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Here are two brief analogies for Epsilon Energy:

• Like a much smaller ConocoPhillips, focused on natural gas and oil production in key US basins.
• A smaller, focused version of Southwestern Energy.

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• Natural Gas Production: Epsilon Energy extracts and sells natural gas from its domestic reserves.
• Crude Oil Production: The company also produces and sells crude oil from its various projects.
• Natural Gas Liquids (NGLs) Production: Epsilon Energy extracts and sells valuable natural gas liquids that are separated during natural gas processing.
• Hydrocarbon Exploration and Development: The company engages in the identification, acquisition, and development of new oil and natural gas reserves.

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Epsilon Energy (EPSN) Major Customers

Epsilon Energy (symbol: EPSN) is an independent natural gas and oil company primarily engaged in the acquisition, exploration, development, and production of oil and natural gas properties. As such, it sells its extracted crude oil, natural gas, and natural gas liquids (NGLs) primarily to other companies for processing, transportation, and further distribution, rather than directly to individual consumers.

Based on their public filings, Epsilon Energy's major customer companies for their natural gas production include:

• BP Energy Company (a subsidiary of BP plc, public symbol: BP)
• Sequent Energy Management, L.P. (a subsidiary of Southern Company Gas, which is a subsidiary of The Southern Company, public symbol: SO)

Epsilon Energy's crude oil and NGLs production is sold to various other purchasers, which typically include refiners and marketers, as disclosed in their public filings.

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Jason Stabell, President / CEO

Jason Stabell was appointed as President and Chief Executive Officer of Epsilon Energy in July 2022. He has a strong track record of value creation in prior upstream endeavors, having worked with Andrew Williamson for over 10 years.

Andrew Williamson, Chief Financial Officer

Andrew Williamson joined Epsilon Energy as Chief Financial Officer in July 2022. He has a strong track record of value creation in prior upstream endeavors, having collaborated with Jason Stabell for more than 10 years.

Henry Clanton, Chief Operating Officer

Paul Atwood, VP of Financial Planning and Analysis

Shannon Lemke, VP of Exploration

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1. Fluctuations in Oil and Natural Gas Prices: The company's business is highly dependent on the prices of oil and natural gas, and any significant fluctuations or decreases in these commodity prices can materially impact Epsilon Energy's financial results. For instance, the challenging natural gas environment in 2024 led to curtailed production and lower wellhead prices for their Marcellus assets.
2. Market Valuation and Stock Performance: Epsilon Energy has experienced elevated near-term risk related to its stock performance, including a sustained pattern of lower highs and lower lows after a temporary breakout. The company's relatively small market capitalization also contributes to this risk, with recent trends suggesting potential for further downside.
3. Production Declines and Operational Challenges: The company has encountered challenges with declining natural gas production and curtailed volumes. In 2024, gas production decreased by 26% year-over-year, which impacted overall performance and throughput in their midstream business. While efforts are underway to diversify and increase liquids production, declines in existing gas volumes due to normal depletion and delayed initial production from new wells remain a risk.

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The global energy transition away from fossil fuels represents a clear and emerging threat to Epsilon Energy, as it does for traditional oil and gas companies. This threat manifests in several ways:

• Accelerating Decarbonization Policies and Regulations: Governments worldwide are implementing increasingly stringent environmental regulations, carbon pricing mechanisms, and mandates for renewable energy adoption and electric vehicle transition. These policies are designed to reduce fossil fuel consumption and directly threaten the long-term demand and market for Epsilon Energy's core products.
• Rapid Advancements and Cost Reductions in Renewable Energy Technologies: The continuous decline in costs for solar and wind power, coupled with significant improvements in battery storage technology, makes renewable energy sources increasingly competitive and viable alternatives to fossil fuels. This technological shift reduces the market share and profitability of traditional energy sources.
• Increasing Investor and Public Pressure on ESG (Environmental, Social, Governance) Factors: There is growing pressure from institutional investors, financial institutions, and the public to divest from or reduce exposure to fossil fuel companies. This impacts access to capital, raises the cost of financing, and can lead to lower valuations for companies like Epsilon Energy if they are perceived as not adequately transitioning their business models.

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Epsilon Energy (EPSN) operates primarily in two main business segments: Natural Gas and Oil Production (Upstream) and Midstream Services (Gas Gathering).

Natural Gas and Oil Production

Epsilon Energy is engaged in the acquisition, development, and production of natural gas and oil reserves, with operations in the Marcellus Shale in Pennsylvania, the Permian Basin in Texas and New Mexico, and the Anadarko Basin in Oklahoma.

• The **Global Oil & Gas Exploration & Production Market** was valued at approximately USD 5,820.40 billion in 2024. This market is projected to grow to around USD 17,926.77 billion by 2034, exhibiting a Compound Annual Growth Rate (CAGR) of 11.8%. Another report indicates a projected growth to USD 18,986.90 billion by 2035 with a CAGR of 11.35% from 2025.
• Specifically for the natural gas component within the **Global Oil Exploration and Production Market**, the revenue was USD 802.74 billion in 2019 and is expected to reach USD 1,080.14 billion in 2031.

