EPSN Epsilon Energy Ltd

Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today reported financial results for the fourth quarter and full-year ended December 31, 2024.

Full Year and Q4 2024 Highlights:

Epsilon - Full Year 2024 & Q4 2024
		2024	2023	Q4 2024	Q3 2024	YoY%	QoQ%
NRI Production
Gas	MMcf	6,142	8,340	1,765	1,304	-26%	35%
Oil	Mbbl	187	65	52	53	186%	-3%
NGL	Mbbl	69	39	17	17	78%	-2%
Total	Mmcfe	7,676	8,965	2,176	1,727	-14%	26%
Revenues	$M
Gas		10,786	14,864	3,958	1,904	-27%	108%
Oil		13,731	5,091	3,537	3,965	170%	-11%
NGL		1,482	984	385	335	51%	15%
Midstream1		5,524	9,791	1,060	1,084	-44%	-2%
Total		31,523	30,730	8,940	7,288	3%	23%
Realized Prices2
Gas	$/Mcf	1.76	1.78	2.24	1.46	-1%	54%
Oil	$/Bbl	73.61	77.96	68.38	74.27	-6%	-8%
NGL	$/Bbl	21.41	25.29	22.98	19.56	-15%	17%
Adj. EBITDA	$M	17,578	18,828	5,335	3,744	-7%	43%
Cash + STI3	$M	6,990	32,649	6,990	8,775	-79%	-20%
Capex4	$M	34,887	22,038	3,804	3,908	58%	-3%
1) Net of elimination entry for fees paid by Epsilon
2) Excludes impact of hedge realizations
3) Includes restricted cash balance
4) Includes acquisitions

The Company returned $7.3 million to shareholders during the year ended December 31, 2024.

• $5.5 million through the quarterly dividends
• $1.8 million through the repurchase of 373,700 shares at an average price of $4.88 per share

Jason Stabell, Epsilon’s Chief Executive Officer, commented, “As we expected, the challenging natural gas environment continued in 2024, Marcellus net wellhead prices were below $2 per Mcf for the year and a meaningful portion (est. 20-25%) of our production for the year was curtailed. This also impacted our midstream business and led to lower throughput volumes for the Auburn Gas Gathering System. We were fully aligned with the operator to hold these reserves back for a better pricing environment, and we are now seeing curtailed volumes, alongside delayed volumes from new wells, back online in the first quarter of 2025. These volumes started to ramp in the fourth quarter, but we are now producing 75% more natural gas in the Marcellus than our 2024 average net daily volumes, into a much improved gas price environment.

We continued to invest in our Texas assets during the year, where we now have 7 gross producing wells, all performing better than or as expected, and approximately 14,000 gross undeveloped acres holding up to 40 gross undeveloped 2-mile locations, in the heart of the ascendant Barnett play. We expect development activity to resume there in the second half of 2025. As mentioned last year, this project successfully diversified our commodity mix and provides optionality for multi-year capital allocation.

In the fourth quarter, we entered into a JV in Alberta with a reputable US sponsor-backed operator. This met our criteria of low entry cost, drill-bit focused, large inventory runway, capable operator and attractive well economics. We are excited about the opportunity as it covers over 30,000 gross acres where the well returns screen attractive on productivity, drilling and completion cost structure, and royalty regime. We have drilled and completed the first two wells and expect to discuss those initial results soon.

During the year we continued our track record of shareholder returns with the fixed quarterly dividend and opportunistic share repurchases.

With growing cash flows and over $50 million in available liquidity, the Company is in a strong position to continue to execute on drilling activity and opportunistic deal-making while still returning cash to shareholders.

We are setup for a strong year in 2025, and we expect material growth in production and cash flows.”

2024 Operations:

Epsilon’s capital expenditures were $34.9 million for the year ended December 31, 2024, a 58% increase year over year. Texas accounted for approximately 70% of the total, related to the acquisition of 3 gross (0.75 net) wells and 3,246 undeveloped acres in Q1 2024, and the development of 2 gross (0.5 net) wells in Q2 & Q3 2024. Pennsylvania accounted for 15% of the total, primarily related to the completion of 10 gross (0.8 net) wells during the year. The remainder was primarily related to the drilling of 4 gross (1.5 net) wells in Alberta.

