $ 4.1 million in excess of the federally insured limits.
The Company periodically assesses the financial condition of these institutions and believe that any possible credit risk is minimal.
−Removed: For the year ended December 31, 2023, the Company had four customers that accounted for 90.7 % of the total trade accounts receivable.
For the year ended December 31, 2024, the Company had three customers that accounted for 89.1 % of the total trade accounts receivable.
+Added: For the year ended December 31, 2023, the Company had four customers that accounted for 90.7 % of the total trade accounts receivable.
Geographic Locations of Operations
Approximately 50 % and 77 % of our revenue during fiscal years 2024 and 2023, respectively, was derived from natural gas production and gathering system revenues in the state of Pennsylvania.
−Removed: As a result of prolonged weak pricing in Zone 4 of the Tennessee Gas Pipeline and, therefore, a reduced pace of development, Epsilon’s management is striving to allocate capital to additional upstream opportunities outside of the Marcellus Shale.
−Removed: More specifically, the Company has allocated capital to the Permian Basin through its investments in New Mexico and Texas.
−Removed: Epsilon’s management expects to continue to seek opportunities outside of the Marcellus Shale in order to provide the Company the flexibility to respond to market conditions by allocating capital across multiple basins and commodities.
+Added: Approximately 40 % and 6 % of our revenue during fiscal year 2024 and 2023, respectively, was derived from oil, natural gas, and natural gas liquids revenues in the state of Texas.
+Added: Epsilon’s management expects to continue to seek opportunities in other North American basins to provide the Company the flexibility to respond to market conditions by allocating capital across multiple basins and commodities.
EPSILON ENERGY LTD.
10 unchanged sentences
Stock-Based Compensation
−Removed: The Company mainly estimates the fair value of all stock options awarded to employees and directors using the Black-Scholes option pricing model.
−Removed: Other models are used for options with more complex vesting criteria.
−Removed: Compensation expense and a corresponding increase to additional paid-in capital are recorded over the vesting period based on the fair value of the options granted using a graded vesting approach.
−Removed: When stock options are exercised for common shares, consideration paid by the stock option holders and additional paid-in capital associated with the stock options are recorded.
−Removed: The Company estimates a forfeiture rate and adjusts the corresponding expense each period based on an updated forfeiture estimate (see Note 7).
The Company has issued time-based restricted stock and performance share units (“PSU”) to employees and directors of the Company.
3 unchanged sentences
Compensation expense and a corresponding increase to additional paid in capital are recorded over the vesting period.
−Removed: In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which significantly changed accounting for leases by requiring that lessees recognize a right of use asset and a related lease liability representing the obligation to make lease payments, for all lease transactions with terms greater than one year.
−Removed: Additional disclosures about an entity’s lease transactions are also required.
−Removed: ASU 2016-02 defines a lease as “a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.” The Company adopted ASU 2016-02 as of January 1, 2022.
−Removed: We have chosen the transition using the comparative report at adoption method of applying the provisions of the new standard at the beginning of the period of adoption instead of the earliest comparative period presented in the consolidated financial statements.
−Removed: There was no material effect from the adoption.
The Company leases office space to be used for general, administrative, and executive offices with terms typically ranging from five to seven years , subject to certain renewal options as applicable.
3 unchanged sentences
Leases with an initial term of 12 months or less are not recorded on the Company’s Consolidated Balance Sheets and lease agreements with lease and non-lease components are generally accounted for as a single lease component.
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
The Company determines whether a contract is, or contains, a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease.
5 unchanged sentences
Recently Issued Accounting Standards
−Removed: The Company, an emerging growth company (“EGC”), has elected to take advantage of the benefits of the extended transition period provided for in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards which allows the Company to defer adoption of certain accounting standards until those standards would otherwise apply to private companies.
−Removed: In June 2016 the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326):
−Removed: Measurement of Credit Losses on Financial Instruments, which removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities.
−Removed: Under current U.S.
−Removed: GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred.
−Removed: The revised guidance removes all recognition thresholds and requires companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the Company expects to collect over the instrument’s contractual life.
−Removed: Epsilon has adopted ASU 2016-13 as of January 1, 2023.
−Removed: There was no impact from the adoption of this ASU.
−Removed: In 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which, for a limited period of time, adds Accounting Standards Codification (“ASC”) 848 to provide entities with certain practical expedients and exceptions from applying modification accounting if certain criteria are met.
−Removed: The amendments are designed to reduce operational challenges that entities will face in applying modification accounting to all contracts that will be revised due to reference rate reform.
−Removed: The guidance in ASC 848 was triggered by the pending discontinuation of certain benchmark reference rates and, in some cases, their replacement by new rates that are more observable or transaction-based and, therefore, less susceptible to manipulation, than certain interest-rate benchmark reference rates commonly used today, including the London Interbank Offered Rate (“LIBOR”).
−Removed: This process of reference rate reform will require entities to modify certain contracts by removing the discontinued rates and including new rates.
−Removed: Epsilon has adopted ASU 2020-04 as of January 1, 2023.
−Removed: There was no impact from the adoption of this ASU.
−Removed: In July 2023, the FASB issued ASU No.
−Removed: 2023-03 to amend various SEC paragraphs in the ASC to primarily reflect the issuance of SEC Staff Accounting Bulletin No.
−Removed: 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718):
−Removed: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.
−Removed: 120 (“SAB 120”), SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force (“EITF”) Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X:
−Removed: Income or Loss Applicable to Common Stock.” ASU 2023-03 amends the ASC for SEC updates pursuant to SEC Staff Accounting Bulletin No.
−Removed: SEC Staff Announcement at the March 24, 2022 EITF Meeting;
−Removed: and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 – General Revision of Regulation S-X;
−Removed: Income or Loss Applicable to Common Stock.
−Removed: SAB 120 provides guidance on the measurement and disclosure of share-based awards shortly before announcing material nonpublic information.
−Removed: These updates were immediately effective and did not have any impact on our consolidated financial statements.
+Added: In October 2023, the FASB issued ASU No.
+Added: 2023-06, Disclosure Improvements:
+Added: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, to amend certain disclosure and presentation requirements.
+Added: For entities subject to the SEC’s existing disclosure requirements, the effective date for each amendment
EPSILON ENERGY LTD.
1 unchanged sentence
For the years ended December 31, 2024 and 2023
−Removed: In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:
−Removed: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, to amend certain disclosure and presentation requirements.
+Added: will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.
+Added: For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the codification and will not become effective for any entity.
+Added: The Company is currently evaluating the impact of this ASU.
In November 2023, the FASB issued ASU No.
3 unchanged sentences
This guidance is effective for fiscal years beginning after December 15, 2023 and interim periods with fiscal years beginning after December 15, 2024.
−Removed: The Company is currently assessing the potential effects of the standard.
+Added: The Company has adopted ASU No.
+Added: 2023-07 as of December 31, 2024.
+Added: See Note 14 “Operating Segments” in the Notes to Consolidated Financial Statements.
