Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today reported first quarter 2025 financial and operating results.

First Quarter 2025 Highlights:

Epsilon - Q1 2025          
    Q1 2025 Q4 2024 Q1 2024 QoQ% YoY%
NRI Production            
Gas MMcf 2,740 1,765 1,666 55 % 64 %
Oil Mbbl 46 52 37 -12 % 24 %
NGL Mbbl 16 17 16 -6 % -2 %
Total Mmcfe 3,108 2,176 1,982 43 % 57 %
             
Revenues $M          
Gas   10,614 3,958 2,963 168 % 258 %
Oil   3,270 3,537 2,715 -8 % 20 %
NGL   387 385 373 1 % 4 %
Midstream1   1,892 1,060 1,936 79 % -2 %
Total   16,163 8,940 7,987 81 % 102 %
             
Realized Prices2            
Gas $/Mcf 3.87 2.24 1.78 73 % 118 %
Oil $/Bbl 71.76 68.38 74.13 5 % -3 %
NGL $/Bbl 24.52 22.98 23.16 7 % 6 %
             
Adj. EBITDA $M 10,609 5,335 4,595 99 % 131 %
             
Cash + STI3 $M 7,363 6,990 15,447 5 % -52 %
             
Capex4 $M 8,035 3,804 21,466 111 % -63 %
             
Dividend $M 1,376 1,370 1,370 0 % 0 %
             
Share Buybacks $M 0 0 1,199   -100 %
             
1) Net of elimination entry for fees paid by Epsilon
2) Excludes impact of hedge realizations
3) Includes restricted cash balance
4) Includes acquisitions

Operations Update:

Epsilon’s capital expenditures were $8.0 million for the quarter ended March 31, 2025. These were primarily related to the drilling and completion of 2 gross (0.5 net) Glauconitic wells in the Garrington area of Alberta, Canada (including $4.9 million in drilling carry in favor of the operator to earn a 25% working interest in the large leasehold position).

Jason Stabell, Epsilon's Chief Executive Officer, commented, “Our Marcellus business performed very well during the quarter with all delayed turn-in-line wells now on production and the lifting of the curtailments we sustained for most of last year. As a result, total gas volumes were up over 50% quarter over quarter. Realized gas prices also rebounded strongly, with Marcellus cash-flows (revenues less operating expenses) up over 200% quarter over quarter and up over 450% from the first quarter last year. This demonstrates the leverage we have in the basin to incremental development in a strong natural gas market. As mentioned previously, we have meaningful remaining undeveloped inventory there. However, we don’t expect any additional development this year.

In Texas, current plans call for 2 gross (0.5 net) new wells over the remainder of the year, in line with our development obligations on the leasehold. The Barnett wells are still economic at current oil prices, but any escalation in activity levels will require higher sustained prices.

Our first two wells in the Alberta JV we entered in October are now on production. Our operating partner is currently evaluating inflow performance and sizing artificial lift and facilities. The current plan is to drill 2 more wells there over the remainder of the year.

With our diversified assets, commodity mix and balance sheet, we remain in a strong position to take advantage of accretive opportunities.”

Current Hedge Book:

NG Hedge Book     Realized - Q125                
2025   Jan-25 Feb-25 Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25 Oct-25 Nov-25 Dec-25
NYMEX Henry Hub (LD)                        
Fixed Swaps MMBTUs (232,500 ) (210,000 ) (387,500 ) (255,000 ) (418,500 ) (255,000 ) (263,500 ) (263,500 ) (255,000 ) (263,500 ) (120,000 ) (120,000 )
Hedges per Day p/day (7,500 ) (7,500 ) (12,500 ) (8,500 ) (13,500 ) (8,500 ) (8,500 ) (8,500 ) (8,500 ) (8,500 ) (4,000 ) (4,000 )
WA Strike Price $ / MMBTU 3.47   3.47   3.68   3.21   3.12   3.21   3.21   3.21   3.21   3.21   4.66   4.66  
Tenn Z4 300L Basis                          
Basis Swaps MMBTUs (232,500 ) (210,000 ) (232,500 ) (255,000 ) (263,500 ) (255,000 ) (263,500 ) (263,500 ) (255,000 ) (263,500 )    
Hedges per Day p/day (7,500 ) (7,500 ) (7,500 ) (8,500 ) (8,500 ) (8,500 ) (8,500 ) (8,500 ) (8,500 ) (8,500 )    
WA Strike Price $ / MMBTU (0.74 ) (0.74 ) (0.74 ) (0.95 ) (0.95 ) (0.95 ) (0.95 ) (0.95 ) (0.95 ) (0.95 )    
                           
