Epsilon Energy Ltd. 10-K

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 full-time employees from Peak. ​ The results of operations attributable to the Peak acquisition have been included in the Company’s consolidated financial statements as of the closing date of the acquisition. We conduct operations in the United States through our wholly owned subsidiaries Epsilon Energy USA Inc., an Ohio corporation, or Epsilon Energy USA; Epsilon Midstream, LLC, a Pennsylvania limited liability company, or Epsilon Midstream; Epsilon Operating, LLC, a Delaware limited liability company; Dewey Energy GP LLC, a Delaware limited liability company; Peak Exploration & Production LLC, a Delaware limited liability company; Peak BLM Lease LLC, a Delaware limited liability company; Peak Powder River Resources, LLC, a Wyoming limited liability company (the licensed operator in the state of Wyoming); Peak Energy Operating #2, LLC, a Colorado limited liability company; Willow Springs Development, LLC, a Colorado limited liability company; Peak Powder River Acquisition, LLC, a Delaware limited liability company; and Altolisa Holdings, LLC, a Delaware limited liability company. Substantially all the Pennsylvania acreage (4,878 net) is dedicated to the Auburn Gas Gathering System (“Auburn GGS”) located in Susquehanna County, Pennsylvania for a 10-year term expiring in 2033 under an operating agreement whereby the Auburn GGS owners charge a fixed gathering and compression rate which is adjusted annually by the CPI-U All Urban Consumer Price Index published by the US Bureau of Labor Statistics. We own a 35% interest in the Auburn GGS which is operated by a subsidiary of Williams Partners, LP. In 2025, we paid $3.5 million (after elimination) to the Auburn GGS to gather and treat our 9.4 Bcf of natural gas production in Pennsylvania ($2.4 million after elimination was paid to the Auburn GGS to gather and treat our 5.7 Bcf in 2024), including the fees paid to our subsidiary, Epsilon Midstream. Our principal executive office is located at 500 Dallas Street, Suite 1250, Houston, Texas 77002, and our telephone number at that address is (281) 670-0002. Our registered office in Alberta, Canada is located at 14505 Bannister Road SE, Suite 300, Calgary, AB, Canada T2X 3J3. Operational Highlights of 2025 Appalachian Basin—Pennsylvania ● During the year ended December 31, 2025, Epsilon’s realized natural gas price was $2.98 per Mcf, 5 ​ ​ excluding the impact of hedges, a 66% increase from $1.80 for the year ended December 31, 2024. ● Total natural gas sales for the year ended December 31, 2025 were 9.4 Bcf, a 65% increase from the 5.7 Bcf sold for the year ended December 31, 2024, driven by new wells and curtailed wells returning to production. ● Gathered and delivered 40.5 Bcf gross (14.2 Bcf net to Epsilon’s interest) during the year, or 111 MMcf/d through the Auburn GGS. ● In 2025, 4 gross (0.24 net) wells were turned on line in January 2025 and 3 gross (0.04) wells were turned on line in March 2025. ​ Permian Basin—Texas and New Mexico ● During the year ended December 31, 2025, Epsilon’s realized price for all Permian Basin production was $49.19 per Boe, excluding the impact of hedges, an 8% decrease from the $53.52 per Boe for the year ended December 31, 2024 . ● Total sales for the year ended December 31, 2025, including oil, natural gas, and natural gas liquids, were 212 Mboe, an 18% decrease from the 259 MBoe sold for the year ended December 31, 2024. ● In 2025, the Company participated in the drilling and completion of 1 gross (0.25 net) wells in Texas. This well went into production in July 2025. ​ Anadarko Basin—Oklahoma ● During the year ended December 31, 2025, Epsilon’s realized price for all Oklahoma production was $4.33 per Mcfe, excluding the impact of hedges, a 0.2% decrease from $4.34 realized for the year ended December 31, 2024. ● Total sales for the year ended December 31, 2025, including