Epsilon Energy Boosts Reserves, Production with $88.5M Peak Acquisition

TL;DR

**EPSN's $88.5 million Peak acquisition and surging gas prices make it a strong buy for growth-oriented energy investors.**

AI Summary

Epsilon Energy Ltd. (EPSN) reported a significant operational expansion and improved financial performance for the fiscal year ended December 31, 2025. The company's total estimated net proved reserves increased to 86.4 Bcf of natural gas, 9.3 MMBbls of oil, and 2.4 MMBbls of NGL reserves. A key strategic move was the acquisition of Peak Exploration & Production LLC and Peak BLM Lease LLC on November 14, 2025, for $88.5 million, comprising $27.6 million in common shares, $10.6 million in contingent common shares, and the settlement of $50.3 million in debt. This acquisition added operated and non-operated production and leasehold interests in the Powder River Basin, Wyoming, and 17 full-time employees. In the Appalachian Basin, Pennsylvania, Epsilon's realized natural gas price surged by 66% to $2.98 per Mcf in 2025 from $1.80 per Mcf in 2024, excluding hedges. Total natural gas sales in this basin increased by 65% to 9.4 Bcf in 2025 from 5.7 Bcf in 2024, driven by new wells and the return of curtailed wells. The company also brought 7 gross wells online in the Appalachian Basin during 2025.

Why It Matters

Epsilon Energy's strategic acquisition of Peak Exploration & Production for $88.5 million significantly expands its footprint in the Powder River Basin, a key oil and gas region, and diversifies its asset base beyond the Appalachian Basin. This move could enhance EPSN's competitive position against larger players by increasing its proved reserves and production capacity, potentially leading to higher revenue and cash flow for investors. The 66% increase in realized natural gas prices and 65% jump in natural gas sales in Pennsylvania demonstrate strong operational execution and favorable market conditions, which directly benefit shareholders and could support future growth initiatives. For employees, the addition of 17 full-time staff from Peak indicates growth and potential for new opportunities within the company, while customers could see more stable supply from a diversified producer.

Risk Assessment

Risk Level: medium — The company's reliance on commodity prices, as evidenced by the 66% increase in realized natural gas price to $2.98 per Mcf in 2025, exposes it to significant market volatility. While the Peak acquisition for $88.5 million expands its asset base, integrating new operations and managing the associated debt settlement of $50.3 million presents execution risks. Furthermore, the company's forward-looking statements explicitly mention known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially, including those related to oil and natural gas production rates and commodity prices.

Analyst Insight

Investors should consider EPSN's strategic expansion into the Powder River Basin via the $88.5 million Peak acquisition as a positive long-term growth driver. Monitor the integration of Peak's assets and the company's ability to sustain the strong natural gas price realization of $2.98 per Mcf and production growth of 65% in the Appalachian Basin. This filing suggests a company actively pursuing growth and benefiting from favorable market conditions.

Financial Highlights

revenue

$28.0 million

total Debt

$50.3 million

revenue Growth

+65%

Revenue Breakdown

Key Numbers

• $88.5 million — Total consideration for Peak acquisition (Comprised of shares and debt settlement, significantly expanding EPSN's asset base.)
• 5,681,489 — Common shares issued for Peak acquisition (Valued at $27.6 million, part of the acquisition consideration.)
• $50.3 million — Debt settled in Peak acquisition (Part of the total consideration for the acquisition.)
• 86.4 Bcf — Net proved natural gas reserves (As of December 31, 2025, indicating significant resource base.)
• 9.3 MMBbls — Net proved oil reserves (As of December 31, 2025, diversifying energy portfolio.)
• 2.4 MMBbls — Net proved NGL reserves (As of December 31, 2025, contributing to liquid hydrocarbon assets.)
• $2.98 per Mcf — Realized natural gas price in 2025 (A 66% increase from $1.80 per Mcf in 2024, boosting revenue.)
• 9.4 Bcf — Total natural gas sales in 2025 (A 65% increase from 5.7 Bcf in 2024, driven by new wells and returning production.)
• 101,265 gross (54,044 net) acres — Leasehold rights held (Indicating significant operational footprint across multiple basins.)
• 17 — Full-time employees added (From the Peak acquisition, expanding the company's workforce.)

