Epsilon Energy (EPSN) risk factors, FY2024 10-K

Risks Related to Oil and Natural Gas Reserves

1. 01Our business is dependent on oil and natural gas prices, and any fluctuations or decreases in such prices could adversely affect our results of operations and financial condition
2. 02Our long-term commercial success depends on our ability to find, acquire, develop and commercially produce oil and natural gas reserves, the failure of which could result in under-use of capital and in losses
3. 03Our reserve estimates may be inaccurate, and future net cash flows as well as our ability to replace any reserves are uncertain
4. 04may vary. Our actual production, revenues, taxes and development and operating expenditures with respect to our reserves will vary from estimates thereof and such variations could be material

Risks Related to Stage of Development, Structure and Capital Resources

1. 05Substantial capital, which may not be available to us in the future, is required to replace and grow reserves
2. 06The borrowing base under our credit facility may be reduced in light of commodity price declines, which could limit us in the future
3. 07The terms of our revolving credit facility may restrict our operations, particularly our ability to respond to changes or to take certain actions
4. 08In addition, the restrictive covenants in our revolving credit facility require us to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we may be unable to meet them
5. 09Depending on forces outside our control, we may need to allocate our available capital in ways that we did not anticipate
6. 10We may issue debt to acquire assets or for working capital
7. 11Competition in the natural gas and oil industry is intense, which may hinder our ability, and the ability of our third-party operating partners, to contract for drilling equipment, and we may not be able to control the scheduling and activities of contracted drilling equipment
8. 12Results of our drilling are uncertain, and we may not be able to generate high returns
9. 13Extensive government legislation and regulatory initiatives could increase costs and impose burdensome operating restrictions that may cause operational delays
10. 14Our corporate structure could result in incremental tax burden in certain circumstances
11. 15Our operations are currently geographically concentrated and therefore subject to regional economic, regulatory and capacity risks
12. 16Delays in business operations may reduce cash flows and subject us to credit risks
13. 17We depend on the successful acquisition, exploration and development of oil and natural gas properties to develop any future reserves and grow production and revenue in the future, and assessments of our assets may be subject to uncertainty
14. 18We depend on third-party operators and our key personnel, and competition for experienced technical personnel may negatively affect our operations
15. 19Our leasehold interests are subject to termination or expiration under certain conditions
16. 20We may incur losses as a result of title deficiencies
17. 21We may be exposed to third-party credit risk, and defaults by third parties could adversely affect us
18. 22We may not be insured against all of the operating risks to which we are exposed

Risks Related to Commodity Prices, Hedging and Marketing

1. 23Natural gas and oil prices fluctuate widely, and low prices for an extended period would likely have a material adverse effect on our business
2. 24From time to time, we may enter into agreements to receive fixed prices on our oil and natural gas production to offset the risk of revenue losses if commodity prices decline; however, if commodity prices increase beyond the levels set in such agreements, we will not benefit from such increases
3. 25Market conditions or operation impediments may hinder our access to natural gas and oil markets or delay our production
4. 26Investor sentiment towards climate change, fossil fuels, and sustainability could adversely affect our business and our share price
5. 27We are subject to complex laws and regulations, including environmental regulations that can have a material adverse effect on the cost, manner and feasibility of doing business
6. 28Environmental and health and safety risks may adversely affect our business

Risks Related to Cybersecurity

1. 29We may be subject to interruptions or failures in our information technology systems
2. 30We are subject to cybersecurity risks. A cyber incident could occur and result in information theft, data corruption, operational disruption and/or financial loss

Risks Related to Internal Controls

1. 31We are a “smaller reporting company” and as a result of the reduced disclosure requirement applicable to smaller reporting companies, our common shares may be less attractive to investors
2. 32As we grow, we may be subject to growth-related risks including capacity constraints and pressure on our internal systems and controls. Our ability to manage growth effectively will require us to continue to implement and improve our operational and financial systems and to train and manage our employee base

Risks Related to Gathering System

1. 33Because of the natural decline in production from existing wells, our success depends on the Anchor Shippers’ economically developing the remaining Marcellus Shale reserves
2. 34Because of the large supply of gas, and limited availability of transportation out of the Marcellus Shale area, our gas is subject to a price differential
3. 35We compete with other operators in our gas gathering energy businesses
4. 36Several of our assets that have been in service for many years may require significant expenditures to maintain them. As a result, our maintenance or repair costs may increase in the future
5. 37We are exposed to the credit risk of our customers and counterparties, and our credit risk management will not be able to completely eliminate such risk
6. 38Prices for natural gas in Northeast Pennsylvania are volatile and are subject to significant discounts from pricing at Henry Hub. This discount and volatility has and could continue to adversely affect our financial results, cash flows, access to capital and ability to maintain our existing businesses
7. 39The financial condition of our natural gas gathering businesses is dependent on the continued availability of natural gas supplies and demand for those supplies in the markets we serve
8. 40Our operations are subject to operational hazards and unforeseen interruptions