In December 2023, the FASB issued ASU No.
1 unchanged sentence
Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to disclose disaggregated information about a reporting entity’s effective tax rate reconciliation, using both percentages and reporting currency amounts for specific standardized categories, as well as disclosure of income taxes paid disaggregated by jurisdiction.
−Removed: ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.
−Removed: The Company is currently assessing the potential effects of this standard.
+Added: The amendments will be effective for fiscal years beginning after December 15, 2024, with early adoption permitted.
+Added: The Company is evaluating the impact of this new standard and believes that the adoption will result in additional disclosures, but will not have any other impact on its consolidated financial statements.
+Added: In March 2024, the FASB issued ASU No.
+Added: 2024-01, Compensation – Stock Compensation (Topic 718):
+Added: Scope Applications of Profits Interest and Similar Awards (“ASU 2024-01”).
+Added: The amendments in ASU 2024-01 improves its overall clarity and operability without changing the guidance and adding illustrative examples to determine whether profits interest award should be accounted for in accordance with Topic 718.
+Added: The amendments will be effective for fiscal years beginning after December 15, 2024, and interim periods within those annual periods.
+Added: The Company does not anticipate that these updates, once adopted, will have a material effect.
+Added: In November 2024, the FASB issued ASU 2024-3 "Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures." The ASU will improve the decision usefulness for investors by requiring public business entities to disclose more detailed information about their expenses such as (a) inventory and manufacturing expense, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, etc.
+Added: The amendments will be effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.
+Added: The amendments will be applied prospectively with an option for a retrospective application.
+Added: The Company is evaluating the impact of this new standard and believes that the adoption will result in additional disclosures, but will not have any other impact on its consolidated financial statements.
Short Term Investments
1 unchanged sentence
The Company’s short term investments consist of US Treasury Bills.
−Removed: These investments were previously classified as held-to-maturity.
−Removed: In May 2023, as a result of a change in business investment strategy, the Company transferred all of its held-to-maturity short term investments to the available-for-sale category.
−Removed: The securities transferred had a total amortized cost of $ 33,026,959 , fair value of $ 33,021,293 and unrealized losses of $ 5,666 at the time of transfer.
−Removed: The unrealized loss was recorded as accumulated other comprehensive income at the time of transfer.
+Added: These investments are classified as available-for-sale.
Available-for-sale short term investments are reported at fair value in the Consolidated Balance Sheets.
6 unchanged sentences
The realized gains on these sales were $ 347,335 .
−Removed: These securities were sold to raise cash to fund capital expenditures.
−Removed: An additional $ 16,410,000 of securities reached maturity with total realized gains of $ 395,767 .
−Removed: The realized gains are included in interest income in the consolidated statements of operations and comprehensive income.
+Added: An additional $ 7,780,000 of securities
EPSILON ENERGY LTD.
1 unchanged sentence
For the years ended December 31, 2024 and 2023
+Added: reached maturity with total realized gains of $ 234,248 .
+Added: The realized gains are included in interest income in the consolidated Statements of Operations and Comprehensive Income.
+Added: During the year ended December 31, 2023, the Company sold securities with a carrying amount of $ 10,394,482 for total proceeds of $ 10,454,976 .
+Added: The realized gains on these sales were $ 60,494 .
+Added: These securities were sold to raise cash to fund capital expenditures.
+Added: An additional $ 16,410,000 of securities reached maturity with total realized gains of $ 395,767 .
+Added: The realized gains are included in interest income in the consolidated statements of operations and comprehensive income.
Property and Equipment
16 unchanged sentences
Asset Acquisitions
+Added: During the year ended December 31, 2024, Epsilon made the following four acquisitions.
+Added: Management determined that substantially all of the fair value of the gross assets acquired were concentrated in oil and gas properties and therefore accounted for these transactions as asset acquisitions and allocated the purchase price based on the relative fair value of the assets acquired and liabilities assumed.
+Added: ● a 25 % working interest in three producing wells in Ector County, Texas for $ 12.1 million.
+Added: ● a 25 % working interest in 3,620 gross undeveloped acres in Ector County, Texas for $ 2.6 million.
+Added: ● a 50 % working interest in 14,243 gross undeveloped acres in Alberta, Canada for $ 1.0 million.
+Added: ● a joint venture covering approximately 130,000 gross undeveloped acres in Alberta, Canada with a commitment to provide an approximately $ 7.0 million drilling carry to earn a 25 % working interest
During the year ended December 31, 2023, Epsilon made the following three acquisitions.
Management determined that substantially all of the fair value of the gross assets acquired were concentrated in oil and gas properties and therefore accounted for these transactions as asset acquisitions and allocated the purchase price based on the relative fair value of the assets acquired and liabilities assumed.
−Removed: There were no asset acquisitions for the year ended December 31, 2022.
● a 10 % interest in two wellbores located in Eddy County, New Mexico for total consideration of $ 2.1 million paid in cash.
● a 25 % working interest in 1,297 gross acres in Ector County, Texas for total consideration of $ 1.3 million paid in cash.
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
● a 25 % working interest in 11,067 gross acres in Ector County, Texas for total consideration of $ 6.3 million paid in cash.
Property Sale
+Added: During the year ended December 31, 2024, Epsilon had no asset sales.
During the year ended December 31, 2023, Epsilon sold two wellbore-only Oklahoma assets for $ 12,498 .
This sale resulted in a loss of $ 1.45 million.
−Removed: During the year ended December 31, 2022, Epsilon sold one wellbore-only Oklahoma asset for $ 200,000 .
−Removed: This sale resulted in a gain of $ 0.22 million.
Property Impairment
6 unchanged sentences
For unproved properties, such as leasehold costs, expected current and future market prices for similar assets are considered relative to carrying values in evaluating impairment.
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
−Removed: No impairment was recorded for the years ended December 31, 2023 and 2022.
+Added: During the year ended December 31, 2024, Epsilon recorded an impairment of $ 1.45 million on the Killam project (interest acquired in April 2024) in Alberta, Canada.
+Added: One well was impaired as a result of a decrease in reserves ($ 0.53 million) and one well drilled during the year was deemed non-commercial ($ 0.92 million).
+Added: For the year ended December 31, 2023, there was no impairment.
+Added: Refer to Note 17 – Fair Value Measurements.
Revolving Line of Credit
The Company closed a senior secured reserve based revolving credit facility on June 28, 2023 with Frost Bank as issuing bank and sole lender.
−Removed: The new facility replaced the Company’s previous facility.
−Removed: The initial commitment and borrowing base is $ 35 million (redetermined as of December 6, 2023), supported by the Company’s upstream assets in Pennsylvania and subject to semi-annual redeterminations with a maturity date of the earlier of June 28, 2027.
+Added: The current borrowing base is $ 45 million (redetermined as of February 10, 2025), supported by the Company’s upstream assets in Pennsylvania and subject to semi-annual redeterminations with a maturity date of June 28, 2027.
Interest will be charged at the Daily Simple SOFR rate plus a margin of 3.25 %.
