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), a North American onshore independent natural gas and oil company, engages in the acquisition, development, gathering, and production of natural oil and gas reserves in the United States. The company operates through Upstream and Gathering System segments. It has natural gas production in the Marcellus Shale in Pennsylvania; and oil, natural gas liquids, and natural gas production in the Permian Basin in Texas and New Mexico, and Anadarko Basin in Oklahoma. Epsilon Energy Ltd. was incorporated in 2005 and is based in Calgary, Canada.

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 twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. 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. And on behalf of the management team, I would like to welcome all of you to today's conference call to review Epsilon's first quarter twenty twenty five 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'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.

[Andrew Williamson, CFO at Epsilon Energy]

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 Stivell, our Chief Executive Officer.

[Jason Stabell, CEO at Epsilon Energy]

Thank you, Andrew. Good morning, and thank you for participating in our twenty twenty five 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. Company delivered strong results this quarter, primarily attributed to the performance of our Pennsylvania business.

[Jason Stabell, CEO at Epsilon Energy]

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. Based on these discussions, we are planning 0.5 net wells in both Texas and Alberta for total capital expenditures of 9,000,000 to $12,000,000 over the balance of this year, including a $1,500,000 drilling carry in favor of our operator in Alberta. We don't expect additional investments this year in Pennsylvania.

[Jason Stabell, CEO at Epsilon Energy]

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 and a strong pricing environment, both on the upstream and midstream side of the business. As Jason mentioned, we don't 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 that it delivers above a 15% rate of return, down to $55 WTI.

[Andrew Williamson, CFO at Epsilon Energy]

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. 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 twenty twenty six, keeping a 30% to 40% of PDP production target in this environment.

[Andrew Williamson, CFO at Epsilon Energy]

Of course, that target can change with market conditions, capital plans, and other factors.

[Henry Clanton, COO at Epsilon Energy]

Now to Henry. 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.

[Henry Clanton, COO at Epsilon Energy]

In Canada, our first two horizontal Manville wells in the Gerington 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 one point mile lateral. Both wells are currently on production with sales commencing in April. Efforts to optimize production with artificial lift are in progress. 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.

[Henry Clanton, COO at Epsilon Energy]

Thank you. Now back to Jason.

[Jason Stabell, CEO at Epsilon Energy]

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

[Operator]

And our first question today comes from John White from ROTH Capital. Please go ahead with your question.

[John White, MD & Senior Research Analyst at Roth Capital Partners, LLC]

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

[John White, MD & Senior Research Analyst at Roth Capital Partners, LLC]

the last

[John White, MD & Senior Research Analyst at Roth Capital Partners, LLC]

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. So we're kind of in that first thirty days working with the operator to get artificial lift installed and get some facilities tied down. So I think probably the most helpful thing is, yes, 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.

[Jason Stabell, CEO at Epsilon Energy]

So either if there's something meaningful on an interim basis, obviously, we'll communicate that with the market. But certainly, I expect a fulsome update on that for our next quarterly report.

[John White, MD & Senior Research Analyst at Roth Capital Partners, LLC]

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

[Jason Stabell, CEO at Epsilon Energy]

Great. Thanks. Thanks, John.

[Operator]

And at this time, I'm 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. And everybody have a great day and look forward to speaking to you in the future. Thank you.

[Operator]

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

Participants

Executives

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

Analysts

• John White, MD & Senior Research Analyst at Roth Capital Partners, LLC