The Auburn Gas Gathering System (Epsilon is a 35% owner) gathered and delivered 36.9 Bcf gross natural gas volumes during the year, or 101 MMcf/d.

Reserves:

The Company has received the year-end 2024 third party reserves report completed by the engineering firm DeGolyer & MacNaughton. The table below summarizes the report.

Epsilon Net Year End Reserves
		12/31/2023									12/31/2024									YoY Change
		Oil		NGL		Gas		Total			Oil		NGL		Gas		Total			Oil		NGL		Gas		Total		Total
		Mbbl		Mbbl		MMcf		Mmcfe			Mbbl		Mbbl		MMcf		Mmcfe			Mbbl		Mbbl		MMcf		Mmcfe		%
Proved Developed		272		249		47,555		50,681			847		490		56,851		64,872			575		241		9,296		14,191		28	%
Proved Undeveloped		69		134		18,361		19,581			725		387		12,550		19,225			656		253		(5,811	)	(356	)	-2	%
Total Proved		341		383		65,916		70,262			1,572		877		69,401		84,097			1,231		494		3,485		13,835		20	%
Total Probable		354		437		156,730		161,474			380		384		137,906		142,487			26		(53	)	(18,824	)	(18,987	)	-12	%
Total Proved + Probable		695		820		222,646		231,736			1,952		1,261		207,307		226,584			1,257		441		(15,339	)	(5,152	)	-2	%

As shown in the table above, Company Proved reserves increased 20% year over year. Produced volumes accounted for an 11% decrease, offset by revisions to prior estimates (+14%) and acquisitions and development activity during the year (+16%). Company Probable reserves decreased 12% year over year.

The primary drivers for the positive revisions were (1) changes to the development plan in PA (as provided by the operator), moving Probable reserves to Proved, (2) Proved reserves acquisitions in Texas, and (3) development activity in Texas adding Proved undeveloped reserves.

The majority of the Company’s inventory in Texas is not included in the reserve report, due to no offset producing wells. The Company believes the unaccounted-for inventory is comparable to the existing wells in the project and expects to add meaningful reserves in Texas with incremental development.

Current Hedge Book:

Hedge Book

Trade Date

Product

Structure

Ref

Contract Start

Contract End

Price / Strike

Outstanding

Metric

01/14/2025

Crude Oil

Swap

NYMEX WTI CMA

04/01/2025

09/30/2025

$72.35

(14,900.00

)

BBL

01/07/2025

Crude Oil

Swap

NYMEX WTI CMA

04/01/2025

12/31/2025

$70.20

(24,600.00

)

BBL

12/30/2024

Natural Gas

Swap

NYMEX Henry Hub (LD)

04/01/2025

10/31/2025

$3.49

(214,000.00

)

MMBTU

12/30/2024

Natural Gas

Swap

Tenn Z4 300L Basis

04/01/2025

10/31/2025

-$0.94

(214,000.00

)

MMBTU

11/21/2024

Natural Gas

Swap

NYMEX Henry Hub (LD)

04/01/2025

10/31/2025

$3.23

(321,000.00

)

MMBTU

11/21/2024

Natural Gas

Swap

Tenn Z4 300L Basis

04/01/2025

10/31/2025

-$0.93

(321,000.00

)

MMBTU

11/20/2024

Natural Gas

Swap

NYMEX Henry Hub (LD)

04/01/2025

10/31/2025

$3.16

(214,000.00

)

MMBTU

11/20/2024

Natural Gas

Swap

Tenn Z4 300L Basis

04/01/2025

10/31/2025

-$0.89

(214,000.00

)

MMBTU

11/13/2024

Natural Gas

Swap

NYMEX Henry Hub (LD)

