Epsilon Energy Q1 2025 Earnings Report

Epsilon Energy EPS Results

• Actual EPS: $0.18
• Consensus EPS: $0.14
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

Epsilon Energy Revenue Results

• Actual Revenue: $16.16 million
• Expected Revenue: $11.71 million
• Beat/Miss: Beat by +$4.45 million
• YoY Revenue Growth: N/A

Epsilon Energy Announcement Details

• Quarter: Q1 2025
• Date: 5/14/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 15, 2025
• Conference Call Time: 11:00AM ET

Epsilon Energy (NASDAQ:EPSN) (NASDAQ: EPSN) is an independent energy company engaged in the acquisition, development and production of oil and natural gas in North America. The company focuses primarily on unconventional, onshore resource plays and seeks to build value through a combination of operated and non-operated exploration and production interests.

Epsilon’s core operations are centered in the Marcellus Shale of northeastern Pennsylvania, where it holds interests in natural gas wells and undeveloped drilling locations. The company also owns interests in related midstream infrastructure, including gathering assets that support the transportation of production from its Marcellus properties.

In addition to its Pennsylvania operations, Epsilon has historically held interests in other North American oil and gas regions, including properties in Oklahoma and Canada. Its portfolio and development activities are subject to changes as the company evaluates acquisitions, divestitures and capital allocation opportunities.

Epsilon Energy Q1 2025 Earnings Call Transcript

Key Takeaways

• Robust Marcellus performance: Upstream cash flows surged 200% sequentially on a 58% production increase and 70% higher realized pricing, while midstream cash flows jumped 140%.
• Conservative capital plan: Only 0.5 net wells planned in both Texas and Alberta, with total capex of $9–$12 million for the rest of 2025 and no additional Pennsylvania activity.
• Hedge profile: Approximately 45% of forecasted PDP oil production hedged at just over $71 WTI and 30% of PDP gas hedged at $3.33 NYMEX, targeting 30–40% overall hedge coverage.
• Canadian development progress: Completed two horizontal Manville wells in the Gerington area (1-mile and 1.5-mile laterals), with production starting in April and further wells planned later this year.
• Financial flexibility maintained: A healthy balance sheet and strong projected cash flows allow Epsilon to uphold its dividend and pursue attractive opportunities.

Presentation

[Operator]

Good morning, everyone, and welcome to the Epsilon Energy First Quarter 2025 Earnings Conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touch-tone phones. To withdraw your questions, you may press star and two. At this time, I'd like to turn the floor over to Andrew Williamson, Chief Financial Officer. Sir, please go ahead.

[Andrew Williamson, CFO at Epsilon Energy]

Thank you, Operator. On behalf of the management team, I would like to welcome all of you to today's conference call to review Epsilon Energy's First Quarter 2025 financial and operational results. Before we begin, I would like to remind you that our comments may include forward-looking statements. It should be noted that a variety of factors could cause Epsilon Energy's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Today's call may also contain certain non-GAAP financial measures. Please refer to the earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. With that, I'd like to turn the call over to Jason Stabell, our Chief Executive Officer.

[Jason Stabell, CEO at Epsilon Energy]

Thank you, Andrew. Good morning, and thank you for participating in our 2025 First Quarter Conference call. Joining me today are Andrew Williamson, our CFO, and Henry Clanton, our COO. We will be available to answer questions later in the call. The company delivered strong results this quarter, primarily attributed to the performance of our Pennsylvania business. Marcellus Upstream cash flows were up sequentially over 200% due to a 58% increase in production and a 70% increase in realized pricing. In addition, midstream cash flows increased 140% sequentially on higher throughput volumes. In light of the current oil price volatility, we have been working with our operators to minimize near-term activity.

[Jason Stabell, CEO at Epsilon Energy]

Based on these discussions, we are planning 0.5 net wells in both Texas and Alberta for total capital expenditures of $9-$12 million over the balance of this year, including a $1.5 million drilling carry in favor of our operator in Alberta. We don't expect additional investments this year in Pennsylvania. Our diversified portfolio has performed well in the current volatile environment. Our strong balance sheet and projected cash flows leave us well positioned to capitalize on attractive opportunities while maintaining our dividend. I will now pass the call to Andrew and Henry for further details on our finances and operations.

