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Epsilon Announces Second Quarter 2025 Results and Transformative Acquisitions in the Powder River Basin
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Aug 13 2025
18 min read

Epsilon Announces Second Quarter 2025 Results and Transformative Acquisitions in the Powder River Basin

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HOUSTON, Aug. 13, 2025 (GLOBE NEWSWIRE) -- Epsilon Energy Ltd. (“Epsilon” or the “Company”) (NASDAQ: EPSN) today announced it has entered into definitive agreements to acquire two entities (Peak Exploration and Production LLC and Peak BLM Lease LLC, together “Peak”) majority owned by funds of Yorktown Energy Partners LLC.

Combined consideration due at closing is the issuance of 6 million Epsilon common shares and the assumption of an estimated $49 million of debt. Additional contingent consideration of up to 2.5 million Epsilon common shares could be due subject to the ability to access acreage currently affected by a drilling permit moratorium in Converse County, Wyoming.

The transactions are expected to close in Q4 2025, subject to obtaining the requisite Epsilon shareholder approval.

Transaction Highlights:

  • Attractively Priced

    • Assuming $6.21/shr (10-day VWAP from 8/11/25) for Epsilon stock, consideration equates to PDP PV15 + PUD PV25 on Peak’s third-party year-end 2024 reserves.

    • Assuming $6.21/shr (10-day VWAP from 8/11/25) for Epsilon stock, consideration equates to $1,100 per undeveloped acre (or $340,000 per priority location)

  • Accretive to forecasted 2025 Adjusted EBITDA, YE 2024 Reserves, and Inventory per share

    • Accretive to forecasted 2026 Adjusted EBITDA per share and CFPS

  • Adds Control of Operations with Experienced In-Basin Team

    • Provides a platform for future growth opportunities and the ability to execute

  • Expands Scope of Asset Base and Optionality for Growth

    • Adds under-invested core Powder River Basin (PRB) position with substantial depth of undeveloped inventory on a mostly held by production position

  • Maintains Strong Balance Sheet and Dividend Per Share

    • Pro-forma business is conservatively capitalized

    • Transaction allows consistent dividend payout and provides future dividend support

The acquired Peak assets include 40,500 net acres in the core of the PRB, with Q2 2025 production of 2.2 MBoepd (56% oil, 44% gas).

Acquired Proved Reserves are 21.5 MMBoe (per Peak’s third-party year-end 2024 reserves report) reflecting an approximately 150% increase to Proved Reserves to Epsilon (note consolidated third-party reserves report volumes are subject to change based on development plans and SEC pricing).

Epsilon estimates there are 111 net priority locations on the acquired PRB position, defined as those with at least 45% working interest, 10,000 ft. of completed lateral length (CLL), and type curve indicative half-cycle economics above 25% at $65 WTI / $4 HHUB commodity prices.

Pro-Forma Epsilon will have four primary project areas to deploy capital – NEPA core Marcellus, Permian Barnett in Texas, the WCSB in Alberta, and now core Power River Basin. The portfolio offers oil and gas directed development opportunities going forward. Pro-forma Q2 2025 production is 47 MMcfe (77% natural gas, 22% oil). Pro-forma YE 2024 Proved reserves are 213 Bcfe (59% natural gas, 39% oil).

Jason Stabell, Epsilon’s Chief Executive Officer, commented “This is a key step forward for the company. We are acquiring a large under exploited asset at an attractive price. The acquisition brings additional balance to our portfolio and importantly, provides both control of the investment cadence and increased optionality to deploy capital for our shareholders as conditions warrant. We are excited to add Yorktown as a large shareholder. I personally have long history with the firm going back over 20 years. We want to thank the Peak team, led by Jack Vaughn, for their help putting this together and we’re excited to work with them going forward.”

At closing, 2 Peak shareholder designees will join the Epsilon board of directors. Epsilon’s management team will lead the combined company.

Texas Capital Securities is serving as financial advisor, and Gray Reed is serving as legal advisor to Epsilon.

