Epsilon Energy Ltd

For the period ended Mar 31, 2024. Filed May 8, 2024.

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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Mar 31, 2024 · Filed May 8, 2024

EPSN$5.20+0.6%Stored close · as of Nov 9, 2026

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Contents

13. Operating Segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as executive management. Segment performance is evaluated based on operating income (loss) as shown in the table below. Interest income and expense, and income taxes are managed separately on a group basis.

The Company’s reportable segments are as follows:

a.	The Upstream segment activities include acquisition, development and production of oil, natural gas, and other liquid reserves on properties within the United States;

b.	The Gas Gathering segment partners with two other companies to operate a natural gas gathering system; and

c.	The Corporate segment activities include corporate listing and governance functions of the Company.

Segment activity for the three months ended March 31, 2024 and 2023 is as follows:


	Upstream		Gas Gathering		Corporate		Elimination		Consolidated
For the three months ended March 31, 2024
Operating revenue
Natural gas		$2,962,979		$—		$—		$—		$2,962,979
Natural gas liquids		372,984		—		—		—		372,984
Oil and condensate		2,715,082		—		—		—		2,715,082
Gathering and compression fees		—		2,250,096		—		(314,398)		1,935,698
Total operating revenue (1)		6,051,045		2,250,096		—		(314,398)		7,986,743

Operating costs
Operating costs		2,082,860		552,570		1,880,592		(314,398)		4,201,624
Depletion, depreciation, amortization and accretion		2,129,709		250,717		—		—		2,380,426
Operating income (loss)		1,838,476		1,446,809		(1,880,592)		—		1,404,693

Other income (expense)
Interest income		—		—		266,272		—		266,272
Interest expense		(8,760)		—		—		—		(8,760)
Loss on derivative contracts		(100,726)		—		—		—		(100,726)
Other income		37		—		(570)		—		(533)
Other income (expense), net		(109,449)		—		265,702		—		156,253
Net income (loss) before income tax expense		$1,729,027		$1,446,809		$(1,614,890)		$—		$1,560,946

Capital expenditures (2)		$23,268,856		$19,026		$—		$—		$23,287,882

For the three months ended March 31, 2023
Operating revenue
Natural gas		$6,256,178		$—		$—		$—		$6,256,178
Natural gas liquids		196,295		—		—		—		196,295
Oil and condensate		517,108		—		—		—		517,108
Gathering and compression fees		—		2,750,503		—		(363,808)		2,386,695
Total operating revenue (1)		6,969,581		2,750,503		—		(363,808)		9,356,276

Operating costs
Operating costs		1,768,087		651,371		2,203,491		(363,808)		4,259,141
Depletion, depreciation, amortization and accretion		1,493,755		279,251		—		—		1,773,006
Operating income (loss)		3,707,739		1,819,881		(2,203,491)		—		3,324,129

Other income (expense)
Interest income		—		—		490,762		—		490,762
Interest expense		(28,437)		—		—		—		(28,437)
Loss on derivative contracts		1,068,660		—		—		—		1,068,660
Other (expense) income		652		—		983		—		1,635
Other income (expense), net		1,040,875		—		491,745		—		1,532,620
Net income (loss) before income tax expense		$4,748,614		$1,819,881		$(1,711,746)		$—		$4,856,749

Capital expenditures (2)		$1,145,146		$21,624		$—		$—		$1,166,770

(1)

Segment operating revenue represents revenues generated from the operations of the segment. Inter-segment sales during the three months ended March 31, 2024 and 2023 have been eliminated upon consolidation. For the three months ended March 31, 2024, Epsilon sold natural gas to 23 unique customers. The two customers over 10% comprised 25% and 12% of total revenue. For the three months ended March 31, 2023, Epsilon sold natural gas to 27 unique customers. The three customers over 10% comprised 12%, 13%, and 11% of total revenue.

(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.

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