Hedged Net Price $ / MMBTU       2.17   2.26   2.26   2.26   2.26   2.26      
Settlements $M (76.73 ) (94.50 ) (159.50 ) (198.40 ) (28.62 )              
                           
NG Hedge Book                          
2026   Jan-26 Feb-26 Mar-26 Apr-26 May-26 Jun-26 Jul-26 Aug-26 Sep-26 Oct-26 Nov-26 Dec-26
NYMEX Henry Hub (LD)                        
Fixed Swaps MMBTUs (124,000 ) (112,000 ) (124,000 ) (120,000 ) (124,000 ) (120,000 ) (124,000 ) (124,000 ) (120,000 ) (124,000 )    
Hedges per Day p/day (4,000 ) (4,000 ) (4,000 ) (4,000 ) (4,000 ) (4,000 ) (4,000 ) (4,000 ) (4,000 ) (4,000 )    
WA Strike Price $ / MMBTU 4.66   4.66   4.66   4.09   4.09   4.09   4.09   4.09   4.09   4.09      
                           
Crude Hedge Book   Realized - Q125                  
2025   Jan-25 Feb-25 Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25 Oct-25 Nov-25 Dec-25
NYMEX WTI CMA                          
Fixed Swaps Bbls (4,682 ) (4,091 ) (4,389 ) (6,600 ) (6,600 ) (6,200 ) (6,200 ) (6,000 ) (5,600 ) (3,400 ) (3,200 ) (3,200 )
Hedges per Day BOPD (151 ) (146 ) (142 ) (220 ) (213 ) (207 ) (200 ) (194 ) (187 ) (110 ) (107 ) (103 )
WA Strike Price $/Bbl 74.34   74.34   74.34   71.73   71.76   71.79   71.07   71.06   71.05   70.20   70.20   70.20  
Settlements $M (3.55 ) 12.81   28.09   57.86                  

Earning’s Call:

The Company will host a conference call to discuss its results on Thursday, May 15, 2025 at 10:00 a.m. Central Time (11:00 a.m. Eastern Time).

Interested parties in the United States and Canada may participate toll-free by dialing (833) 816-1385. International parties may participate by dialing (412) 317-0478. Participants should ask to be joined to the “Epsilon Energy First Quarter 2025 Earnings Conference Call.”

A webcast can be viewed at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=Ehro2Pgc. A webcast replay will be available on the Company's website (www.epsilonenergyltd.com) following the call.

About Epsilon

Epsilon Energy Ltd. is a North American onshore natural gas and oil production and gathering company with assets in Pennsylvania, Texas, Alberta CA, New Mexico, and Oklahoma.

Forward-Looking Statements

Certain statements contained in this news release constitute forward looking statements. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, ‘may”, “will”, “project”, “should”, ‘believe”, and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated. Forward-looking statements are based on reasonable assumptions, but no assurance can be given that these expectations will prove to be correct and the forward-looking statements included in this news release should not be unduly relied upon.

Contact Information:

281-670-0002

Jason StabellChief Executive OfficerJason.Stabell@EpsilonEnergyLTD.com

Andrew Williamson Chief Financial Officer Andrew.Williamson@EpsilonEnergyLTD.com

 
EPSILON ENERGY LTD.Unaudited Consolidated Statements of Operations (All amounts stated in US$)
             
    Three months ended March 31,
    2025   2024
Revenues from contracts with customers:            
Gas, oil, NGL, and condensate revenue   $ 14,270,790     $ 6,051,045  
Gas gathering and compression revenue     1,892,350       1,935,698  
Total revenue     16,163,140       7,986,743  
             
Operating costs and expenses:            
Lease operating expenses     2,755,898       1,768,462  
Gathering system operating expenses     552,651       552,570  
Depletion, depreciation, amortization, and accretion     3,475,857       2,380,426  
Impairment expense     6,669       —  
General and administrative expenses:            
Stock based compensation expense     385,838       321,569  
Other general and administrative expenses     1,818,418       1,559,023  
Total operating costs and expenses     8,995,331       6,582,050  
Operating income     7,167,809       1,404,693  
             