Interested parties can find more information on the transaction in a presentation posted to the Company’s website: www.epsilonenergyltd.com

Second Quarter 2025 Highlights:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Epsilon - Q2 2025

 

 

 

 

 

 

 

 

 

 

 

Q2 2025

Q1 2025

Q2 2024

QoQ%

YoY%

 

 

 

 

NRI Production

 

 

 

 

 

 

 

 

 

 

Gas

MMcf

2,752

2,740

1,407

0

%

96

%

 

 

 

 

Oil

Mbbl

44

46

45

-3

%

-1

%

 

 

 

 

NGL

Mbbl

8

16

19

-50

%

-59

%

 

 

 

 

Total

Mmcfe

3,064

3,108

1,791

-1

%

71

%

 

 

 

 

Daily

Mmcfe/d

33.7

34.5

19.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$M

 

 

 

 

 

 

 

 

 

Gas

 

6,910

10,614

1,961

-35

%

252

%

 

 

 

 

Oil

 

2,725

3,270

3,514

-17

%

-22

%

 

 

 

 

NGL

 

145

387

389

-63

%

-63

%

 

 

 

 

Midstream1

 

1,845

1,892

1,444

-3

%

28

%

 

 

 

 

Total

 

11,625

16,163

7,308

-28

%

59

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized Prices2

 

 

 

 

 

 

 

 

 

 

Gas

$/Mcf

2.51

3.87

1.39

-35

%

80

%

 

 

 

 

Oil

$/Bbl

61.72

71.75

78.44

-14

%

-21

%

 

 

 

 

NGL

$/Bbl

18.51

24.52

20.21

-25

%

-8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adj. EBITDA

$M

7,396

10,609

3,904

-30

%

89

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash + STI3

$M

10,378

7,363

9,481

41

%

9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capex4

$M

4,032

8,035

5,709

-50

%

-29

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend

$M

1,376

1,376

1,372

0

%

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share Buybacks

$M

0

0

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 $4 million for the quarter ended June 30, 2025. These were related to the drilling of 1 gross (0.25 net) well in Texas, and the completion of 1 gross (0.25 net) well in the Garrington area of Alberta. The well in Texas is the eighth Barnett well developed in the project and has been completed with flowback operations beginning this week. The Canada capital expenditure was a carry-over on the wells drilled and completed in the first quarter.

The Company is taking a $2.7 million impairment in the second quarter related to the recently drilled wells in the Garrington area of Alberta. The impairment is driven by a combination of drilling and completion cost overruns, early well performance below expectations, and due to first half realizations, the forward impairment test assumption using a lower oil price.

Jason Stabell, Epsilon’s Chief Executive Officer, commented, “These early learnings are not unusual in a project area of this size. We learned valuable lessons that will improve our drilling and completion approach, and we still feel the asset has great potential with approximately 30,000 gross acres in the Garrington area and another 130,000 gross acres in the Harmattan area. We continue to work with our operating partner on a prudent plan for further investments.”

Current Hedge Book:   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Date

Natural Gas

Crude Oil

 

Swaps

Basis Swaps

Costless Collars

Swaps

Costless Collars

 

Volume (MMcf)

Price ($/MMBtu)

Volume (MMcf)

Basis ($/MMBtu)

Volume (MMcf)

Bought Put ($/MMBtu)

Sold Call ($/MMBtu)

Volume (MBbl)

Price ($/Bbl)

Volume (MBbl)

Bought Put ($/Bbl)

Sold Call ($/Bbl)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q 2025

 

830

 

 

3.57

 

 

675

 

 

(0.74

)

 

-

 

 

-

 

 

-

 

 

13

 

 

74.34

 

 

-

 

 

-

 

 

-

 

 

2Q 2025

 

1,094

 

 

3.20

 

 

774

 

 

(0.95

)

 

-

 

 

-

 

 

-

 

 

19

 

 

71.76

 

 

-

 

 

-

 

 

-

 

 

3Q 2025

 

782

 

 

3.21

 

 

782

 

 

(0.95

)

 

-

 

 

-

 

 

-

 

 

18

 

 

71.06

 

 

-

 

 

-

 

 

-

 

 

4Q 2025

 

508

 

 

3.91

 

 

264

 

 

(0.95

)

 

122

 

 

4.00

 

 

6.17

 

 

22

 

 

67.66

 

 

-

 

 

-

 

 

-

 

 

FY 2025

 