−Removed: The facility is secured by the assets of the Company’s subsidiary, Epsilon Energy USA.
−Removed: As of December 31, 2023, there were no borrowings under the facility.
+Added: The facility is secured by the assets of the Company’s Epsilon Energy USA subsidiary (Borrower).
+Added: There are currently no borrowings under the facility.
Under the terms of the facility, the Company must adhere to the following financial covenants:
7 unchanged sentences
SOFR + 3.25 %
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
Shareholders’ Equity
2 unchanged sentences
(b) Purchases of Equity Securities
−Removed: On March 9, 2023, Epsilon’s Board of Directors (the “Board”) authorized a new share repurchase program of up to 2,292,644 common shares, representing 10 % of the outstanding common shares of Epsilon, for an aggregate purchase price of not more than US $ 15.0 million.
−Removed: The program is pursuant to a normal course issuer bid and will be conducted in accordance with Rule 10b-18 under the Exchange Act.
−Removed: The program commenced on March 27, 2023 and will end on March 26, 2024, unless the maximum amount of common shares is purchased before then or Epsilon provides earlier notice of termination.
−Removed: During the year ended December 31, 2023, we repurchased 968,149 common shares and spent $ 4,940,295 at an average price of $ 5.08 per share (excluding commissions) under the new plan.
+Added: On March 19, 2024, the Board of Directors authorized a new share repurchase program of up to 2,191,320 common shares, representing 10 % of the outstanding common shares of Epsilon at such time, for an aggregate purchase price of not more than US $ 12.0 million.
+Added: The program was pursuant to a normal course issuer bid and was conducted in accordance with Rule 10b-18 under the Exchange Act.
+Added: The program commenced on March 27, 2024 and was set to expire on March 26, 2025, unless the maximum amount of common shares is purchased before then or the Board approves earlier termination.
+Added: During the year ended December 31, 2024, we repurchased 125,000 common shares and spent $ 627,500 at an average price of $ 5.00 per share (excluding commissions) under the plan.
+Added: On February 12, 2025, the Board terminated and revoked authority under the program.
The previous share repurchase program commenced on March 9, 2023.
During the year ended December 31, 2023, we repurchased 968,149 common shares of the maximum of 2,292,644 authorized for repurchase and spent $ 4,940,295 under the plan.
−Removed: The repurchased stock had an average price of $ 6.32 per share (excluding commissions) and
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
−Removed: was subsequently retired during the year ended December 31, 2022.
−Removed: In 2023, we repurchased and retired 190,700 common shares at an average price of $ 5.82 per share (excluding commissions) before the plan terminated on March 7, 2023.
−Removed: In 2023, the Company repurchased 1,158,849 shares at an average price of $ 5.20 per share (excluding commissions) under the two consecutive repurchase programs.
−Removed: On March 19, 2024, the Board of Directors authorized a new share repurchase program of up to 2,191,320 common shares, representing 10 % of the current outstanding common shares of Epsilon, for an aggregate purchase price of not more than US $ 12.0 million.
+Added: The repurchased stock had an average price of $ 5.08 per share (excluding commissions) and 897,275 common shares were retired during the year ended December 31, 2023.
+Added: In 2024, we repurchased 248,700 common shares and spent $ 1,203,708 at an average price of $ 4.82 per share (excluding commissions) and retired 319,574 common shares before the plan terminated on March 26, 2024.
+Added: In 2024, the Company repurchased 373,700 shares and spent $ 1,831,208 at an average price of $ 4.88 per share (excluding commissions) under the two consecutive repurchase programs.
+Added: On February 12, 2025, the Board authorized a new share repurchase program of up to 2,200,876 common shares, representing 10 % of the current outstanding common shares of Epsilon, for an aggregate purchase price of not more than US $ 13.0 million.
The program is pursuant to a normal course issuer bid and will be conducted in accordance with Rule 10b-18 under the Exchange Act.
−Removed: The program will commence on March 27, 2024 and end on March 26, 2025, unless the maximum amount of common shares is purchased before then or Epsilon provides earlier notice of termination.
+Added: The program will commence on February 12, 2025 and end on February 11, 2026, unless the maximum amount of common shares is purchased before then or the Board approves earlier termination.
(c) Equity Incentive Plan
1 unchanged sentence
Shareholders approved the 2020 Plan at the Meeting.
−Removed: Following Epsilon’s listing on the NASDAQ Global Market, the Board determined that it is in the best interest of the shareholders to approve a new incentive plan that is compliant with U.S.
−Removed: public company equity plan rules and practices that would replace Epsilon’s Amended and Restated 2017 Stock Option Plan (including its predecessors) and the Share Compensation Plan (collectively referred to as the “Predecessor Plans”).
−Removed: No further awards will be granted under the Predecessor Plans.
The 2020 Plan provides for incentive compensation in the form of stock options, stock appreciation rights, restricted stock and stock units, performance shares and units, other stock-based awards and cash-based awards.
Under the 2020 Plan, Epsilon is authorized to issue up to 2,000,000 common shares.
−Removed: Restricted Stock Awards
−Removed: For the year ended December 31, 2023, 358,546 restricted common shares with a weighted average market price at grant date of $ 5.42 were awarded to the Company’s management, employees, and board of directors.
−Removed: For the year ended December 31, 2022, 289,231 restricted common shares with a weighted average market price at grant date of $ 6.28 were awarded to the Company’s officers, employees, and board of directors.
+Added: Restricted Stock Unit
+Added: For the year ended December 31, 2024, 300,052 restricted common shares with a weighted average grant date fair value of $ 5.97 were awarded to the Company’s management, employees, and board of directors.
+Added: For the year ended December 31, 2023, 358,546 restricted common shares with a weighted average grant date fair value of $ 5.42 were awarded to the Company’s management, employees, and board of directors.
These shares vest over a three or four-year period, with an equal number of shares being issued per period on the anniversary of the award resolution.
1 unchanged sentence
The Company determined the fair value of the granted Restricted Stock-based on the market price of the common shares of the Company on the date of grant.
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
The following table summarizes restricted stock for the years ended December 31, 2024 and 2023:
7 unchanged sentences
Stock compensation expense recognized during the year ended December 31, 2024 was $ 1,244,416 (during the year ended December 31, 2023, $ 959,525 ).
−Removed: The total value of vested shares during the year ended December 31, 2023 was $ 875,014 (during the year ended December 31, 2022:
−Removed: $ 1,010,911 ).
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
+Added: The total fair value of vested shares during the year ended December 31, 2024 was $ 1,303,187 (during the year ended December 31, 2023:
At December 31, 2024, the Company had unrecognized stock-based compensation related to these shares of $ 3,198,469 to be recognized over a weighted-average period of 1.30 years.
−Removed: Performance Share Unit Awards (“PSU”)
+Added: Performance Share Unit (“PSU”)
The Company historically granted PSUs, which are paid in stock to certain key employees.
−Removed: The PSUs will vest on the last day of the performance period.