04/01/2025

10/31/2025

$3.08

(535,000.00

)

MMBTU

11/13/2024

Natural Gas

Swap

Tenn Z4 300L Basis

04/01/2025

10/31/2025

-$0.89

(535,000.00

)

MMBTU

10/07/2024

Crude Oil

Swap

NYMEX WTI CMA

04/01/2025

06/30/2025

$72.00

(7,500.00

)

BBL

10/02/2024

Natural Gas

Swap

NYMEX Henry Hub (LD)

04/01/2025

10/31/2025

$3.23

(535,000.00

)

MMBTU

10/02/2024

Natural Gas

Swap

Tenn Z4 300L Basis

04/01/2025

10/31/2025

-$1.04

(535,000.00

)

MMBTU

02/26/2024

Crude Oil

Swap

NYMEX WTI CMA

03/01/2025

03/01/2025

$74.34

(4,389.00

)

BBL

Earning’s Call:

The Company will host a conference call to discuss its results on Thursday, March 20, 2025, at 10:30 a.m. Central Time (11:30 a.m. Eastern Time).

Interested parties in the United States and Canada may participate toll-free by dialing (833) 816-1385. International parties may participate by dialing (412) 317-0478. Participants should ask to be joined to the “Epsilon Energy 2024 Year End Earnings Conference Call.”

A webcast can be viewed at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=lEJXH1I5. A webcast replay will be available on the Company’s website (www.epsilonenergyltd.com) following the call.

About Epsilon

Epsilon Energy Ltd. is a North American onshore natural gas and oil production and gathering company with assets in Pennsylvania, Texas, Alberta CA, New Mexico, and Oklahoma.

Forward-Looking Statements

Certain statements contained in this news release constitute forward looking statements. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, ‘may”, “will”, “project”, “should”, ‘believe”, and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated. Forward-looking statements are based on reasonable assumptions, but no assurance can be given that these expectations will prove to be correct and the forward-looking statements included in this news release should not be unduly relied upon.

Contact Information:

281-670-0002

Jason StabellChief Executive OfficerJason.Stabell@EpsilonEnergyLTD.com

Andrew Williamson Chief Financial Officer Andrew.Williamson@EpsilonEnergyLTD.com

EPSILON ENERGY LTD.Unaudited Consolidated Statements of Operations(All amounts stated in US$)
		Year ended December 31,
		2024				2023
Revenues from contracts with customers:
Gas, oil, NGL, and condensate revenue		$	25,998,712			$	20,939,221
Gas gathering and compression revenue			5,524,063				9,790,531
Total revenue			31,522,775				30,729,752
Operating costs and expenses:
Lease operating expenses			7,264,824				6,405,281
Gathering system operating expenses			2,265,190				2,459,694
Depletion, depreciation, amortization, and accretion			10,185,119				7,685,084
Impairment expense			1,450,076				—
Loss on sale of oil and gas properties			—				1,449,871
General and administrative expenses:
Stock based compensation expense			1,244,416				1,018,262
Other general and administrative expenses			5,688,714				6,293,234
Total operating costs and expenses			28,098,339				25,311,426
Operating income			3,424,436				5,418,326
Other income (expense):
Interest income			493,277				1,673,241
Interest expense			(46,400	)			(80,379	)
(Loss) gain on derivative contracts			(391,147	)			3,130,055
Other income			76,727				4,357
Other income, net			132,457				4,727,274
Net income before income tax expense			3,556,893				10,145,600
Income tax expense			1,629,093				3,200,447
NET INCOME		$	1,927,800			$	6,945,153
Currency translation adjustments			262,588				(3,872	)
Unrealized (loss) gain on securities			(1,598	)			1,598
NET COMPREHENSIVE INCOME		$	2,188,790			$	6,942,879
Net income per share, basic		$	0.09			$	0.31
Net income per share, diluted		$	0.09			$	0.31
Weighted average number of shares outstanding, basic			21,930,277				22,496,772
Weighted average number of shares outstanding, diluted			21,930,277				22,511,647

