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Revenue Recognition
 6 Months Ended
Jun. 30, 2021
Revenue Recognition  
Revenue Recognition

7. Revenue Recognition

Revenues are comprised primarily of sales of natural gas along with the revenue generated from the Company’s ownership interest in the gas gathering system in the Auburn field in Northeastern Pennsylvania. Also included is natural gas, crude oil and NGLs from Oklahoma.

Overall, product sales revenue generally is recorded in the month when contractual delivery obligations are satisfied, which occurs when control is transferred to the Company’s customers at delivery based on contractual terms and conditions. In addition, gathering and compression revenue generally is recorded in the month when contractual service obligations are satisfied, which occurs as control of those services is transferred to the Company’s customers.

The following table details revenue for the three and six months ended June 30, 2021 and 2020.

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Three months ended June 30, 

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Six Months Ended June 30, 

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2021

    

2020

    

2021

    

2020

Operating revenue

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​

​

​

​

​

​

​

​

​

​

​

Natural gas

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$

5,106,922

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$

3,876,340

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$

11,439,021

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$

7,896,104

Natural gas liquids

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​

52,529

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​

10,204

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​

98,150

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​

41,862

Oil and condensate

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​

79,303

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​

128,503

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​

140,738

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​

188,225

Gathering and compression fees

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​

1,851,095

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​

2,263,740

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​

3,853,252

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​

4,580,442

Total operating revenue

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$

7,089,849

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$

6,278,787

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$

15,531,161

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$

12,706,633

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Product Sales Revenue

The Company enters into contracts with third party purchasers to sell its natural gas, oil, NGLs and condensate production. Under these product sales arrangements, the sale of each unit of product represents a distinct performance obligation. Product sales revenue is recognized at the point in time that control of the product transfers to the purchaser based on contractual terms which reflect prevailing commodity market prices. To the extent that marketing costs are incurred by the Company prior to the transfer of control of the product, those costs are included in lease operating expenses on the Company’s consolidated statements of operations.

Settlement statements for product sales, and the related cash consideration, are received from the purchaser within 30 days. As a result, the Company must estimate the amount of production delivered to the customer and the consideration that will ultimately be received for sale of the natural gas, oil, NGLs, or condensate. Estimated revenue due to the Company is recorded within the receivables line item on the accompanying consolidated balance sheets until payment is received.

Gas Gathering and Compression Revenue

The Company also provides natural gas gathering and compression services through its ownership interest in the gas gathering system in the Auburn field. For the provision of gas gathering and compression services, the Company collects its share of the gathering and compression fees per unit of gas serviced and recognizes gathering revenue over time using an output method based on units of gas gathered.

The settlement statement from the operator of the Auburn Gas Gathering System is received two months after transmission and compression has occurred. As a result, the Company must estimate the amount of production that was transmitted and compressed within the system. Estimated revenue due to the Company is recorded within the receivables line item on the accompanying consolidated balance sheets until payment is received.

Allowance for Doubtful Accounts

The Company records an allowance for doubtful accounts on a case-by-case basis once there is evidence that collection is not probable. For the three and six months ended June 30, 2021, there were no accounts for which collection was not probable.

Due to the bankruptcy file by Chesapeake Energy Corporation on June 28, 2020, the Company recorded an allowance for possible uncollectable fees. Unpaid fees attributable to CHK for May and June 2020 gathering system fees were $1.1 million and $1.3 million respectively. For the three and six months ended June 30, 2020, Epsilon recorded an allowance for doubtful accounts for the Company’s 35% share of these payment for a total bad debt expense of $0.8 million.

In December 2020, a global resolution between Williams and CHK was approved by the United States Bankruptcy court and CHK agreed to pay all pre-petition and past due receivables related to midstream expenses, per the existing contracts. We received our share of the pre-petition amounts and as such, reversed our $0.8 million allowance for doubtful accounts in December 2020.

The following table details accounts receivable as of June 30, 2021 and December 31, 2020.

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June 30, 

    

December 31, 

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2021

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2020

Accounts receivable

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​

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Natural gas and oil sales

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$

2,067,528

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$

2,107,910

Joint interest billing

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​

87,714

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​

69,495

Gathering and compression fees

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​

1,372,708

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​

1,736,043

Other

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​

426

​

​

3,840

Total accounts receivable

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$

3,528,376

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$

3,917,288

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