3,213

 

$

3.41

 

 

2,494

 

($

0.89

)

 

122

 

$

4.00

 

$

6.17

 

 

72

 

$

70.82

 

 

-

 

 

-

 

 

-

 

 

1Q 2026

 

360

 

 

4.66

 

 

-

 

 

-

 

 

180

 

 

4.00

 

 

6.17

 

 

6

 

 

66.00

 

 

-

 

 

-

 

 

-

 

 

2Q 2026

 

546

 

 

4.13

 

 

-

 

 

-

 

 

137

 

 

3.50

 

 

5.40

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

3Q 2026

 

552

 

 

4.13

 

 

-

 

 

-

 

 

138

 

 

3.50

 

 

5.40

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

4Q 2026

 

186

 

 

4.13

 

 

-

 

 

-

 

 

169

 

 

3.86

 

 

5.96

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

FY 2026

 

1,644

 

$

4.25

 

 

-

 

 

-

 

 

623

 

$

3.74

 

$

5.77

 

 

6

 

$

66.00

 

 

-

 

 

-

 

 

-

 

 

1Q 2027

 

-

 

 

-

 

 

-

 

 

-

 

 

180

 

 

4.00

 

 

6.18

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

2Q 2027

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

3Q 2027

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

4Q 2027

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

FY 2027

 

-

 

 

-

 

 

-

 

 

-

 

 

180

 

$

4.00

 

$

6.18

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

Earning’s Call:

The Company will host a conference call to discuss its results on Thursday, August 14, 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 Second Quarter 2025 Earnings Conference Call.”

A webcast can be viewed at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=cduY0BIa. 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.

Important Additional Information Regarding the Transactions Will Be Filed With the SEC

In connection with the proposed transactions, the Company will file a proxy statement with the SEC. The definitive proxy statement will be sent to the stockholders of the Company. The Company may also file other documents with the SEC regarding the proposed transactions. INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE ADVISED TO CAREFULLY READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTIONS, THE PARTIES TO THE TRANSACTIONS AND THE RISKS ASSOCIATED WITH THE TRANSACTIONS. Investors and security holders may obtain a free copy of the proxy statement (when available) and other relevant documents filed by the Company with the SEC from the SEC’s website at www.sec.gov. Security holders and other interested parties will also be able to obtain, without charge, a copy of the proxy statement and other relevant documents (when available) by (1) directing your written request to: 500 Dallas Street, Suite 1250, Houston, Texas or (2) contacting our Investor Relations department by telephone at 281-670-0002. Copies of the documents filed by the Company with the SEC will be available free of charge on the Company’s website at http://www.epsilonenergyltd.com.

Participants in the Solicitation

The Company and certain of its directors, executive officers and employees may be considered participants in the solicitation of proxies in connection with the proposed transaction.  Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the stockholders of the Company in connection with the transactions, including a description of their respective direct or indirect interests, by security holdings or otherwise, will be included in the proxy statement described above when it is filed with the SEC. Additional information regarding the Company’s directors and executive officers is also included in its 2025 Proxy Statement, which was filed with the SEC on April 22, 2025. These documents are available free of charge as described above.

Contact Information:

281-670-0002

Jason Stabell
Chief Executive Officer
Jason.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 June 30,

 

Six months ended June 30,

 

 

2025

 

 

2024

 

 

2025

 

 

2024

 

Revenues from contracts with customers:

 

 

 

 

 

 

 

 

 

 

 

 

Gas, oil, NGL, and condensate revenue

 

$

9,779,728

 

 

$

5,863,370

 

 

$

24,050,518

 

 

$

11,914,415

 

Gas gathering and compression revenue

 

 

1,845,005

 

 

 

1,444,448

 

 

 

3,737,355

 

 

 

3,380,146

 

Total revenue

 

 

11,624,733

 

 

 

7,307,818

 

 

 

27,787,873

 

 

 

15,294,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

 

2,462,785

 

 

 

1,649,867

 

 

 

5,218,683

 

 

 

3,418,329

 

Gathering system operating expenses

 

 

613,795

 

 

 

649,967

 

 

 

1,166,446

 

 

 

1,202,537

 

Depletion, depreciation, amortization, and accretion

 