        

EPSILON ENERGY LTD.Unaudited Consolidated Balance Sheets(All amounts stated in US$)
		December 31,				December 31,
		2024				2023
ASSETS
Current assets
Cash and cash equivalents		$	6,519,793			$	13,403,628
Accounts receivable			5,843,722				6,015,448
Short term investments			—				18,775,106
Fair value of derivatives			—				1,219,025
Prepaid income taxes			975,963				952,301
Other current assets			792,041				763,288
Total current assets			14,131,519				41,128,796
Non-current assets
Property and equipment:
Oil and gas properties, successful efforts method
Proved properties			191,349,210				160,263,511
Unproved properties			28,364,186				25,504,873
Accumulated depletion, depreciation, amortization and impairment			(122,751,395	)			(113,708,210	)
Total oil and gas properties, net			96,962,001				72,060,174
Gathering system			43,116,371				42,738,273
Accumulated depletion, depreciation, amortization and impairment			(36,449,511	)			(35,539,996	)
Total gathering system, net			6,666,860				7,198,277
Land			637,764				637,764
Buildings and other property and equipment, net			259,335				291,807
Total property and equipment, net			104,525,960				80,188,022
Other assets:
Operating lease right-of-use assets, long term			344,589				441,987
Restricted cash			470,000				470,000
Prepaid drilling costs			982,717				1,813,808
Total non-current assets			106,323,266				82,913,817
Total assets		$	120,454,785			$	124,042,613
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable trade		$	2,334,732			$	3,149,371
Gathering fees payable			997,016				1,136,237
Royalties payable			1,400,976				1,422,898
Accrued capital expenditures			572,079				696,761
Accrued compensation			695,018				636,295
Other accrued liabilities			371,503				649,037
Fair value of derivatives			487,548				118,770
Operating lease liabilities			121,135				86,473
Total current liabilities			6,980,007				7,895,842
Non-current liabilities
Asset retirement obligations			3,652,296				3,502,952
Deferred income taxes			12,738,577				11,553,943
Operating lease liabilities, long term			355,776				476,911
Total non-current liabilities			16,746,649				15,533,806
Total liabilities			23,726,656				23,429,648
Commitments and contingencies (Note 11)
Shareholders' equity
Preferred shares, no par value, unlimited shares authorized, none issued or outstanding			—				—
Common shares, no par value, unlimited shares authorized and 22,008,766 shares issued and outstanding at December 31, 2024 and 22,222,722 issued and 22,151,848 shares outstanding at December 31, 2023			116,081,031				118,272,565
Treasury shares, at cost, 0 at December 31, 2024 and 70,874 at December 31, 2023			—				(360,326	)
Additional paid-in capital			12,118,907				10,874,491
Accumulated deficit			(41,505,076	)			(37,946,042	)
Accumulated other comprehensive income			10,033,267				9,772,277
Total shareholders' equity			96,728,129				100,612,965
Total liabilities and shareholders' equity		$	120,454,785			$	124,042,613