−Removed: The number of PSUs that will ultimately vest is based on two performance targets as follows:
−Removed: ● The targets for the PSUs are based on (i) the relative total stockholder return (“TSR”) percentile ranking and (ii) the relative cash flow per debt adjusted share – growth (“CFDAS Growth”) percentile ranking of the Company, each as compared to the Company’s peer group as specified in the award agreement during the applicable one-year performance period ending on December 31.
−Removed: ● Cash Flow per Debt Adjusted Share (“CFDAS”) is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) divided by the sum of the (i) the total debt plus the value of preferred stock minus cash and the amount of dividends paid for the year divided by the share price at the end of the year;
−Removed: and (ii) the actual share count at year end.
−Removed: ● The vesting of each PSU Award will be based 50 % on TSR performance and 50 % based on CFDAS Growth performance.
−Removed: ● The recipient of the award must be employed with the Company at the time of vesting.
−Removed: The number of shares ultimately issued under these awards can range from zero to 200 % of target award amounts at the discretion of the Compensation Committee of the Board of Directors.
+Added: The number of shares ultimately issued under these awards can range from zero to 200 % of target awarded amounts at the discretion of the Compensation committee of the Board of Directors.
+Added: During the years ended December 31, 2024 and 2023, the Company awarded no PSUs.
During the year ended December 31, 2023, a total of 15,833 common shares vested.
−Removed: The following table summarizes PSUs for the years ended December 31, 2023 and 2022:
−Removed: December 31, 2023
−Removed: December 31, 2022
−Removed: Remaining Life
−Removed: Remaining Life
−Removed: Balance non-vested PSUs at beginning of period
−Removed: Balance non-vested PSUs at end of period
−Removed: Stock compensation expense for the granted PSUs is recognized over the vesting period.
Stock compensation expense recognized during the year ended December 31, 2024 related to PSUs was $ 0 (during the year ended December 31, 2023, $ 58,737 ).
−Removed: The total value of vested shares during the year ended December 31, 2023 was $ 80,432 (during the year ended December 31, 2022:
At December 31, 2024, the Company had no unrecognized stock-based compensation related to these shares.
−Removed: During the years ended December 31, 2023 and 2022, the Company awarded no PSUs.
Stock Options
−Removed: As of December 31, 2023, the Company had outstanding stock options covering 57,500 common shares at an overall average exercise price of $ 5.03 per common share to officers and employees of the Company and its subsidiaries.
−Removed: These 57,500 options have a weighted-average expected remaining term of approximately 0.05 years.
+Added: As of December 31, 2024, the Company had no outstanding stock options.
The following table summarizes stock option activity for the years ended December 31, 2024 and 2023:
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
December 31, 2024
2 unchanged sentences
Balance at beginning of period
−Removed: Expired/Forfeited
Balance at period-end
1 unchanged sentence
At December 31, 2024 and 2023, the Company had unrecognized stock-based compensation related to these options of nil .
−Removed: The total intrinsic value of the outstanding options at December 31, 2023 was $ 2,875 (at December 31, 2022:
−Removed: The total intrinsic value of options exercised during the year ended December 31, 2023 was $ 5,500 (during the year ended December 31, 2022:
+Added: The total intrinsic value of the outstanding options at December 31, 2024 was nil (at December 31, 2023:
+Added: The total intrinsic value of options exercised during the year ended December 31, 2024 was nil (during the year ended December 31, 2023:
During the years ended December 31, 2024 and 2023, the Company awarded no stock options.
−Removed: The following table summarizes information for stock options outstanding at December 31, 2023:
−Removed: Contractual Life
−Removed: Exercise Price
−Removed: As of December 31, 2023
−Removed: The value of the options was recorded as stock-based compensation expense, with an offsetting amount to additional paid-in capital based on the vesting terms.
−Removed: Stock-based compensation expense for the options, for the years ended December 31, 2023 and 2022 was nil .
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
Revenue Recognition
−Removed: Revenues are comprised primarily of sales of natural gas, oil and NGLs, along with the revenue generated from the Company’s ownership interest in the gas gathering system in the Auburn field in Northeastern Pennsylvania.
+Added: Revenues are comprised primarily of sales of natural gas, oil and NGLs, along with the revenue generated from the Company’s ownership interest in the Auburn gas gathering system in Northeastern Pennsylvania.
Overall, product sales revenue generally is recorded in the month when contractual delivery obligations are satisfied, which occurs when control is transferred to the Company’s customers at delivery points based on contractual terms and conditions.
1 unchanged sentence
Gathering System revenues derived from Epsilon’s production, which have been eliminated from total gathering system revenues (“elimination entry”), amounted to $ 1.1 million and $ 1.4 million, respectively, for the years ended December 31, 2024 and 2023.
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
The following table details revenue for the years ended December 31, 2024 and 2023:
5 unchanged sentences
Total operating revenue
−Removed: (1) Net of the elimination entry
+Added: (1) Net of elimination
Product Sales Revenue
7 unchanged sentences
Gas Gathering and Compression Revenue
−Removed: The Company also provides natural gas gathering and compression services through its ownership interest in the gas gathering system in the Auburn field.
+Added: The Company also provides natural gas gathering and compression services through its ownership interest in the Auburn gas gathering system in Pennsylvania.
For the provision of gas gathering and compression services, the Company collects its share of the gathering and compression fees per unit of gas serviced and recognizes gathering revenue over time using an output method based on units of gas gathered.
2 unchanged sentences
Estimated revenue due to the Company is recorded within the receivables line item on the accompanying consolidated balance sheets until payment is received.
−Removed: Allowance for Credit Losses
−Removed: The Company records an allowance for credit losses on a case-by-case basis once there is evidence that collection is not probable.
−Removed: At December 31, 2023 and 2022, there were no accounts for which collection was not probable.
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
+Added: Current Expected Credit Losses
+Added: Under ASU 326, Financial Instruments – Credit Losses, estimated losses on financial assets are provided through an allowance for credit losses.
+Added: We also have accounts receivable which are primarily from purchasers of oil and natural gas, counterparties to our financial instruments, and revenues earned for compression and gathering services.
+Added: Our oil, gas, and natural gas liquids accounts receivables are generally collected within 30 days after the end of the month.
+Added: Compression and gathering receivables are generally collected within 60 days after the end of the month.
+Added: We assess collectability through various procedures, including review of our trade receivable balances by counterparty, assessing economic events and conditions, our historical experience with counterparties, the counterparty’s financial condition and the amount and age of past due accounts.
+Added: As of December 31, 2024 and 2023, we determined that our allowance for credit loss was nil .
The following table details accounts receivable as of December 31, 2024 and 2023:
5 unchanged sentences
Total accounts receivable
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
Accumulated Other Comprehensive Income
3 unchanged sentences
Balance at beginning of period
−Removed: Translation loss
−Removed: Unrealized gain on securities
+Added: Translation gain/(loss)
+Added: Unrealized (loss)/gain on securities
Balance at end of period
−Removed: Net income before income taxes is as follows for the periods indicated:
+Added: Net income (loss) before income taxes is as follows for the periods indicated:
Year ended December 31,
( 2,769,534 )
+Added: ( 1,167,609 )
We file a federal income tax return in the United States, Canada, and various state and local jurisdictions.