 

3,201,654

 

 

 

2,048,403

 

 

 

6,677,511

 

 

 

4,428,829

 

Impairment expense

 

 

2,670,000

 

 

 

 

 

 

2,676,669

 

 

 

 

General and administrative expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation expense

 

 

385,838

 

 

 

313,589

 

 

 

771,676

 

 

 

635,158

 

Other general and administrative expenses

 

 

1,461,878

 

 

 

1,478,215

 

 

 

3,280,296

 

 

 

3,037,238

 

Total operating costs and expenses

 

 

10,795,950

 

 

 

6,140,041

 

 

 

19,791,281

 

 

 

12,722,091

 

Operating income

 

 

828,783

 

 

 

1,167,777

 

 

 

7,996,592

 

 

 

2,572,470

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

17,247

 

 

 

108,943

 

 

 

32,546

 

 

 

375,215

 

Interest expense

 

 

(19,906

)

 

 

(8,759

)

 

 

(32,117

)

 

 

(17,519

)

Gain (loss) on derivative contracts

 

 

2,573,863

 

 

 

(94,891

)

 

 

1,111,693

 

 

 

(195,617

)

Other (expense) income

 

 

(10,839

)

 

 

101,606

 

 

 

(33,338

)

 

 

101,073

 

Other income, net

 

 

2,560,365

 

 

 

106,899

 

 

 

1,078,784

 

 

 

263,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income before income tax expense

 

 

3,389,148

 

 

 

1,274,676

 

 

 

9,075,376

 

 

 

2,835,622

 

Income tax expense

 

 

1,837,687

 

 

 

459,016

 

 

 

3,507,881

 

 

 

513,066

 

NET INCOME

 

$

1,551,461

 

 

$

815,660

 

 

$

5,567,495

 

 

$

2,322,556

 

Currency translation adjustments

 

 

(75,496

)

 

 

22,229

 

 

 

(125,612

)

 

 

22,593

 

Unrealized gain (loss) on securities

 

 

 

 

 

3,011

 

 

 

 

 

 

(1,598

)

NET COMPREHENSIVE INCOME

 

$

1,475,965

 

 

$

840,900

 

 

$

5,441,883

 

 

$

2,343,551

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share, basic

 

$

0.07

 

 

$

0.04

 

 

$

0.25

 

 

$

0.11

 

Net income per share, diluted

 

$

0.07

 

 

$

0.04

 

 

$

0.25

 

 

$

0.11

 

Weighted average number of shares outstanding, basic

 

22,017,310

 

 

 

21,921,752

 

 

 

22,013,062

 

 

 

21,957,980

 

Weighted average number of shares outstanding, diluted

 

22,202,315

 

 

 

22,029,475

 

 

 

22,155,629

 

 

 

21,987,142

 

 

 

 

 

 

 

 

 

 

 

 

 

 

        

EPSILON ENERGY LTD.
Unaudited Consolidated Balance Sheets
 (All amounts stated in US$)

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

 

 

 

 

2025

 

 

2024

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,907,653

 

 

$

6,519,793

 

 

 

 

 

Accounts receivable

 

 

5,496,883

 

 

 

5,843,722

 

 

 

 

 

Fair value of derivatives

 

 

732,528

 

 

 

 

 

 

 

 

Prepaid income taxes

 

 

 

 

 

975,963

 

 

 

 

 

Other current assets

 

 

396,264

 

 

 

792,041

 

 

 

 

 

Total current assets

 

 

16,533,328

 

 

 

14,131,519

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

 

 

 

Oil and gas properties, successful efforts method

 

 

 

 

 

 

 

 

 

 

Proved properties

 

 

197,197,902

 

 

 

191,879,210

 

 

 

 

 

Unproved properties

 

 

33,496,835

 

 

 

28,364,186

 

 

 

 

 

Accumulated depletion, depreciation, amortization and impairment

 

(131,899,045

)

 

 

(123,281,395

)

 

 

 

 

Total oil and gas properties, net

 

 

98,795,692

 

 

 

96,962,001

 

 

 

 

 

Gathering system

 

 

43,416,065

 

 

 

43,116,371

 

 

 

 

 

Accumulated depletion, depreciation, amortization and impairment

 

