Epsilon Energy is an Alberta-incorporated, North American onshore producer that spent the past two quarters trading low-priced Appalachian natural gas for higher-priced Wyoming oil and liquids. The shift is now visible in the revenue mix before it is visible in the bottom line.
The second-quarter revenue print of $18.3 million, up 57 percent over the year-ago quarter, looks expansionary at first glance. The entire year-over-year delta sits in the Wyoming oil and liquids contribution from the Peak acquisition, not in growth in the existing Pennsylvania gas core. Adjusted EBITDA (earnings before net interest, taxes, depletion, depreciation, amortization, and accretion, the cash-earnings measure the company uses) actually fell to $5.8 million from $7.4 million a year earlier, even as revenue rose.
The forward question is whether the liquids mix that lifted the top line can carry the P and L through a period of natural decline in the Pennsylvania gas field. The company guides third-quarter oil production up 27 percent sequentially and full-year oil up 194 percent, a steep ramp that depends on integration and pricing both holding.