−Removed: We believe that we have appropriate support for the income tax positions taken and to be taken on the Company's tax returns and that the accruals for tax liabilities are adequate for all open years based on our assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter.
+Added: We believe that we have appropriate support for the income tax positions taken and to be taken on the Company's tax returns and that the accruals for tax liabilities are adequate for all open years based on our assessment of many factors
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
+Added: including past experience and interpretations of tax law applied to the facts of each matter.
The Company's tax returns are open to audit under the statute of limitations for the years ending December 31, 2021 through December 31, 2024.
5 unchanged sentences
The following table presents the reconciliation of our income taxes calculated at the statutory federal tax rate to the income tax provision in our financial statements.
−Removed: Our effective tax rate for 2023 differs from the statutory rate primarily due to states taxes, foreign withholding taxes, & the recognition of a valuation allowance on our Canadian and Oklahoma
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
−Removed: state deferred tax assets.
−Removed: Our effective tax rate for 2022 differs from the statutory rate primarily due to states taxes & the recognition of a valuation allowance on our Canadian and Oklahoma state deferred tax assets.
+Added: Our effective tax rate for 2024 and 2023 differs from the statutory rate primarily due to states taxes, foreign withholding taxes, and the recognition of a valuation allowance on our Canadian and Oklahoma state deferred tax assets.
Income tax provision computed at the statutory federal tax rate
7 unchanged sentences
Income tax expense
+Added: Our effective tax rate for 2024 and 2023, excluding the impact of Canadian loss net valuation allowance, is 25.48 % and 28.29 %, respectively.
Deferred income taxes primarily represent the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
Net deferred tax liabilities consisted of the following at December 31, 2024 and 2023:
4 unchanged sentences
Lease Liabilities
−Removed: Unrealized derivatives/other
+Added: Unrealized derivatives
Gross deferred tax assets
9 unchanged sentences
( 1,752,767 )
−Removed: Unrealized derivatives/other
+Added: Unrealized derivatives
Gross deferred tax liabilities
7 unchanged sentences
A state valuation allowance of $ 0.13 million is applicable to the net state deferred tax assets attributable to Oklahoma because of objective negative evidence on the cumulative loss incurred in the state over the three-year period ended December 31, 2024.
−Removed: As of December 31, 2023, we have $ 42.1 million of Canadian net operating loss carry-forwards, which will expire between 2027-2043.
+Added: As of December 31, 2024, we have $ 40.9 million of Canadian net operating loss carry-forwards.
A separate valuation allowance of $ 11.1 million attributable to Canadian net operating losses and other tax carryovers is recorded because it is more likely than not to be utilized.
−Removed: The net change in the total valuation allowance for each of the years ended December 31, 2023 and 2022 was an increase of $ 0.50 million and a decrease of $ 0.66 million, respectively.
−Removed: On August 16, 2022, legislation commonly known as the Inflation Reduction Act was signed into law.
−Removed: Among other things, the Inflation Reduction Act includes a 1% excise tax on corporate stock repurchases applicable to repurchases
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
−Removed: after December 31, 2022, and also a new minimum tax based on book income.
−Removed: The Inflation Reduction Act did not have a material impact on our effective tax rate.
+Added: The net change in the total valuation allowance for each of the years ended December 31, 2024 and 2023 was a decrease of $ 0.5 million and an increase of $ 0.50 million, respectively.
The Company does not have any material uncertain tax positions.
−Removed: The Company recognizes interest expense and penalties related to the uncertain tax position in the income tax expense line in the accompanying consolidated statements of operations and comprehensive income.
+Added: The Company recognizes interest expense and penalties related to the uncertain tax position in the income tax expense line in the accompanying consolidated statements of operations and comprehensive loss.
Accrued interest and penalties are included in other non-current liabilities in the consolidated balance sheets and were $ 0 as of December 31, 2024 and 2023.
1 unchanged sentence
The Company also enters into commitments for capital expenditures in advance of the expenditures being made.
−Removed: As of December 31, 2023, our commitments for capital expenditures were nil .
−Removed: On March 10, 2021, Epsilon filed a complaint against Chesapeake Appalachia, LLC (“Chesapeake”) in the United States District Court for the Middle District of Pennsylvania, Scranton, Pennsylvania (“Middle District”).
−Removed: Epsilon claims that Chesapeake has breached a settlement agreement and several operating agreements (“JOAs”) to which Epsilon and Chesapeake are parties.
−Removed: Epsilon asserts that Chesapeake has failed to cooperate with Epsilon’s efforts to develop resources in the Auburn Development, located in North-Central Pennsylvania, as required under both the settlement agreement and JOAs.
−Removed: Epsilon requested a preliminary injunction but was unsuccessful in obtaining that injunction.
−Removed: Epsilon filed a motion to amend its original Complaint.
−Removed: Chesapeake opposed.
−Removed: The Court ruled in Epsilon’s favor and allowed Epsilon’s amendment.
−Removed: Chesapeake moved to dismiss the amended Complaint.
−Removed: The Court granted the motion to dismiss on a narrow issue without prejudice to Epsilon’s right to file a new lawsuit based on new proposals made after the Court’s decision.
−Removed: Epsilon filed a motion for reconsideration of that decision, but the court denied the motion for reconsideration on January 18, 2022.
−Removed: Epsilon filed a notice of appeal on February 15, 2022 challenging the District Court's rulings in the case.
−Removed: Following the Third Circuit's ruling to remand the case back to District court, Epsilon has sought and was granted a dismissal of the case without prejudice in September 2023.
+Added: As of December 31, 2024, our commitments for capital expenditures were $ 7.8 million.
+Added: All of the capital commitments are related to the first two wells of the joint venture in Alberta entered into in October 2024.
+Added: Of the total commitment, $ 3.4 million is drilling carry in favor of the operator, and the remaining amount is our working interest share of outstanding authorizations for future expenditures.
EPSILON ENERGY LTD.
2 unchanged sentences
Under ASC 842, Leases, the Company recognized an operating lease related to its corporate office as of December 31, 2024 summarized in the following table:
−Removed: Operating lease right-of-use assets
Operating lease right-of-use assets, long term
9 unchanged sentences
Weighted average discount rate (annualized) - operating lease
−Removed: The Company had one office lease that expired in April 2023.
On March 1, 2023, the Company commenced a new office lease with a 70 month lease term and future lease payments estimated to be approximately $ 0.85 million.
11 unchanged sentences
Basic net income per share is computed on the basis of the weighted-average number of common shares outstanding during the period.
−Removed: Diluted net income per share is computed based upon the weighted-average number of
+Added: Diluted net income per share is computed based upon the weighted-average number of common shares outstanding during the period plus the assumed issuance of common shares for all potentially dilutive securities.