Key Players & Entities

• Epsilon Energy Ltd. (company) — registrant and acquirer
• Peak Exploration & Production LLC (company) — acquired entity
• Peak BLM Lease LLC (company) — acquired entity
• Williams Partners, LP (company) — operator of Auburn GGS
• NASDAQ Global Market (regulator) — exchange where EPSN trades
• United States Securities and Exchange Commission (regulator) — regulatory body for filing
• Alberta, Canada (regulator) — jurisdiction of incorporation
• Susquehanna County, Pennsylvania (regulator) — location of Auburn GGS
• Powder River Basin (regulator) — location of acquired assets
• Appalachian Basin (regulator) — location of natural gas production

FAQ

Risk Factors

• Commodity Price Volatility [high — market]: Epsilon's financial performance is highly sensitive to fluctuations in natural gas and oil prices. The realized natural gas price in the Appalachian Basin surged 66% to $2.98 per Mcf in 2025, but this volatility poses a significant risk to revenue and profitability.
• Production and Reserve Risk [medium — operational]: The company's reserve base of 86.4 Bcf of natural gas and 9.3 MMBbls of oil is subject to depletion and the success of future development. The acquisition of Peak added production and leasehold interests, but integrating and operating these new assets carries inherent operational risks.
• Acquisition Integration and Debt [medium — financial]: The $88.5 million acquisition of Peak involved significant share issuance and debt settlement ($50.3 million). Successful integration of Peak's assets and employees, along with managing the associated debt and contingent consideration, is crucial for financial stability.
• Environmental and Regulatory Compliance [medium — regulatory]: As an energy producer, Epsilon is subject to extensive environmental regulations. Changes in regulations related to drilling, production, and emissions could increase compliance costs and impact operations in basins like the Powder River and Appalachian.

Industry Context

Epsilon Energy operates in the competitive North American on-shore natural gas and oil sector. The industry is characterized by significant capital requirements for exploration and development, sensitivity to commodity price cycles, and increasing regulatory scrutiny. Recent trends include consolidation through acquisitions, like Epsilon's purchase of Peak, and a focus on optimizing production from existing basins such as the Appalachian and Powder River.

Regulatory Implications

Epsilon faces ongoing regulatory risks related to environmental protection, emissions standards, and drilling permits across its operating regions. Compliance with evolving regulations in states like Pennsylvania and Wyoming is critical to maintaining operational continuity and avoiding potential fines or production curtailments.

What Investors Should Do

1. Monitor integration of Peak acquisition
2. Track commodity price trends
3. Analyze reserve replacement and development plans
4. Assess debt levels and repayment capacity

Key Dates

• 2025-11-14: Acquisition of Peak Exploration & Production LLC and Peak BLM Lease LLC — Significantly expanded Epsilon's asset base in the Powder River Basin, adding production and leasehold interests.
• 2025-11-19: Settlement of contingent consideration for Peak acquisition — Finalized the acquisition terms, issuing additional shares valued at $10.6 million.
• 2025-12-31: Year-end reserve reporting — Reported 86.4 Bcf of natural gas, 9.3 MMBbls of oil, and 2.4 MMBbls of NGL reserves, indicating substantial resource potential.

Glossary

Bcf

Billion cubic feet, a standard unit for measuring natural gas volume. (Used to quantify Epsilon's natural gas reserves and production.)

MMBbls

Million barrels, a standard unit for measuring oil and natural gas liquids volume. (Used to quantify Epsilon's oil and NGL reserves.)

NGL

Natural Gas Liquids, valuable hydrocarbon components extracted from natural gas. (Represents a diversified revenue stream for Epsilon beyond natural gas and oil.)

Leasehold rights

The rights granted by a landowner to explore for and produce oil and gas from a specific area of land. (Indicates Epsilon's ownership and control over potential future production areas.)