Midstream Services (Gas Gathering)

Epsilon Energy also provides midstream services, holding a 35% interest in the Auburn Gas Gathering System in Susquehanna County, Pennsylvania, which is responsible for collecting, processing, compressing, and delivering natural gas.

• The **U.S. Natural Gas Distribution Market** was valued at USD 170.0 billion in 2024 and is projected to increase to USD 186.0 billion by 2032, with a CAGR of 1.0% during the period of 2025–2032. Another estimate places the U.S. Natural Gas Distribution market size at USD 174.7 billion in 2024, expecting it to reach USD 222.5 billion in 2025, reflecting a 27.4% increase in 2025.

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Here are 3-5 expected drivers of future revenue growth for Epsilon Energy (EPSN) over the next 2-3 years:

1. Strategic Acquisition in the Powder River Basin: Epsilon Energy's acquisition of Peak companies, with assets in the Powder River Basin, is a significant driver of future revenue. This strategic move is expected to add substantial oil-weighted production and inventory, positioning the company for medium to long-term success. The acquisition is projected to boost proved reserves by over 150% and liquids production by more than 200% based on year-end 2024 reports. The company anticipates commencing infrastructure investments and development in this basin in late 2026 or early 2027, focusing on multi-well pad development with high-return Parkman wells.
2. Resumption of Permian Drilling Activities: The company plans to resume drilling in the Permian Basin in 2026. Epsilon Energy has reported strong performance in its Permian Basin projects, with new wells significantly contributing to operating cash flow. This continued development in a proven high-performance area is expected to drive production and, consequently, revenue growth.
3. Increased Investment in Marcellus Shale (Second Half of 2026): While Epsilon Energy does not anticipate material investments in the Marcellus region in the first half of 2026 due to market conditions, it plans to increase investment in the Marcellus in the latter half of 2026. This strategy reflects an eventual focus on leveraging its core Northeast Pennsylvania Marcellus position, which holds substantial undeveloped inventory.
4. Leveraging Oil Price Recovery and Hedging Strategy: The acquisition of the Peak companies' oil-weighted assets is expected to strategically position Epsilon Energy to benefit from a potential recovery in oil prices. Furthermore, the company has implemented a robust hedging strategy, with 60% of peak proved developed producing (PDP) oil volumes hedged for 2026 at a weighted average WTI strike price of $63.30 per barrel, and approximately 50% of gas hedged with a floor above $3.30. This approach aims to provide both protection against price volatility and upside potential in a favorable pricing environment, thereby stabilizing and potentially increasing revenue.

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Share Repurchases

• Epsilon Energy's Board of Directors approved a new one-year share repurchase program on February 13, 2025, authorizing the repurchase of up to 2,200,876 common shares, representing 10% of outstanding shares, for an aggregate purchase price not exceeding $13.0 million.
• This new program commenced on February 12, 2025, and is set to end on February 11, 2026.
• In 2024, the company returned $7.3 million to shareholders, which included $1.8 million in share repurchases.

Share Issuance

• Epsilon Energy is seeking shareholder approval to issue up to 8.5 million common shares as consideration for the acquisition of two Peak entities and related assets in the Powder River Basin, with the transaction expected to close in Q4 2025.
• Pro forma ownership after the Peak acquisition is estimated to result in current Epsilon shareholders holding approximately 72% and the acquired companies approximately 28% on a fully diluted basis.

Inbound Investments

• Epsilon Energy entered into definitive agreements to acquire two entities, Peak Exploration and Production LLC and Peak BLM Lease LLC ("Peak"), majority owned by funds of Yorktown Energy Partners LLC, with the transaction expected to close in Q4 2025.
• The consideration for the Peak acquisition includes the issuance of 6 million Epsilon common shares and the assumption of an estimated $49 million of debt, with potential additional contingent consideration of up to 2.5 million Epsilon common shares.
• The acquired Peak assets include 40,500 net acres in the core of the Powder River Basin, with the acquisition expected to increase Epsilon's proved reserves by approximately 150%.

Outbound Investments

• Epsilon Energy entered Alberta's oil and gas market through two joint ventures in the Garrington and Harmattan areas of Canada, acquiring a 25% working interest in approximately 30,000 gross acres of undeveloped land focused on horizontal development of the Glauconitic and Ellerslie formations.
• In April 2024, Epsilon also entered a separate joint venture in Alberta's Killam area, acquiring a 50% working interest in 14,000 gross acres to develop the Mannville formation, with an investment of C$1.4 million and a commitment to drill two wells in 2024.

Capital Expenditures

• Epsilon's capital expenditures were $34.9 million for the full year ended December 31, 2024, marking a 58% increase year over year.
• Approximately 70% of the 2024 capital expenditures were allocated to Texas, primarily for the acquisition of three gross (0.75 net) wells and 3,246 undeveloped acres in Q1 2024, and the development of two gross (0.5 net) wells in Q2 and Q3 2024.
• For the first quarter of 2024, capital expenditures totaled $21.4 million, primarily related to an acquisition in Ector County, Texas, the drilling of one gross well in Ector Co., Texas, and the completion of seven gross wells in Susquehanna Co., Pennsylvania.