EPSILON ENERGY LTD.
1 unchanged sentence
For the years ended December 31, 2024 and 2023
−Removed: common shares outstanding during the period plus the assumed issuance of common shares for all potentially dilutive securities.
The net income used in the calculation of basic and diluted net income per share are as follows:
10 unchanged sentences
Anti-dilutive unvested time-based restricted shares
−Removed: Anti-dilutive unvested performance-based restricted shares
+Added: Anti-dilutive unvested performance-based restricted units
Total Anti-dilutive shares
Operating Segments
−Removed: Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
−Removed: The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as executive management.
+Added: Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (CODM).
+Added: The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as executive management consisting of the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer.
+Added: The CODM uses the Company’s consolidated financial results, including operating income or loss by segment, to make key operating decisions, assess performance, and to allocate resources.
Segment performance is evaluated based on operating income or loss as shown in the table below.
1 unchanged sentence
The Company’s reportable segments are as follows:
−Removed: The Upstream segment activities include acquisition, development and production of natural gas and oil reserves on properties within the United States;
+Added: The Upstream segment activities include acquisition, development and production of natural gas and oil reserves on properties within the United States and Canada;
The Gas Gathering segment partners with two other companies to operate a natural gas gathering system.
−Removed: The Corporate segment activities include corporate listing and governance functions of the Company.
EPSILON ENERGY LTD.
8 unchanged sentences
Gathering and compression fees
−Removed: ( 1,375,879 )
−Removed: Total operating revenue (1)
+Added: Intersegment gathering and compression fees
+Added: Reconciliation of operating revenue
+Added: Elimination of intersegment revenues
( 1,135,176 )
−Removed: Operating costs
+Added: Total consolidated operating revenue (1)
Operating costs
−Removed: ( 1,375,879 )
+Added: Gathering, transportation, and compression
+Added: Other lease operating expense
+Added: Intersegment other lease operating expense
Depletion, depreciation, amortization and accretion
−Removed: Operating income (loss)
+Added: Segment operating income
+Added: Reconciliation of segment operating income
+Added: Salary expense
+Added: Stock based compensation
+Added: Other general and administrative
+Added: Elimination of intersegment other lease operating expenses
( 1,135,176 )
+Added: Total consolidated operating income
Other income (expense)
1 unchanged sentence
Interest expense
−Removed: Gain on derivative contracts
−Removed: Other income (expense), net
−Removed: Net income (loss) before income tax expense
−Removed: ( 5,637,981 )
+Added: Loss on derivative contracts
+Added: Other income, net
+Added: Net income before income tax expense
+Added: Capital expenditures (2)
Segment assets
+Added: Total segment assets reconciled to consolidated amounts are as follows:
+Added: Total segment assets
Current assets, net
−Removed: Proved properties
−Removed: Unproved properties
−Removed: Gathering system
Other property and equipment
Operating lease right-of-use asset
−Removed: Total segment assets
−Removed: Capital expenditures (3)
+Added: Restricted Cash
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
+Added: Gas Gathering
As of and for the year ended December 31, 2023
3 unchanged sentences
Gathering and compression fees
−Removed: ( 1,523,660 )
−Removed: Total operating revenue (1)
+Added: Intersegment gathering and compression fees
+Added: Reconciliation of operating revenue
+Added: Elimination of intersegment revenues
( 1,375,879 )
−Removed: Operating costs
+Added: Total consolidated operating revenue (1)
Operating costs
−Removed: ( 1,523,660 )
+Added: Gathering, transportation, and compression
+Added: Other lease operating expense
+Added: Intersegment other lease operating expense
+Added: Loss on sale of oil and gas properties
Depletion, depreciation, amortization and accretion
−Removed: Operating income (loss)
+Added: Segment operating income
+Added: Reconciliation of segment operating income
+Added: Salary expense
+Added: Stock based compensation
+Added: Other general and administrative
+Added: Elimination of intersegment other lease operating expenses
( 1,375,879 )
+Added: Total consolidated operating income
Other income (expense)
1 unchanged sentence
Interest expense
−Removed: Loss on derivative contracts
−Removed: Other (expense) income
−Removed: Other income (expense), net
−Removed: Net income (loss) before income tax expense
−Removed: ( 6,892,715 )
+Added: Gain on derivative contracts
+Added: Other income, net
+Added: Net income before income tax expense
+Added: Capital expenditures (2)
Segment assets
+Added: Total segment assets reconciled to consolidated amounts are as follows:
+Added: Total segment assets
Current assets, net
−Removed: Proved properties
−Removed: Unproved properties
−Removed: Gathering system
Other property and equipment
−Removed: Total segment assets
−Removed: Capital expenditures (3)
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
+Added: Operating lease right-of-use asset
+Added: Restricted Cash
(1) Segment operating revenue represents revenues generated from the operations of the segment.
1 unchanged sentence
For the year ended December 31, 2024, we sold natural gas to 34 unique customers.
−Removed: Direct Energy Business Marketing, LLC and EQT Energy, LLC each accounted for 10 % or more of our total revenue.
+Added: SWN Energy Services Company, LLC accounted for 10 % or more of our total revenue.
For the year ended December 31, 2023, we sold natural gas to 33 unique customers.
Direct Energy Business Marketing, LLC and EQT Energy, LLC each accounted for 10 % or more of our total revenue.
−Removed: (2) Operating expenses for the year ended December 31, 2023 includes loss on the sale of Oklahoma assets of $ 1,449,871 .
(2) Capital expenditures for the Upstream segment consist primarily of the acquisition of properties, and the drilling and completing of wells while Gas Gathering consists of expenditures relating to the expansion, completion, and maintenance of the gathering and compression facility .
3 unchanged sentences
These activities are intended to manage Epsilon’s exposure to fluctuations in commodity prices for natural gas by securing fixed price contracts for a portion of expected sales volumes.
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
Inherent in the Company’s fixed price contracts, are certain business risks, including market risk and credit risk.
1 unchanged sentence
Credit risk is the risk of loss from nonperformance by the Company’s counterparty to a contract.
−Removed: The Company does not currently require collateral from any of its counterparties nor do its counterparties require collateral from the Company.
−Removed: The Company enters into certain commodity derivative instruments to mitigate commodity price risk associated with a portion of its future natural gas production and related cash flows.
−Removed: The natural gas revenues and cash flows are affected by changes in commodity product prices, which are volatile and cannot be accurately predicted.
+Added: The Company may be required to post collateral depending on the cumulative balance owed to a counterparty on a mark-to-market basis.
+Added: The Company enters into certain commodity derivative instruments to mitigate commodity price risk associated with a portion of its future natural gas and oil production and related cash flows.
+Added: The natural gas and oil revenues and cash flows are affected by changes in commodity product prices, which are volatile and cannot be accurately predicted.
The objective for holding these commodity derivatives is to protect the operating revenues and cash flows related to a portion of the future natural gas sales from the risk of significant declines in commodity prices, which helps ensure the Company’s ability to fund the capital budget.