oil, natural gas, and natural gas liquids, were 0.34 Bcfe, a 17% decrease from 0.41 Bcfe sold for the year ended December 31, 2024. ● In 2025, there was no development activity in Oklahoma. The Company sold all of its assets in the Anadarko Basin in December 2025. ​ Powder River Basin—Wyoming ● The Powder River Basin assets were acquired on November 14, 2025. ● During the period ended December 31, 2025, Epsilon’s realized price for all Wyoming production was $36.91 per Boe, excluding the impact of hedges. ● Total sales for the period ended December 31, 2025, including oil, natural gas, and natural gas liquids, were 108.5 MBoe. ​ Western Canadian Sedimentary Basin—Alberta, Canada ● During the year ended December 31, 2025, Epsilon’s realized price for all Canada production was $36.07 per Boe, excluding the impact of hedges, a 22% decrease from the $46.07 per Boe realized for the year ended December 31, 2024. ● Total sales for the year ended December 31, 2025, including oil, natural gas, and natural gas liquids, were 27.4 MBoe , a 996% increase from 2.5 MBoe sold for the year ended December 31, 2024. ● In 2025, the Company participated in the completion of 2 gross (0.5 net) wells in Canada. The two wells turned on line in March 2025. ​ 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 Consolidated Financial Statements. 7 ​ ​ Oil and Natural Gas Production and Revenues and Gathering System Revenues A summary of our net oil and natural gas production, average oil and natural gas prices and related revenues and our gathering system revenues for the years ended December 31, 2025 and 2024, respectively, follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Production Volumes ​ ​ ​ ​ ​ ​ Pennsylvania ​ ​ ​ ​ ​ ​ Natural gas (MMcf) ​ ​ 9,402 ​ ​ 5,699 Total (MMcfe) ​ ​ 9,402 ​ ​ 5,699 Permian Basin ​ ​ ​ ​ ​ ​ Natural gas (MMcf) ​ ​ 161 ​ ​ 205 Natural gas liquids (MBoe) ​ ​ 36 ​ ​ 52 Oil (MBbl) ​ ​ 149 ​ ​ 173 Total (MMcfe) ​ ​ 1,271 ​ ​ 1,554 Oklahoma ​ ​ ​ ​ ​ ​ Natural gas (MMcf) ​ ​ 197 ​ ​ 237 Natural gas liquids (MBoe) ​ ​ 14 ​ ​ 17 Oil (MBbl) ​ ​ 9 ​ ​ 11 Total (MMcfe) ​ ​ 335 ​ ​ 408 Wyoming ​ ​ ​ ​ ​ ​ Natural gas (MMcf) ​ ​ 189 ​ ​ — Natural gas liquids (MBoe) ​ ​ 27 ​ ​ — Oil (MBbl) ​ ​ 50 ​ ​ — Total (MMcfe) ​ ​ 651 ​ ​ — Canada ​ ​ ​ ​ ​ ​ Natural gas (MMcf) ​ ​ 52 ​ ​ — Natural gas liquids (MBoe) ​ ​ 4 ​ ​ — Oil (MBbl) ​ ​ 15 ​ ​ 3 Total (MMcfe) ​ ​ 166 ​ ​ 15 Company Total ​ ​ ​ ​ ​ ​ Natural gas (MMcf) ​ ​ 10,001 ​ ​ 6,142 Natural gas liquids (MBoe) ​ ​ 81 ​ ​ 69 Oil (MBbl) ​ ​ 223 ​ ​ 187 Total (MMcfe) ​ ​ 11,825 ​ ​ 7,676 ​ 8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Revenues ​ ​ ​ ​ ​ ​ Pennsylvania ​ ​ ​ ​ ​ ​ Natural gas revenue ​ $ 28,012,040 ​ $ 10,247,834 Avg. Price ($/Mcf) ​ $ 2.98 ​ $ 1.80 Gathering system revenue (net of elimination) ​ $ 6,683,735 ​ $ 5,524,063 Total PA Revenues ​ $ 34,695,775 ​ $ 15,771,897 Permian Basin ​ ​ ​ ​ ​ ​ Natural gas revenue ​ $ 113,038 ​ $ 32,930 Avg. Price ($/Mcf) ​ $ 0.70 ​ $ 0.16 Natural gas liquids revenue ​ $ 706,010 ​ $ 1,060,967 Avg. Price ($/Bbl) ​ $ 19.51 ​ $ 20.48 Oil and condensate revenue ​ $ 9,614,603 ​ $ 12,770,258 Avg. Price ($/Bbl) ​ $ 64.50 ​ $ 73.81 Total Permian Basin Revenues ​ $ 10,433,651 ​ $ 13,864,155 Oklahoma ​ ​ ​ ​ ​ ​ Natural gas revenue ​ $ 640,607 ​ $ 505,304 Avg. Price ($/Mcf) ​ $ 3.25 ​ $ 2.13 Natural gas liquids revenue ​ $ 318,108 ​ $ 420,991 Avg. Price ($/Bbl) ​ $ 22.56 ​ $ 24.16 Oil and condensate revenue ​ $ 507,406 ​ $ 844,265 Avg. Price ($/Bbl) ​ $ 54.11 ​ $ 76.75 Total OK Revenues ​ $ 1,466,121 ​ $ 1,770,560 Wyoming ​ ​ ​ ​ ​ ​ Natural gas revenue ​ $ 291,933 ​ $ — Avg. Price ($/Mcf) ​ $ 1.54 ​ $ — Natural gas liquids revenue ​ $ 872,263 ​ $ — Avg. Price ($/Bbl) ​ $ 32.48 ​ $ — Oil and condensate revenue ​ $ 2,840,537 ​ $ — Avg. Price ($/Bbl) ​ $ 56.66 ​ $ — Total WY Revenues ​ $ 4,004,733 ​ $ — Canada ​ ​ ​ ​ ​ ​ Natural gas revenue ​ $ 63,828 ​ $ — Avg. Price ($/Mcf) ​ $ 1.22 ​ $ — Natural gas liquids revenue ​ $ 82,479 ​ $ — Avg. Price ($/Bbl) ​ $ 23.01 ​ $ — Oil and condensate revenue ​ $ 840,969 ​ $ 116,163 Avg. Price ($/Bbl) ​ $ 55.84 ​ $ 46.04 Total Canada Revenues ​ $ 987,276 ​ $ 116,163 Total Company Revenues ​ $ 51,587,556 ​ $ 31,522,775 ​ Gathering System Operations Epsilon Energy USA is the 100% owner of Epsilon Midstream, which owns a 35% undivided interest in the Auburn GGS, located in Susquehanna County, Pennsylvania, with partners Appalachia Midstream Services, LLC (43.875%) and Equinor Pipelines, LLC (21.125%). The Anchor Shippers, consisting of Epsilon Energy USA, Equinor USA Onshore Properties, Inc., and Expand Energy Corporation, dedicated approximately 18,000 mineral acres to the Auburn GGS on January 1, 2012 for an initial term of 15 years under an Anchor Shipper Gas Gathering Agreement for northern Pennsylvania whereby the Auburn GGS owners received a fixed percentage rate of return on the total capital invested in the construction of the system. On May 17, 2024, Epsilon Energy USA executed a new Anchor Shipper Gas Gathering Agreement for northern Pennsylvania (the “ASGGA”) with operator Appalachia Midstream Services, LLC for a primary term of ten years and an 9 ​ ​ effective date of January 1, 2024. Epsilon Energy USA simultaneously terminated the prior agreement. The new ASGGA establishes fixed gathering, compression and cross-flow rates for all shippers on each system into which Epsilon produces natural gas. These rates will be adjusted annually by the Consumer Price Index for All Urban Consumers (“CPI-U”) commencing January 2025. Notably, the gathering rates in Auburn GGS, Rome GGS & Overfield GGS will no longer be subject to a cost-of-service redetermination annually; however, acreage dedications, service priority levels, required shipper approvals and shipper voting procedures are all substantially consistent with the prior agreement. Revenues from the Auburn GGS are earned primarily from the Anchor Shippers with well pads located within the Auburn GGS system boundary. Revenues are also earned when natural gas originating in adjacent gathering systems flow into the Auburn GGS (“cross-flow gas”) to the compression facility, and then to the delivery meter at Tennessee Gas Pipeline. The relative mix of Anchor Shipper gas and cross-flow gas is critical to the revenue and earnings of the Auburn GGS because the cross-flow gathering rate is only 25% of the Anchor Shipper rate. Shippers cross-flowing gas must pay the gathering rate of the originating gathering system plus 25% of the Auburn GGS gathering rate. The purpose of the reduced rate is to attract additional volumes that require delivery to Tennessee Gas Pipeline when there is spare capacity at the Auburn compression facility, or the “Auburn CF”. The Auburn GGS consists of approximately 44 miles of gathering pipelines, a small auxiliary compression facility and a main compression facility with three dehydration units and three Caterpillar 3612 compression units. At inception, the capacity of the Auburn CF was approximately 330,000 Mcf per day at a design suction pressure of 800 psig. The design suction pressure was subsequently reduced to 550 psig in June 2020 at the request of the Anchor Shippers. This request served to minimize throughput decline during a period of low pricing in which the drilling of new wells was undesirable. The design suction pressure at the Auburn compression facility was reduced further from 550 psig to 450 psig in January 2025 and from 450 psig to 400 psig in December 2025. Operating at the lower design suction pressure has the benefit of reducing hydrate occurrences in the system which can pose an operational hazard. The current system capacity of the Auburn CF at this lower design pressure is approximately 127,000 Mcf per day. The facility capacity could be increased again, if required, by either adding compression units or increasing