Other income (expense):            
Interest income     15,299       266,272  
Interest expense     (12,211 )     (8,760 )
Loss on derivative contracts     (1,462,170 )     (100,726 )
Other expense     (22,499 )     (533 )
Other (expense) income, net     (1,481,581 )     156,253  
             
Net income before income tax expense     5,686,228       1,560,946  
Income tax expense     1,670,194       54,050  
NET INCOME   $ 4,016,034     $ 1,506,896  
Currency translation adjustments     (50,116 )     364  
Unrealized loss on securities     —       (4,609 )
NET COMPREHENSIVE INCOME   $ 3,965,918     $ 1,502,651  
             
Net income per share, basic   $ 0.18     $ 0.07  
Net income per share, diluted   $ 0.18     $ 0.07  
Weighted average number of shares outstanding, basic     22,008,766       21,994,207  
Weighted average number of shares outstanding, diluted     22,109,819       21,994,207  
             

EPSILON ENERGY LTD.Unaudited Consolidated Balance Sheets (All amounts stated in US$)
 
    March 31,   December 31,
    2025   2024
ASSETS            
Current assets            
Cash and cash equivalents   $ 6,892,735     $ 6,519,793  
Accounts receivable     8,003,517       5,843,722  
Prepaid income taxes     —       975,963  
Other current assets     647,295       792,041  
Total current assets     15,543,547       14,131,519  
Non-current assets            
Property and equipment:            
Oil and gas properties, successful efforts method            
Proved properties     194,811,616       191,879,210  
Unproved properties     33,425,087       28,364,186  
Accumulated depletion, depreciation, amortization and impairment     (126,370,072 )     (123,281,395 )
  Total oil and gas properties, net     101,866,631       96,962,001  
Gathering system     43,176,418       43,116,371  
Accumulated depletion, depreciation, amortization and impairment     (36,777,152 )     (36,449,511 )
  Total gathering system, net     6,399,266       6,666,860  
Land     637,764       637,764  
Buildings and other property and equipment, net     246,894       259,335  
Total property and equipment, net     109,150,555       104,525,960  
Other assets:            
Operating lease right-of-use assets, long term     318,604       344,589  
Restricted cash     470,000       470,000  
Prepaid drilling costs     22,581       982,717  
Total non-current assets     109,961,740       106,323,266  
Total assets   $ 125,505,287     $ 120,454,785  
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current liabilities            
Accounts payable trade   $ 2,013,172     $ 2,334,732  
Gathering fees payable     1,651,164       997,016  
Royalties payable     2,019,819       1,400,976  
Income taxes payable     924,905       —  
Accrued capital expenditures     309,630       572,079  
Accrued compensation     284,905       695,018  
Other accrued liabilities     481,770       371,503  
Fair value of derivatives     1,534,675       487,548  
Operating lease liabilities     121,293       121,135  
  Total current liabilities     9,341,333       6,980,007  
Non-current liabilities            
Asset retirement obligations     3,716,029       3,652,296  
Deferred income taxes     12,417,125       12,738,577  
Operating lease liabilities, long term     326,527       355,776  
  Total non-current liabilities     16,459,681       16,746,649  
Total liabilities     25,801,014       23,726,656  
Commitments and contingencies (Note 11)            
Shareholders' equity            
Preferred shares, no par value, unlimited shares authorized, none issued or outstanding     —       —  
Common shares, no par value, unlimited shares authorized and 22,008,766 shares issued and outstanding at March 31, 2025 and December 31, 2024     116,081,031       116,081,031  
Additional paid-in capital     12,504,745       12,118,907  
Accumulated deficit     (38,864,654 )     (41,505,076 )
Accumulated other comprehensive income     9,983,151       10,033,267  
  Total shareholders' equity     99,704,273       96,728,129  
Total liabilities and shareholders' equity   $ 125,505,287     $ 120,454,785  
             

EPSILON ENERGY LTD.Unaudited Consolidated Statements of Cash Flows (All amounts stated in US$)
             