Epsilon has historically elected not to designate any of its financial commodity derivative contracts as accounting hedges and, accordingly, accounts for these financial commodity derivative contracts using the mark-to-market accounting method.
−Removed: Under this accounting method, changes in the fair value of outstanding financial instruments are recognized as gains or losses in the period of change and are recorded as g ain (loss) on derivative contracts on the consolidated statements of operations and comprehensive income.
+Added: Under this accounting method, changes in the fair value of outstanding financial instruments are recognized as gains or losses in the period of change and are recorded as (loss) gain on derivative contracts on the consolidated statements of operations and comprehensive income.
The related cash flow impact is reflected in cash flows from operating activities.
−Removed: During 2023, Epsilon recognized gains on financial commodity derivative contracts of $ 3,130,055 .
+Added: During 2024, Epsilon recognized losses on financial commodity derivative contracts of $ 391,147 .
This amount included cash received on the settlement of these contracts of $ 1,196,656 .
2 unchanged sentences
Commodity Derivative Contracts
+Added: At December 31, 2024, the Company had outstanding NYMEX HH swaps totaling 2.2615 Bcf with a weighted average strike price of $ 3.26 and Tennessee Z4 basis swaps totaling 2.2615 Bcf with a weighted average strike price of ($ 0.91 ) covering January 2025 to October 2025, and NYMEX WTI CMA swaps totaling 20,662 Bbls with a weighted average strike price of $ 73.49 to hedge a portion of expected volumes for the contract period of January 2025 to June 2025.
At December 31, 2023, the Company had outstanding NYMEX HH swaps totaling 1.905 Bcf with a weighted average strike price of $ 3.25 and Tennessee Z4 basis swaps totaling 1.905 Bcf with a weighted average strike price of ($ 1.10 ) to hedge a portion of expected volumes for the contract period of January 2024 to October 2024.
−Removed: At December 31, 2022, the Company had outstanding NYMEX HH swaps totaling 1.07 Bcf and Tennessee Z4 basis swaps totaling 1.07 Bcf outstanding.
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
Fair Value of Derivative
1 unchanged sentence
Tennessee Z4 basis swap
+Added: Crude Oil NYMEX WTI CMA
Fair Value of Derivative
+Added: NYMEX Henry Hub swap
Tennessee Z4 Basis swap
Net Fair Value of Derivatives
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
The following table presents the changes in the fair value of Epsilon’s commodity derivatives for the periods indicated:
Year ended December 31,
−Removed: Fair value of asset (liability), beginning of the period
−Removed: Gains on derivative contracts included in earnings
+Added: Fair value of asset, beginning of the period
+Added: (Loss) gain on derivative contracts included in earnings
Settlement of commodity derivative contracts
( 1,196,656 )
−Removed: Fair value of asset, end of the period
+Added: ( 3,251,890 )
+Added: Fair value of (liability) asset, end of the period
The following table presents the fair value of derivatives, as presented in the Consolidated Balance Sheets, on a net basis as they are subject to master netting arrangements:
9 unchanged sentences
Each year we review, and to the extent necessary, revise our asset retirement obligations estimates in accordance with recent activity and current service costs.
−Removed: EPSILON ENERGY LTD.
−Removed: Notes to the Consolidated Financial Statements (Continued)
−Removed: For the years ended December 31, 2023 and 2022
The following table presents the activity in Epsilon’s asset retirement obligations for the periods indicated:
5 unchanged sentences
Balance end of period
+Added: EPSILON ENERGY LTD.
+Added: Notes to the Consolidated Financial Statements (Continued)
+Added: For the years ended December 31, 2024 and 2023
Fair Value Measurements
The methodologies used to determine the fair value of our financial assets and liabilities at December 31, 2024 were the same as those used at December 31, 2023.
−Removed: Cash and cash equivalents, restricted cash, accounts receivable, and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments.
+Added: Cash, restricted cash, accounts receivable, and accounts payable are carried at cost, which approximates fair value because of the short-term maturity of these instruments.
+Added: Cash equivalents are carried at fair value.
The Company’s revolving line of credit has a recorded value that approximates its fair value since its variable interest rate is tied to current market rates and the applicable margins represent market rates.
The revolving line of credit is classified within Level 2 of the fair value hierarchy.
−Removed: The Company has investments in U.S.
+Added: The Company had investments in U.S.
Treasury bills, all of which mature over a period of 3 and 12 months and are classified as short term investments.
1 unchanged sentence
Treasury bills are classified within Level 1 of the fair value hierarchy.
−Removed: Commodity derivative instruments consist of NYMEX HH swap and basis swap contracts for natural gas.
+Added: Commodity derivative instruments consist of NYMEX HH swap and basis swap contracts for natural gas and NYMEX WTI CMA swap contracts for crude oil.
The Company’s derivative contracts are valued based on a marked to market approach.
6 unchanged sentences
Cash equivalents
−Removed: Short term investments
Derivative contracts
4 unchanged sentences
Cash equivalents
+Added: Short term investments
Derivative contracts
+Added: Non-Recurring Fair Value Measurements
+Added: The Company performed an impairment test on our oil and gas properties and it was determined that the carrying amount of the Killam project in Alberta, Canada exceeded the estimated undiscounted future cash flows resulting in a reduction of the carrying amount of the oil properties to their estimated fair values by $ 1.45 million.
+Added: This nonrecurring fair value measurement is classified within Level 3 of the fair value hierarchy.
+Added: For the year ended December 31, 2023, there was no impairment.
EPSILON ENERGY LTD.
1 unchanged sentence
For the years ended December 31, 2024 and 2023
−Removed: Current Expected Credit Loss
−Removed: Under ASU 326, Financial Instruments – Credit Losses, estimated losses on financial assets are provided through an allowance for credit losses.
−Removed: The majority of our financial assets are invested in U.S.
−Removed: Treasury bills.
−Removed: We also have accounts receivable which are primarily from purchasers of oil and natural gas, counterparties to our financial instruments, and revenues earned for compression and gathering services.
−Removed: Our oil, gas, and natural gas liquids accounts receivables are generally collected within 30 days after the end of the month.
−Removed: Compression and gathering receivables are generally collected within 60 days after the end of the month.
−Removed: We assess collectability through various procedures, including review of our trade receivable balances by counterparty, assessing economic events and conditions, our historical experience with counterparties, the counterparty’s financial condition and the amount and age of past due accounts.
−Removed: As of December 31, 2023 and 2022, we determined that our allowance for credit loss was nil .
−Removed: Subsequent Events
−Removed: On January 30, 2024, the Company repurchased 248,700 shares at $ 4.82 per share (excluding commissions) under the existing share repurchase plan.
−Removed: On February 27, 2024 the Company closed an acquisition in the Permian Basin in Ector County, Texas.
−Removed: The acquired assets are a 25 % working interest in 3 producing wells and 3,246 gross undeveloped acres, in partnership with the same operator of the Company’s existing assets in Texas.