the design suction pressure. The Auburn CF delivers processed natural gas into the Tennessee Gas Pipeline at the Shoemaker Dehy receipt meter. The Auburn GGS is connected with the adjacent Rome GGS, which allows for the receipt of additional natural gas to maximize utilization of the Auburn CF and Tennessee Gas Pipeline meter capacity. During the years ended December 31, 2025 and 2024, the Auburn GGS delivered 40.5 Bcf and 36.9 Bcf respectively, of natural gas, or 111,000 Mcf per day and 101,000 Mcf per day. Gathering system revenues derived from Epsilon’s production, which have been eliminated from total gathering system revenues (“elimination entry”), amounted to $1.9 million and $1.1 million for the years ended December 31, 2025 and 2024, respectively. Proved Reserves Per our reserve reports prepared by independent petroleum consultants, DeGolyer and MacNaughton and Cawley, Gillespie & Associates (Powder River Basin assets only), our estimated proved reserves as of December 31, 2025, are summarized in the table below. See Risk Factors for information relating to the uncertainties surrounding these reserve categories. 10 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Natural Gas ​ Natural Gas ​ Oil and Other ​ Total ​ ​ ​ ​ MMcf ​ ​ ​ Liquids MBbl ​ ​ ​ Liquids MBbl ​ ​ ​ MMcfe Proved developed reserves ​ 75,849 ​ 1,599 ​ 4,000 109,444 Proved undeveloped reserves ​ 10,523 ​ 753 ​ 5,259 46,593 Total Proved Reserves at December 31, 2025 ​ 86,372 ​ 2,352 ​ 9,259 156,037 ​ ​ ​ ​ ​ ​ ​ ​ Changes in Total Proved Undeveloped Reserves ​ ​ ​ ​ Proved undeveloped reserves at December 31, 2024 ​ 12,550 ​ 387 ​ 725 19,225 Revisions of previous estimates ​ (4,949) ​ (85) ​ (194) ​ (6,628) Acquisitions ​ 4,609 ​ 639 ​ 4,933 ​ 38,041 Divestitures ​ (1,521) ​ (134) ​ (65) ​ (2,715) Transfers to proved developed ​ (166) ​ (54) ​ (140) (1,330) Proved undeveloped reserves at December 31, 2025 10,523 753 5,259 46,593 ​ Revisions to previous estimates for total proved undeveloped reserves for 2025 include reductions of 6,340 MMcfe related to changes to the previously adopted development plan and reductions of 269 MMcfe related to technical revisions and reductions of 19 MMcfe related to commodity pricing. Acquisitions of 38,041 MMcfe relate to reserves acquired in Wyoming from the Peak acquisition. Divestitures of 2,715 MMcfe relate to the selling of all interests in Oklahoma. Transfers to Proved Developed Reserves of 1,330 MMcfe relates to the development of wells in the Permian Basin. Our development capital spending to convert Proved Undeveloped Reserves to Proved Developed Reserves for the periods indicated is as follows: ● In 2025 in Pennsylvania, 4 gross (0.24) wells were turned on line in January 2025 and 3 gross (0.04) wells were turned on line in March 2025. ​ ● In 2024 in Pennsylvania, we drilled 3 gross (0.04 net) wells and participated in the completion of 10 gross (0.82 net) wells. The three wells turned on line in October 2024. ● In 2025 in the Permian Basin, the Company participated in the drilling and completion of 1 gross (.25 net) well. This well went into production in Texas in July 2025. ● In 2024 in the Permian Basin, the Company participated in the drilling and completion of 2 gross (0.5 net) wells. These wells went into production in May 2024 and July 2024. ● In 2025 in Canada, we participated in the completion of 2 gross (0.5 net) wells. The two wells turned on line in March 2025. ● In 2024 in Canada, we participated in the drilling and completion of 2 gross (0.5 net) wells. One well was put on production in September 2024. One well was deemed non-commercial. ​ ● In 2025 and 2024 in Oklahoma, there was no development activity. The Company sold all of its assets in Oklahoma in December 2025. ​ Internal Controls Over Reserves Estimation Process and Qualifications of Technical Persons with Oversight for the Company’s Overall Reserve Estimation Process Our policies regarding