(37,057,605

)

 

 

(36,449,511

)

 

 

 

 

Total gathering system, net

 

 

6,358,460

 

 

 

6,666,860

 

 

 

 

 

Land

 

 

637,764

 

 

 

637,764

 

 

 

 

 

Buildings and other property and equipment, net

 

 

245,555

 

 

 

259,335

 

 

 

 

 

Total property and equipment, net

 

 

106,037,471

 

 

 

104,525,960

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets, long term

 

 

295,317

 

 

 

344,589

 

 

 

 

 

Restricted cash

 

 

470,000

 

 

 

470,000

 

 

 

 

 

Prepaid drilling costs

 

 

277,552

 

 

 

982,717

 

 

 

 

 

Total non-current assets

 

 

107,080,340

 

 

 

106,323,266

 

 

 

 

 

Total assets

 

$

123,613,668

 

 

$

120,454,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

Accounts payable trade

 

$

2,018,533

 

 

$

2,334,732

 

 

 

 

 

Gathering fees payable

 

 

1,139,057

 

 

 

997,016

 

 

 

 

 

Royalties payable

 

 

1,553,262

 

 

 

1,400,976

 

 

 

 

 

Income taxes payable

 

 

1,596,958

 

 

 

 

 

 

 

 

Accrued capital expenditures

 

 

225,923

 

 

 

572,079

 

 

 

 

 

Accrued compensation

 

 

465,055

 

 

 

695,018

 

 

 

 

 

Other accrued liabilities

 

 

283,540

 

 

 

371,503

 

 

 

 

 

Fair value of derivatives

 

 

 

 

 

487,548

 

 

 

 

 

Operating lease liabilities

 

 

121,057

 

 

 

121,135

 

 

 

 

 

Total current liabilities

 

 

7,403,385

 

 

 

6,980,007

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

Asset retirement obligations

 

 

3,764,816

 

 

 

3,652,296

 

 

 

 

 

Deferred income taxes

 

 

11,958,901

 

 

 

12,738,577

 

 

 

 

 

Operating lease liabilities, long term

 

 

296,250

 

 

 

355,776

 

 

 

 

 

Total non-current liabilities

 

 

16,019,967

 

 

 

16,746,649

 

 

 

 

 

Total liabilities

 

 

23,423,352

 

 

 

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 22,017,405 shares issued and outstanding at June 30, 2025 and 22,008,766 issued and outstanding at December 31, 2024

 

 

116,081,031

 

 

 

116,081,031

 

 

 

 

 

Additional paid-in capital

 

 

12,890,583

 

 

 

12,118,907

 

 

 

 

 

Accumulated deficit

 

 

(38,688,953

)

 

 

(41,505,076

)

 

 

 

 

Accumulated other comprehensive income

 

 

9,907,655

 

 

 

10,033,267

 

 

 

 

 

Total shareholders' equity

 

 

100,190,316

 

 

 

96,728,129

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

123,613,668

 

 

$

120,454,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


EPSILON ENERGY LTD.
Unaudited Consolidated Statements of Cash Flows
 (All amounts stated in US$)

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30,

 

 

 

 

 

2025

 

 

2024

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income

 

$

5,567,495

 

 

$

2,322,556

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Depletion, depreciation, amortization, and accretion

 

 

6,677,511

 

 

 

4,428,829

 

 

 

 

Impairment expense

 

 

2,676,669

 

 

 

 

 

 

 

Accretion of discount on available for sale securities

 

 

 

 

 

(297,637

)

 

 

 

(Gain) loss on derivative contracts

 

 

(1,111,693

)

 

 

195,617

 

 

 

 

Settlement (paid) received on derivative contracts

 

 

(108,383

)

 

 

760,542

 

 

 

 

Settlement of asset retirement obligation

 

 

(1,600

)

 

 

(87,284

)

 

 

 

Stock-based compensation expense

 

 

771,676

 

 

 

635,158

 

 

 

 

Deferred income tax benefit

 

 

(779,676

)

 

 

(54,736

)

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

346,839

 

 

 

1,070,784

 

 

 

 

Prepaid income taxes

 

 

 

 

 

319,770

 

 

 

 

Other assets and liabilities

 