McF

Thousand cubic feet, a unit for measuring natural gas volume. (Used to report natural gas prices and production volumes.)

Contingent consideration

Additional payments or shares to be issued in an acquisition if certain future performance targets are met. (Part of the Peak acquisition structure, indicating potential future dilution or value transfer.)

Year-Over-Year Comparison

While specific comparative figures for the prior year's 10-K are not detailed in this excerpt, the provided data indicates significant growth in 2025. Natural gas sales volume increased by 65% and the realized price rose by 66%, suggesting a substantial improvement in revenue compared to 2024. The acquisition of Peak also represents a major strategic expansion not present in the prior year's operational footprint.

Key Financial Figures

• $88.5 million — her, "Peak") for total consideration of $88.5 million consisting of 1) issuance of 5,681,489
• $27.6 m — ce of 5,681,489 common shares valued at $27.6 million, 2) contingent consideration of u
• $10.6 m — up to 2,500,000 common shares valued at $10.6 million, and the settlement of $50.3 mill
• $50.3 million — at $10.6 million, and the settlement of $50.3 million of debt. The contingent consideration w
• $10.6 million — issuance of 2,234,847 common shares for $10.6 million. The acquired assets primarily include
• $3.5 million — Williams Partners, LP. In 2025, we paid $3.5 million (after elimination) to the Auburn GGS t
• $2.4 million — natural gas production in Pennsylvania ($2.4 million after elimination was paid to the Aubur
• $2.98 — psilon's realized natural gas price was $2.98 per Mcf, 5 excluding the impact of h
• $1.80 — e impact of hedges, a 66% increase from $1.80 for the year ended December 31, 2024.
• $49.19 — ce for all Permian Basin production was $49.19 per Boe, excluding the impact of hedges
• $53.52 — pact of hedges, an 8% decrease from the $53.52 per Boe for the year ended December 31,
• $4.33 — d price for all Oklahoma production was $4.33 per Mcfe, excluding the impact of hedge
• $4.34 — impact of hedges, a 0.2% decrease from $4.34 realized for the year ended December 31
• $36.91 — ed price for all Wyoming production was $36.91 per Boe, excluding the impact of hedges
• $36.07 — zed price for all Canada production was $36.07 per Boe, excluding the impact of hedges

Filing Documents

• epsn-20251231x10k.htm (10-K) — 3859KB
• epsn-20251231xex23d1.htm (EX-23.1) — 6KB
• epsn-20251231xex23d2.htm (EX-23.2) — 3KB
• epsn-20251231xex23d3.htm (EX-23.3) — 6KB
• epsn-20251231xex31d1.htm (EX-31.1) — 11KB
• epsn-20251231xex31d2.htm (EX-31.2) — 11KB
• epsn-20251231xex32d1.htm (EX-32.1) — 7KB
• epsn-20251231xex32d2.htm (EX-32.2) — 7KB
• epsn-20251231xex99d1.htm (EX-99.1) — 83KB
• epsn-20251231xex99d2.htm (EX-99.2) — 58KB
• epsn-20251231xex23d3001.jpg (GRAPHIC) — 5KB
• 0001104659-26-035794.txt ( ) — 14438KB
• epsn-20251231.xsd (EX-101.SCH) — 72KB
• epsn-20251231_cal.xml (EX-101.CAL) — 103KB
• epsn-20251231_def.xml (EX-101.DEF) — 339KB
• epsn-20251231_lab.xml (EX-101.LAB) — 723KB
• epsn-20251231_pre.xml (EX-101.PRE) — 552KB
• epsn-20251231x10k_htm.xml (XML) — 2716KB

FORWARD LOOKING STATEMENTS

FORWARD LOOKING STATEMENTS. Certain statements contained in this report constitute forward-looking statements. The use of any of the words anticipate,'' continue,'' estimate,'' expect,'' may,'' will,'' project,'' should,'' believe,'' and similar expressions and statements relating to matters that are not historical facts constitute forward looking statements'' within the meaning of applicable securities laws. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated. Such 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 report should not be unduly relied upon. These statements are made only as of the date of this report. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to oil and natural gas production rates, commodity prices for crude oil or natural gas, supply and demand for oil and natural gas; the estimated quantity of oil and natural gas reserves, including reserve life; future development and production costs, and statements expressing general views about future operating results — are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our present expecta