EPSILON ENERGY LTD.Unaudited Consolidated Statements of Cash Flows(All amounts stated in US$)
		Year ended December 31,
		2024				2023
Cash flows from operating activities:
Net income		$	1,927,800			$	6,945,153
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion, depreciation, amortization, and accretion			10,185,119				7,685,084
Impairment expense			1,450,076				—
Accretion of discount on available for sale securities			(297,637	)			(836,528	)
Loss on sale of oil and gas properties			—				1,449,871
Gain (loss) on derivative contracts			391,147				(3,130,055	)
Settlement received on derivative contracts			1,196,656				3,251,890
Settlement of asset retirement obligation			(88,992	)			(509,802	)
Stock-based compensation expense			1,244,416				1,018,262
Deferred income tax expense			1,184,634				936,549
Changes in assets and liabilities:
Accounts receivable			171,726				1,185,938
Prepaid income taxes			(23,662	)			187,793
Other assets and liabilities			(17,828	)			126,347
Accounts payable, royalties payable and other accrued liabilities			(493,176	)			(122,203	)
Net cash provided by operating activities			16,830,279				18,188,299
Cash flows from investing activities:
Additions to unproved oil and gas properties			(4,507,280	)			(8,136,442	)
Additions to proved oil and gas properties			(31,695,651	)			(10,377,642	)
Additions to gathering system properties			(341,452	)			(82,302	)
Additions to land, buildings and property and equipment			(16,513	)			(49,689	)
Purchases of short term investments - held to maturity			—				(32,812,974	)
Purchases of short term investments - available for sale			(4,045,785	)			(11,988,982	)
Proceeds from short term investments - held to maturity			6,743,178				26,864,976
Proceeds from short term investments - available for sale			16,373,752				—
Proceeds from sale of oil and gas properties			—				12,498
Prepaid drilling costs			831,091				(1,813,808	)
Net cash used in investing activities			(16,658,660	)			(38,384,365	)
Cash flows from financing activities:
Buyback of common shares			(1,831,208	)			(6,055,601	)
Exercise of stock options			—				62,875
Dividends paid			(5,486,834	)			(5,600,655	)
Debt issuance costs			—				(140,000	)
Net cash used in financing activities			(7,318,042	)			(11,733,381	)
Effect of currency rates on cash, cash equivalents, and restricted cash			262,588				(3,872	)
Decrease in cash, cash equivalents, and restricted cash			(6,883,835	)			(31,933,319	)
Cash, cash equivalents, and restricted cash, beginning of period			13,873,628				45,806,947
Cash, cash equivalents, and restricted cash, end of period		$	6,989,793			$	13,873,628
Supplemental cash flow disclosures:
Income tax paid - federal		$	414,250			$	1,250,000
Income tax paid - state (PA)		$	—			$	182,000
Income tax (refund) paid - state (other)		$	(2,071	)		$	7,583
Interest paid		$	16,832			$	97,595
Non-cash investing activities:
Change in proved properties accrued in accounts payable and accrued liabilities		$	(862,744	)		$	1,611,724
Change in gathering system accrued in accounts payable and accrued liabilities		$	36,645			$	16,969
Asset retirement obligation asset additions and adjustments		$	54,902			$	1,190,579

		Year ended December 31,
		2024				2023
Net income		$	1,927,800			$	6,945,153
Add Back:
Interest income, net			(446,877	)			(1,592,862	)
Income tax expense			1,629,093				3,200,447
Depreciation, depletion, amortization, and accretion			10,185,119				7,685,084
Impairment expense			1,450,076				—
Stock based compensation expense			1,244,416				1,018,262
Loss on sale of assets			—				1,449,871
Loss on derivative contracts net of cash received or paid on settlement			1,587,803				121,835
Foreign currency translation loss			570				(278	)
Adjusted EBITDA		$	17,578,000			$	18,827,512

Epsilon defines Adjusted EBITDA as earnings before (1) net interest expense, (2) taxes, (3) depreciation, depletion, amortization and accretion expense, (4) impairments of natural gas and oil properties, (5) non-cash stock compensation expense, (6) gain or loss on derivative contracts net of cash received or paid on settlement, (7) gain or loss on derivative contracts net of cash received or paid on settlement, and (8) other income. Adjusted EBITDA is not a measure of financial performance as determined under U.S. GAAP and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with U.S. GAAP or as a measure of profitability or liquidity.

Additionally, Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Epsilon has included Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA provides useful information regarding its ability to service debt and to fund capital expenditures. It further provides investors a helpful measure for comparing operating performance on a "normalized" or recurring basis with the performance of other companies, without giving effect to certain non-cash expenses and other items. This provides management, investors and analysts with comparative information for evaluating the Company in relation to other natural gas and oil companies providing corresponding non-U.S. GAAP financial measures or that have different financing and capital structures or tax rates. These non-U.S. GAAP financial measures should be considered in addition to, but not as a substitute for, measures for financial performance prepared in accordance with U.S. GAAP.