[Andrew Williamson, CFO at Epsilon Energy]

Thanks, Jason. The performance in the Marcellus this quarter demonstrates our assets leveraged to incremental development there in a strong pricing environment, both on the upstream and midstream side of the business. As Jason mentioned, we do not expect incremental development there this year, but we have substantial remaining undeveloped inventory, roughly 500,000 completed lateral length feet gross, which we expect to be developed starting late next year or early in 2027. I will caveat that by saying the operator's stated plans are, of course, subject to change based on gas market conditions and other factors. In Texas, our Barnett type curve is economic, and it delivers above a 15% rate of return, down to $55 WTI. We are aligned with the operator in limiting capital spending there to our leasehold obligations, which includes two gross wells over the remainder of the year.

[Andrew Williamson, CFO at Epsilon Energy]

Incremental activity will warrant sustained oil prices above $65 WTI. On the hedge book, we're approximately 45% hedged on forecasted PDP oil production for the remainder of the year from May, at just over $71 WTI. For gas, we're approximately 30% hedged on forecasted PDP production for the same period at $3.33 NYMEX. We will look to add to gas hedges, assuming attractive prices for this winter and summer 2026, keeping a 30%-40% of PDP production target in this environment. Of course, that target can change with market conditions, capital plans, and other factors. Now to Henry.

[Henry Clanton, COO at Epsilon Energy]

Thank you, Jason and Andrew. To add further to Jason's comments regarding development this year, in Texas, the current plan calls for two wells to be drilled to satisfy the lease development obligations. Both of these wells are expected to be two-mile laterals or longer. The first well is planned to spud in late May, with the completion planned for the third quarter. In Canada, our first two horizontal Montney wells in the Gerrington area were completed in the first quarter. The initial well was completed as a one-mile lateral, and the second well was completed as a mile and a half lateral. Both wells are currently on production, with sales commencing in April. Efforts to optimize production with artificial lift are in progress.

[Henry Clanton, COO at Epsilon Energy]

Additionally, we continue to work with the operator about the location and timing of the next two wells in the project, which are planned for this year. Thank you. Now back to Jason.

[Jason Stabell, CEO at Epsilon Energy]

Thanks, guys. Operator, we can now open the lines for questions.

[Operator]

Ladies and gentlemen, at this time, if you would like to ask a question, please press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster. Our first question today comes from John White from Roth Capital. Please go ahead with your question.

[John White, Senior Analyst at Roth Capital]

Good morning and congratulations on the very strong production results out of your Marcellus asset. I'm sure you're glad to get these curtailments behind you that you've had to endure for most of the last year. You said there's not going to be any more development drilling in the Marcellus this year. Do you want to offer any additional details on the first two wells in Alberta and how those are doing?

[Jason Stabell, CEO at Epsilon Energy]

Hey, John, it's Jason. Thanks for the question. A little early to offer too much there, other than to say we've got oil and gas. Started flowing that to sales in early April. We're kind of in that first 30 days working with the operator to get artificial lift installed and get some facilities tied down. I think probably the most helpful thing is, yeah, we're producing cash flow up there right now, but we're really going to have more definitive comments as we march through the second quarter into the third quarter. If there's something meaningful on an interim basis, obviously we'll communicate that with the market. Certainly, I expect a fulsome update on that for our next quarterly report.

[John White, Senior Analyst at Roth Capital]

Okay. Given the timing, that's understandable. Thanks for taking my question. I'll turn it back to the operator.

[Jason Stabell, CEO at Epsilon Energy]

Great. Thanks.

[Andrew Williamson, CFO at Epsilon Energy]

Thanks, John.

[Operator]

Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. At this time, showing no additional questions, I'd like to turn the floor back over to management for any closing remarks.

[Jason Stabell, CEO at Epsilon Energy]

Thank you, Operator. Appreciate everybody's continued interest and support of Epsilon. As always, we're here to answer questions if any come to you after we conclude this meeting. Everybody have a great day and look forward to speaking to you in the future. Thank you.

[Operator]

With that, ladies and gentlemen, we will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

Participants

Executives

• Andrew Williamson, CFO
• Henry Clanton, COO
• Jason Stabell, CEO

Analysts

• John White, Senior Analyst at Roth Capital