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Operating Segments
12 Months Ended
Dec. 31, 2019
Operating Segments.  
Operating Segments

12. 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 profit or loss as shown in the table below. Interest expense, interest income 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 primarily natural gas 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 as at, and for the years ended December 31, 2019 and 2018 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Upstream

    

Gas Gathering

    

Corporate

    

Elimination

    

Consolidated

As at and for the year ended December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

$

16,945,302

 

$

 —

 

$

 —

 

$

 —

 

$

16,945,302

Natural gas liquids

 

 

110,394

 

 

 —

 

 

 —

 

 

 —

 

 

110,394

Oil and condensate

 

 

314,267

 

 

 —

 

 

 —

 

 

 —

 

 

314,267

Gathering and compression fees

 

 

 —

 

 

10,517,439

 

 

 —

 

 

(1,197,066)

 

 

9,320,373

Total operating revenue

 

$

17,369,963

(1)

$

10,517,439

 

$

 —

 

$

(1,197,066)

 

 

26,690,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings for the period

 

$

5,151,434

 

$

6,158,670

 

$

(2,612,105)

(3)

 

 —

 

$

8,697,999

Operating costs

 

 

6,571,394

 

 

2,534,475

 

 

 —

 

 

(1,197,066)

 

 

7,908,803

Development geological and geophysical expenses

 

 

83,748

 

 

 —

 

 

 —

 

 

 —

 

 

83,748

Depletion, deprec., amortization and accretion

 

 

5,563,387

 

 

1,824,294

 

 

 —

 

 

 —

 

 

7,387,681

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets

 

$

83,056,034

 

$

14,430,680

 

$

182,489

 

 

 —

 

$

97,669,203

Capital expenditures(2)

 

 

13,014,051

 

 

325,277

 

 

 —

 

 

 —

 

 

13,339,328

Proved properties

 

 

41,564,221

 

 

 —

 

 

 —

 

 

 —

 

 

41,564,221

Unproved properties

 

 

21,047,512

 

 

 —

 

 

 —

 

 

 —

 

 

21,047,512

Gathering system

 

 

 —

 

 

11,483,535

 

 

 —

 

 

 —

 

 

11,483,535

Other property and equipment

 

 

587,193

 

 

 —

 

 

 —

 

 

 —

 

 

587,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at and for the year ended December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

$

19,031,422

 

$

 —

 

$

 —

 

$

 —

 

$

19,031,422

Natural gas liquids

 

 

295,142

 

 

 —

 

 

 —

 

 

 —

 

 

295,142

Oil and condensate

 

 

376,079

 

 

 —

 

 

 —

 

 

 —

 

 

376,079

Gathering and compression fees

 

 

 —

 

 

11,087,507

 

 

 —

 

 

(1,105,945)

 

 

9,981,562

Total operating revenue

 

$

19,702,643

(1)

$

11,087,507

 

$

 —

 

$

(1,105,945)

 

 

29,684,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings for the period

 

$

7,742,587

 

$

6,814,188

 

$

(7,894,715)

(3)

$

 —

 

$

6,662,060

Operating costs

 

 

6,665,856

 

 

2,385,766

 

 

 —

 

 

(1,105,945)

 

 

7,945,677

Depletion, deprec., amortization and accretion

 

 

5,294,200

 

 

1,887,553

 

 

 —

 

 

 —

 

 

7,181,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets

 

$

71,350,546

 

$

15,440,047

 

$

1,107,116

 

$

 —

 

$

87,897,709

Capital expenditures(2)

 

 

2,472,919

 

 

197,321

 

 

 —

 

 

 —

 

 

2,670,240

Proved properties

 

 

35,044,173

 

 

 —

 

 

 —

 

 

 —

 

 

35,044,173

Unproved properties

 

 

19,498,666

 

 

 —

 

 

 —

 

 

 —

 

 

19,498,666

Gathering system

 

 

 —

 

 

12,903,274

 

 

 —

 

 

 —

 

 

12,903,274


(1)

Segment operating revenue represents revenues generated from the operations of the segment. Inter‑segment sales during the years ended December 31, 2019 and 2018 have been eliminated upon consolidation. For the year ended December 31, 2019, Epsilon sold natural gas to 29 unique customers. The two customers over 10% comprised 47% and 27% of total revenue. For the year ended December 31, 2018, Epsilon sold natural gas to 28 unique customers. The two customers over 10% comprised 46% and 21% of total revenue.

(2)

Capital expenditures for Upstream consist primarily of the drilling and completing of wells while Gas Gathering consists of expenditures relating to the installation of additional gathering facilities.

(3)

Segment reporting for net earnings for the period does not include non‑monetary compensation, general and administrative expense, interest income, interest expense or income tax amounts as they are managed on a group basis and are instead included in the corporate column for reconciliation purposes. Additionally, gains & (losses) from commodity hedging contracts are also included in the corporate column for reconciliation purposes.