BUSINESS

ITEM 1. BUSINESS. Summary Epsilon Energy Ltd. (the "Company" or "Epsilon" or "we") was incorporated under the laws of the Province of Alberta, Canada on March 14, 2005, pursuant to the ABCA. The Company is extra-provincially registered in Ontario pursuant to the Business Corporations Act (Ontario). Epsilon is a North American on-shore focused independent natural gas and oil company engaged in the acquisition, development, gathering and production of natural gas and oil reserves. On February 14, 2019, Epsilon's registration statement on Form 10 was declared effective by the United States Securities and Exchange Commission and on February 19, 2019, we began trading in the United States on the NASDAQ Global Market under the trading symbol "EPSN." At December 31, 2025, Epsilon's total estimated net proved reserves were 86.4 Bcf of natural gas reserves, 9.3 MMBbls of oil reserves, and 2.4 MMBbls of NGL reserves. Epsilon holds leasehold rights to approximately 101,265 gross (54,044 net) acres. The Company has natural gas production in the Appalachian Basin Pennsylvania and oil, natural gas liquids and natural gas production in the Powder River Basin in Wyoming, the Permian Basin in Texas and New Mexico, and the Western Canadian Sedimentary Basin in Alberta, Canada. On November 14, 2025, Epsilon acquired Peak Exploration & Production LLC and Peak BLM Lease LLC and their subsidiaries (together, "Peak") for total consideration of $88.5 million consisting of 1) issuance of 5,681,489 common shares valued at $27.6 million, 2) contingent consideration of up to 2,500,000 common shares valued at $10.6 million, and the settlement of $50.3 million of debt. The contingent consideration was settled on November 19, 2025, through the issuance of 2,234,847 common shares for $10.6 million. The acquired assets primarily include operated and non-operated production and leasehold interests in the core of the Powder River Basin in Wyoming. As part of the acquisition, the Company added 17

Properties

Properties Wells As of December 31, 2025, Epsilon's 101,265 gross (54,044 net) acres are located in the United States and Canada 6 and include 540 gross (90.69 net) wells. Of these wells, 105 gross (45 net) wells are operated. Gross (1) Net (2) Producing Wells Gas 274 33.63 Oil 194 55.42 Total Producing Wells 468 89.05 Non-Producing Wells 72 1.64 Total Wells 540 90.69 Acreage As of December 31, 2025, our leasehold inventory consisted of the following acreage amounts, rounded to the nearest acre: Gross (1) Net (2) (3) Developed Acres Pennsylvania 11,398 4,878 Wyoming 10,428 6,781 Texas 3,086 771 Canada 4,138 1,273 29,050 13,703 Undeveloped Acres Pennsylvania 250 250 Wyoming 50,517 32,785 Texas 13,548 3,354 Canada 7,900 3,950 72,215 40,339 Total Acres Pennsylvania 11,648 5,129 Wyoming 60,945 39,566 Texas 16,634 4,126 Canada 12,038 5,223 Total acres 101,265 54,044 (1) "Gross" means one hundred percent of the working interest ownership in each leasehold tract of land. (2) "Net" means the Company's fractional working interest share in each leasehold tract of land on which productive wells have been drilled. (3) "Net Undeveloped" means the Company's fractional working interest share in each leasehold tract of land where productive wells have yet to be drilled. Business Segments Our operations are conducted by two operating segments for which information is provided in our consolidated financial statements for the years ended December 31, 2025 and 2024. The two segments are as follows: Upstream: Activities include interest in the acquisition, exploration, development and production of oil and natural gas reserves. Gathering System: Interest in a natural gas gathering system. For information about our segment's revenues, profits and losses, total capital expenditures, and total assets, see Note 14 "Operating Segments" in the Notes to Consolidate

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