Release Date: May 15, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Epsilon Energy Ltd (NASDAQ:EPSN) reported a significant increase in Marcellus upstream cash flows, up over 200% sequentially due to a 58% increase in production and a 70% increase in realized pricing.

• Midstream cash flows also saw a substantial increase of 140% sequentially, driven by higher throughput volumes.

• The company maintains a strong balance sheet and projected cash flows, positioning it well to capitalize on attractive opportunities while maintaining its dividend.

• Epsilon Energy Ltd (NASDAQ:EPSN) has a diversified portfolio that has performed well in the current volatile environment.

• The Barnett type curve in Texas is economic, delivering above a 15% rate of return down to $55 WTI.

Negative Points

• Epsilon Energy Ltd (NASDAQ:EPSN) does not expect additional investments in Pennsylvania this year, indicating a potential slowdown in development activities.

• Incremental activity in Texas will require sustained oil prices above $65 WTI, which may limit growth if prices do not meet this threshold.

• The company is approximately 45% hedged on forecasted PDP oil production and 30% hedged on gas, which may limit upside potential if market prices increase.

• Development plans in Alberta are still in early stages, with more definitive updates expected in future quarters, creating uncertainty in the short term.

• The company's plans are subject to change based on gas market conditions and other factors, indicating potential volatility in future operations.

Q & A Highlights

• Warning! GuruFocus has detected 8 Warning Sign with EPSN.

Q: Can you provide additional details on the first two wells in Alberta and their performance? A: Jason Stivell, CEO: It's early to provide extensive details, but we have started oil and gas production with sales commencing in early April. We're currently working with the operator to install artificial lift and finalize facilities. We expect to provide a more comprehensive update in our next quarterly report, unless there are significant interim developments.

Q: What are the plans for development in Texas this year? A: Henry Clanton, COO: We plan to drill two wells in Texas to meet lease development obligations. These wells are expected to be two-mile laterals or longer, with the first well spudding in late May and completion expected in the third quarter.

Q: How is the company managing its hedge book for oil and gas production? A: Andrew Williamson, CFO: We are approximately 45% hedged on forecasted PDP oil production for the remainder of the year at just over $71 WTI. For gas, we are about 30% hedged at $3.33 in IMAX. We aim to maintain a 30-40% hedge on PDP production, adjusting as market conditions and capital plans evolve.