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

1. Epsilon Energy acquires Peak entities for 6 million shares and $49 million debt. 2. Acquisition adds 40,500 acres and substantial proved reserves to Epsilon's portfolio. 3. CEO expresses confidence in growth potential and controls enhancement through the acquisition. 4. Transaction expected to close in Q4 2025 pending shareholder approval. 5. Pro-forma structure will support dividends while enhancing operational scope.

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FAQ

Why Bullish?

The acquisition significantly increases Epsilon's reserves and production capacity, similar to companies like Cadence Resources after strategic acquisitions in competitive markets which led to share price appreciation.

How important is it?

The acquisition is a significant strategic move, likely to enhance EPSN's market position and financials, thus influencing investor sentiment and stock performance positively.

Why Long Term?

The long-term growth potential stems from increased reserves and production, akin to companies like Devon Energy that saw sustained growth from M&A activities.

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DVNKOSSWN
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 capitalizedTransaction 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 / $4 HHUB commodity prices. Pro-Forma Epsilon will have four primary project areas to deploy capital – NEPA core Marcellus, Permian Barnett in Texas, the WCSB in Alberta, and now core Power River Basin. The portfolio offers oil and gas directed development opportunities going forward. Pro-forma Q2 2025 production is 47 MMcfe (77% natural gas, 22% oil). Pro-forma YE 2024 Proved reserves are 213 Bcfe (59% natural gas, 39% oil). Jason Stabell, Epsilon’s Chief Executive Officer, commented “This is a key step forward for the company. We are acquiring a large under exploited asset at an attractive price. The acquisition brings additional balance to our portfolio and importantly, provides both control of the investment cadence and increased optionality to deploy capital for our shareholders as conditions warrant. We are excited to add Yorktown as a large shareholder. I personally have long history with the firm going back over 20 years. We want to thank the Peak team, led by Jack Vaughn, for their help putting this together and we’re excited to work with them going forward.” At closing, 2 Peak shareholder designees will join the Epsilon board of directors. Epsilon’s management team will lead the combined company. Texas Capital Securities is serving as financial advisor, and Gray Reed is serving as legal advisor to Epsilon. Interested parties can find more information on the transaction in a presentation posted to the Company’s website: www.epsilonenergyltd.com Second Quarter 2025 Highlights:                    Epsilon - Q2 2025           Q2 2025Q1 2025Q2 2024QoQ%YoY%    NRI Production          GasMMcf2,7522,7401,4070%96%    OilMbbl444645-3%-1%    NGLMbbl81619-50%-59%    TotalMmcfe3,0643,1081,791-1%71%    DailyMmcfe/d33.734.519.7                 Revenues$M         Gas 6,91010,6141,961-35%252%    Oil 2,7253,2703,514-17%-22%    NGL 145387389-63%-63%    Midstream1 1,8451,8921,444-3%28%    Total 11,62516,1637,308-28%59%               Realized Prices2          Gas$/Mcf2.513.871.39-35%80%    Oil$/Bbl61.7271.7578.44-14%-21%    NGL$/Bbl18.5124.5220.21-25%-8%               Adj. EBITDA$M7,39610,6093,904-30%89%               Cash + STI3$M10,3787,3639,48141%9%               Capex4$M4,0328,0355,709-50%-29%               Dividend$M1,3761,3761,3720%0%               Share Buybacks$M000                 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 $2.7 million impairment in the second quarter related to the recently drilled wells in the Garrington area of Alberta. The impairment is driven by a combination of drilling and completion cost overruns, early well performance below expectations, and due to first half realizations, the forward impairment test assumption using a lower oil price. Jason Stabell, Epsilon’s Chief Executive Officer, commented, “These early learnings are not unusual in a project area of this size. We learned valuable lessons that will improve our drilling and completion approach, and we still feel the asset has great potential with approximately 30,000 gross acres in the Garrington area and another 130,000 gross acres in the Harmattan area. We continue to work with our operating partner on a prudent plan for further investments.”   Current Hedge Book:                           DateNatural GasCrude Oil SwapsBasis SwapsCostless CollarsSwapsCostless Collars Volume (MMcf)Price ($/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 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 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.

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