 

385,445

 

 

 

354,014

 

 

 

 

Accounts payable, royalties payable, gathering fees payable, and other accrued liabilities

 

 

(66,454

)

 

 

(572,099

)

 

 

 

Income taxes payable

 

 

2,572,921

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

16,930,750

 

 

 

9,075,514

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Additions to unproved oil and gas properties

 

 

(5,132,649

)

 

 

(2,993,155

)

 

 

 

Additions to proved oil and gas properties

 

 

(5,997,993

)

 

 

(26,425,017

)

 

 

 

Additions to gathering system properties

 

 

(228,327

)

 

 

(70,236

)

 

 

 

Additions to land, buildings and property and equipment

 

 

(12,102

)

 

 

(13,912

)

 

 

 

Purchases of short term investments - available for sale

 

 

 

 

 

(4,045,785

)

 

 

 

Proceeds from short term investments - held to maturity

 

 

 

 

 

23,116,930

 

 

 

 

Prepaid drilling costs

 

 

705,165

 

 

 

886,981

 

 

 

 

Net cash used in investing activities

 

 

(10,665,906

)

 

 

(9,544,194

)

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Buyback of common shares

 

 

 

 

 

(1,203,708

)

 

 

 

Dividends paid

 

 

(2,751,372

)

 

 

(2,742,349

)

 

 

 

Net cash used in financing activities

 

 

(2,751,372

)

 

 

(3,946,057

)

 

 

 

Effect of currency rates on cash, cash equivalents, and restricted cash

 

 

(125,612

)

 

 

22,593

 

 

 

 

Decrease in cash, cash equivalents, and restricted cash

 

 

3,387,860

 

 

 

(4,392,144

)

 

 

 

Cash, cash equivalents, and restricted cash, beginning of period

 

 

6,989,793

 

 

 

13,873,628

 

 

 

 

Cash, cash equivalents, and restricted cash, end of period

 

$

10,377,653

 

 

$

9,481,484

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

 

Income tax paid - federal

 

$

1,325,000

 

 

$

140,000

 

 

 

 

Income tax paid - state (PA)

 

$

355,138

 

 

$

 

 

 

 

Income tax paid (refund) - state (other)

 

$

1,710

 

 

$

(8,608

)

 

 

 

Interest paid

 

$

9,552

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash investing activities:

 

 

 

 

 

 

 

 

 

Change in proved properties accrued in accounts payable

 

$

(690,866

)

 

$

(1,471,985

)

 

 

 

Change in gathering system accrued in accounts payable

 

$

71,366

 

 

$

45,862

 

 

 

 

Asset retirement obligation asset additions and adjustments

 

$

18,235

 

 

$

21,831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

 

 

 

2025

 

 

2024

 

  

2025

 

 

2024

 

 

 

 

 

Net income

 

$

1,551,461

 

 

$

815,660

 

 

$

5,567,495

 

 

$

2,322,556

 

 

 

 

 

Add Back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense (income), net

 

 

2,659

 

 

 

(100,184

)

 

 

(429

)

 

 

(357,696

)

 

 

 

 

Income tax expense

 

 

1,837,687

 

 

 

459,016

 

 

 

3,507,881

 

 

 

513,066

 

 

 

 

 

Depreciation, depletion, amortization, and accretion

 

 

3,201,654

 

 

 

2,048,403

 

 

 

6,677,511

 

 

 

4,428,829

 

 

 

 

 

Impairment expense

 

 

2,670,000

 

 

 

 

 

 

2,676,669

 

 

 

 

 

 

 

 

Stock based compensation expense

 

 

385,838

 

 

 

313,589

 

 

 

771,676

 

 

 

635,158

 

 

 

 

 

(Gain) loss on derivative contracts net of cash received or paid on settlement

 

 

(2,267,203

)

 

 

367,148

 

 

 

(1,220,076

)

 

 

956,159

 

 

 

 

 

Foreign currency translation loss

 

 

14,021

 

 

 

 

 

 

24,310

 

 

 

570

 

 

 

 

 

Adjusted EBITDA

 

$

7,396,117

 

 

$

3,903,632

 

 

$

18,005,037

 

 

$

8,498,642

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 with 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.