    Three months ended March 31,
    2025   2024
Cash flows from operating activities:            
Net income   $ 4,016,034     $ 1,506,896  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depletion, depreciation, amortization, and accretion     3,475,857       2,380,426  
Impairment expense     6,669       —  
Accretion of discount on available for sale securities     —       (216,180 )
Loss on derivative contracts     1,462,170       100,726  
Settlement (paid) received on derivative contracts     (415,043 )     488,285  
Settlement of asset retirement obligation     (1,600 )     (1,653 )
Stock-based compensation expense     385,838       321,569  
Deferred income tax expense (benefit)     (321,452 )     (22,993 )
Changes in assets and liabilities:            
Accounts receivable     (2,159,795 )     953,714  
Prepaid income taxes     978,542       (68,401 )
Other assets and liabilities     141,640       146,477  
Accounts payable, royalties payable, gathering fees payable, and other accrued liabilities     91,390       (1,897,438 )
Income taxes payable     922,326       —  
Net cash provided by operating activities     8,582,576       3,691,428  
Cash flows from investing activities:            
Additions to unproved oil and gas properties     (5,060,901 )     (3,088,198 )
Additions to proved oil and gas properties     (2,578,866 )     (17,226,449 )
Additions to gathering system properties     (104,275 )     (22,650 )
Additions to land, buildings and property and equipment     —       (7,681 )
Purchases of short term investments - available for sale     —       (4,045,785 )
Proceeds from short term investments - held to maturity     —       10,794,285  
Prepaid drilling costs     960,136       1,813,808  
Net cash used in investing activities     (6,783,906 )     (11,782,670 )
Cash flows from financing activities:              
Buyback of common shares     —       (1,203,708 )
Dividends paid     (1,375,612 )     (1,370,409 )
Net cash used in financing activities     (1,375,612 )     (2,574,117 )
Effect of currency rates on cash, cash equivalents, and restricted cash     (50,116 )     364  
Decrease in cash, cash equivalents, and restricted cash     372,942       (10,664,995 )
Cash, cash equivalents, and restricted cash, beginning of period     6,989,793       13,873,628  
Cash, cash equivalents, and restricted cash, end of period   $ 7,362,735     $ 3,208,633  
             
Supplemental cash flow disclosures:            
Income tax paid - federal   $ 80,000     $ —  
Income tax paid - state (PA)   $ 5,138     $ —  
Income tax paid - state (other)   $ 25     $ —  
Interest paid   $ 657     $ —  
             
Non-cash investing activities:            
Change in proved properties accrued in accounts payable   $ 341,974     $ 2,946,528  
Change in gathering system accrued in accounts payable   $ (44,228 )   $ (3,624 )
Asset retirement obligation asset additions and adjustments   $ 18,235     $ 16,372  
    Three months ended March 31,
    2025   2024
Net income   $ 4,016,034     $ 1,506,896  
Add Back:            
Interest income, net     (3,088 )     (257,512 )
Income tax expense     1,670,194       54,050  
Depreciation, depletion, amortization, and accretion     3,475,857       2,380,426  
Impairment expense     6,669       —  
Stock based compensation expense     385,838       321,569  
Loss on derivative contracts net of cash received or paid on settlement     1,047,127       589,011  
Foreign currency translation loss     10,289       570  
Adjusted EBITDA   $ 10,608,920     $ 4,595,010  

Epsilon defines Adjusted EBITDA as earnings before (1) net interest expense, (2) taxes, (3) depreciation, depletion, amortization and accretion expense, (4) impairments of natural gas and oil properties, (5) non-cash stock compensation expense, (6) gain or loss on derivative contracts net of cash received or paid on settlement, and (7) other income. Adjusted EBITDA is not a measure of financial performance as determined under U.S. GAAP and should not be considered in isolation from or as a substitute for net income or cash flow measures prepared in accordance with U.S. GAAP or as a measure of profitability or liquidity.

Additionally, Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Epsilon has included Adjusted EBITDA as a supplemental disclosure because its management believes that EBITDA provides useful information regarding its ability to service debt and to fund capital expenditures. It further provides investors a helpful measure for comparing operating performance on a "normalized" or recurring basis with the performance of other companies, without giving effect to certain non-cash expenses and other items. This provides management, investors and analysts with comparative information for evaluating the Company in relation to other natural gas and oil companies providing corresponding non-U.S. GAAP financial measures or that have different financing and capital structures or tax rates. These non-U.S. GAAP financial measures should be considered in addition to, but not as a substitute for, measures for financial performance prepared in accordance with U.S. GAAP.

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