−Removed: The effective date for the transaction was (i) February 1, 2024 with respect to the leases and (ii) March 1, 2024 with respect to the wells.
−Removed: The total consideration paid was $ 15 million, funded from cash on-hand.
+Added: The table below summarizes the fair value of the impaired assets at December 31, 2024.
+Added: Quoted Prices
+Added: Identical Assets
+Added: Nonrecurring fair value measurement
+Added: Long-lived assets held and used
+Added: Total Nonrecurring fair value measurement
EPSILON ENERGY LTD.
23 unchanged sentences
NET PROVED RESERVE SUMMARY
−Removed: All reserves located in United States
Natural Gas (MMcf)
22 unchanged sentences
Net proved reserves at December 31, 2024
+Added: (1) Revisions of previous estimates for Pennsylvania for 2023 include reductions of 9,626 MMcf related to well performance, reductions of 21,830 MMcf related to commodity pricing, and additions of 16,625 MMcf related to changes in previously adopted development plans.
+Added: (2) Revisions of previous estimates for Oklahoma for 2023 include reductions of 454 MMcfe related to commodity pricing, 1,760 MMcfe related to changes in previously adopted development plans, and 777 MMcfe related to well performance.
+Added: (3) Revisions of previous estimates for Pennsylvania for 2024 include additions of 10,244 MMcf related to changes in previously adopted development plans, reductions of 2,849 MMcf related to commodity pricing, and additions of 939 MMcf related to well performance.
+Added: (4) Revisions of previous estimates for the Permian Basin for 2024 include additions of 2,317 MMcfe related to well performance and reductions of 23 MMcfe related to commodity pricing.
+Added: (5) Revisions of previous estimates for Oklahoma for 2024 include reductions of 196 MMcfe related to commodity pricing and 410 MMcfe related to well performance.
EPSILON ENERGY LTD.
Supplemental Information to Consolidated Financial Statements
−Removed: All reserves located in United States
Proved developed reserves:
51 unchanged sentences
Supplemental Information to Consolidated Financial Statements
−Removed: (1) Revisions of previous estimates for Pennsylvania for 2022 include additions of 6,238 MMcf related to well performance and 4,759 MMcf related to commodity pricing, and reductions of 18,898 MMcf related to changes to previously adopted development plans.
−Removed: (2) Revisions of previous estimates for Oklahoma for 2022 include additions of 310 MMcfe related to commodity pricing, reductions of 4,353 MMcfe related to changes to previously adopted development plans and reductions of 1,561 MMcfe related to well performance.
−Removed: (3) Revisions of previous estimates for Pennsylvania for 2023 include reductions of 9,626 MMcf related to well performance, reductions of 21,830 MMcf related to commodity pricing, and additions of 16,625 MMcf related to changes in previously adopted development plans.
−Removed: (4) Revisions of previous estimates for Oklahoma for 2023 include reductions of 454 MMcfe related to commodity pricing, 1,760 MMcfe related to changes in previously adopted development plans, and 777 MMcfe related to well performance.
Capitalized Costs Relating to Natural gas and oil Producing Activities
−Removed: The following table sets forth the capitalized costs relating to Epsilon’s crude oil and natural gas production and gathering activities at December 31, 2023 and 2022:
+Added: The following table sets forth the capitalized costs relating to Epsilon’s crude oil and natural gas production activities at December 31, 2024 and 2023:
Year ended December 31,
1 unchanged sentence
Unproved properties
−Removed: Gathering system properties
Total Oil & Gas Properties
8 unchanged sentences
Development costs are incurred to obtain access to proved reserves, including the cost of drilling, as well as the costs to develop the gathering system.
−Removed: Year ended December 31,
Oil and Natural Gas Activities:
+Added: Total costs incurred for oil and natural gas activities as of December 31, 2024
Unproved acquisition costs
−Removed: Development costs
−Removed: Total costs incurred for oil and natural gas activities
−Removed: Gathering System development costs
+Added: Proved acquisition costs
+Added: Proved development costs
Total costs incurred
+Added: Total costs incurred for oil and natural gas activities as of December 31, 2023
+Added: Unproved acquisition costs
+Added: Proved development costs
+Added: Total costs incurred
Results of Operations for Natural Gas and Oil Producing Activities
The following table sets forth results of operations for natural gas and oil producing activities for the years ended December 31, 2024 and 2023:
−Removed: EPSILON ENERGY LTD.
−Removed: Supplemental Information to Consolidated Financial Statements
Year ended December 31,
7 unchanged sentences
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Natural gas and oil Reserves
−Removed: The following information has been developed utilizing procedures prescribed by the Extractive Activities—Natural Oil and Gas (Topic 932) of the ASC and based on natural gas reserves and production volumes estimated by our independent petroleum consultants, DeGolyer and MacNaughton.
+Added: The following information has been developed utilizing procedures prescribed by the Extractive Activities—Natural Oil and Gas (Topic 932) of the ASC and based on natural gas reserves and production volumes estimated by our
+Added: EPSILON ENERGY LTD.
+Added: Supplemental Information to Consolidated Financial Statements
+Added: independent petroleum consultants, DeGolyer and MacNaughton.
The commodity prices estimated below were based on a 12-month average of first-day-of-the-month commodity prices for the years 2024 and 2023.
8 unchanged sentences
The following table sets forth the standardized measure of discounted future net cash flows from projected production of Epsilon’s gas reserves as of December 31, 2024 and 2023.
−Removed: Year ended December 31,
+Added: Standard measure of discounted net cash flows as of December 31, 2024
Future cash inflows
5 unchanged sentences
10% annual discount for estimated timing of cash flows
−Removed: (146,368,246)
Standardized measure of discounted future net cash flows
+Added: Standard measure of discounted net cash flows as of December 31, 2023
+Added: Future cash inflows
+Added: Future production costs
+Added: Future development costs (1)
+Added: Future income taxes (2)
+Added: Future net cash flows (undiscounted)
+Added: 10% annual discount for estimated timing of cash flows
+Added: Standardized measure of discounted future net cash flows
(1) Costs associated with the abandonment of proved properties are included in future development costs.
4 unchanged sentences
The following table sets forth the changes in the standardized measure of discounted future net cash flows for the years ended December 31, 2024 and 2023:
−Removed: Year ended December 31,
−Removed: Beginning balance
+Added: Future net cash flows as of December 31, 2022
Revenue less production and other costs
1 unchanged sentence
(144,425,073)
+Added: (156,373,808)
Development costs incurred
4 unchanged sentences
Timing differences and other technical revisions
−Removed: Ending balance
+Added: Future net cash flows as of December 31, 2023
+Added: Revenue less production and other costs
+Added: Changes in price, net of production costs
+Added: Development costs incurred
+Added: Net changes in future development costs
+Added: Revisions of previous quantity estimates
+Added: Accretion of discount
+Added: Net change in income taxes
+Added: Purchases of reserves in place
+Added: Timing differences and other technical revisions
+Added: Future net cash flows as of December 31, 2024
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
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.