internal controls over reserve estimates require reserves to be prepared by an independent engineering firm under the supervision of our Chief Operating Officer, and to be in compliance with generally accepted geologic, petroleum engineering and evaluation principles and definitions and guidelines established by the SEC. The corporate staff interacts with our internal petroleum engineers and geoscience professionals in each of our operating areas and with operating, accounting and marketing employees to obtain the necessary data for the reserves estimation process. We provide our engineering firm with property interests, production, capital budgets, current operating costs, current production prices and other information. This information is reviewed by our Chief Operating Officer to ensure accuracy and completeness of the data prior to submission to our independent engineering firm. Reserves are reviewed and approved internally by our Chief Operating Officer on a semi-annual basis. Our Chief Operating Officer holds a Bachelor of Science degree in Petroleum Engineering and received a Master’s Degree of Business Administration. He has over 30 years of 11 ​ ​ experience in upstream exploration and production, and has managed all phases of drilling, completions, production and field operations. The reserve information in this report is based on estimates prepared by DeGolyer and MacNaughton and Cawley, Gillespie & Associates, our independent petroleum consultants. Estimates of reserves were prepared by the use of appropriate geologic, petroleum engineering, and evaluation principles and techniques that are in accordance with the reserves definitions of Rules 4-10(a) (1)-(32) of Regulation S-X of the SEC and with practices generally recognized by the petroleum industry as presented in the publication of the Society of Petroleum Engineers entitled “Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information (revised June 2019) Approved by the SPE Board on 25 June 2019” and in Monograph 3 and Monograph 4 published by the Society of Petroleum Evaluation Engineers. The method or combination of methods used in the analysis of each reservoir was tempered by experience with similar reservoirs, stage of development, quality and completeness of basic data, and production history. For the evaluation of unconventional reservoirs, a performance-based methodology integrating the appropriate geology and petroleum engineering data was utilized for this report. Performance-based methodology primarily includes (1) production diagnostics, (2) decline-curve analysis, and (3) model-based analysis (if necessary, based on availability of data). Production diagnostics include data quality control, identification of flow regimes, and characteristic well performance behavior. These analyses were performed for all well groupings (or type-curve areas). The person responsible for preparing the DeGolyer and MacNaughton reserve report, Dilhan Ilk, is a Registered Professional Engineer (No.139334) in the State of Texas and a Senior Vice President of the firm. Dr. Ilk graduated from Texas A&M University with a Doctor in Philosophy degree in Petroleum Engineering, is a member of the Society of Petroleum Engineers, and has in excess of 15 years of experience in oil and gas reservoir studies and reserves evaluations. Cawley Gillespie & Associates is a Texas Registered Engineering Firm (F-693), made up of independent registered professional engineers and geologists that have provided petroleum consulting services to the oil and gas industry for over 60 years. The lead evaluator that prepared the reserve report was Zane Meekins, P.E., Executive Vice President at Cawley Gillespie. ​ Mr. Meekins has been with Cawley Gillespie since 1989 and graduated from Texas A&M University in 1987 with a Bachelor of Science degree in Petroleum Engineering. Mr. Meekins is a State of Texas registered professional engineer (License #71055) and a member of the Society of Petroleum Evaluation Engineers and the Society of Petroleum Engineers. Mr. Meekins meets or exceeds the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers. Mr. Meekins is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserves definitions and guidelines. ​ Marketing and Major Customers Natural gas marketing is competitive in northeast Pennsylvania because of the limited interstate transportation capacity and ample natural gas supply. We do not currently own any firm transportation on interstate pipelines that would enable us to diversify our natural gas sales to downstream locations. As a result, all of our Pennsylvania gas sales occur in Zone 4 of the Tennessee Gas Pipeline at the Shoemaker Dehy meter, which is the receipt point from the Auburn CF. Epsilon uses a third-party service, ARM Energy Management LLC (“ARM”) for its Pennsylvania natural gas marketing. In this capacity, ARM is responsible for carrying out marketing activities such as submission of nominations, receipt of payments, and submission of invoices. For the year ended December 31, 2025, we sold natural gas through ARM to 34 unique customers. SWN Energy Services Company, LLC accounted for 10% or more of our total revenue. For the year ended December 31, 2024, we sold natural gas through ARM to 33 unique customers. Direct Energy Business Marketing, LLC and EQT Energy, LLC each accounted for 10% or more of our total revenue. In Wyoming, for our operated oil and gas production, two customers accounted for 95.7% of our total revenues. 12 ​ ​ Geographic Locations of Operations Approximately 67% and 50% of our revenue during fiscal years 2025 and 2024, respectively, was derived from natural gas production and gathering system revenues in the state of Pennsylvania. Approximately 19% and 40% of our revenue during fiscal years 2025 and 2024, respectively, was derived from oil, natural gas, and natural gas liquids revenues in the state of Texas. In November 2025, the Company completed the acquisition of oil and gas assets in the Powder River Basin, Wyoming which will materially increase the geographic diversification of our revenues going forward and could provide enhanced flexibility to respond to market conditions by allocating capital across multiple basins and commodities. However, the Company is still subject to geographic concentration, and we may be disproportionately exposed to the effect of regional supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, processing or transportation capacity constraints, market limitations, weather events or interruption of the processing or transportation of crude oil or natural gas. Competition It is not uncommon in the oil and natural gas industry to experience shortages of drilling and completion rigs, equipment, pipe, services, and personnel, which can cause both delays in development drilling activities and significant cost increases. We are exposed to the risk of industry competition for drilling rigs, completion rigs and availability of related equipment and services, among other goods and services required in our business. Employees As of December 31, 2025, we had twenty-seven full-time employees (including executive officers) in Texas, Colorado, and Wyoming. None of our employees are subject to a collective bargaining agreement or represented by a union. The foundation of our Company is our employees and our success begins with a values-driven culture and commitment to developing a skilled, agile, diverse and engaged workforce where every employee understands that they can and do make a difference. Advancing a safe, ethical, inclusive and diverse culture creates an environment that attracts and retains the high-performing workforce needed to successfully execute our strategy. We continue to foster a culture that embraces inclusion and diversity and encourages collaboration. Our core values include inclusion and diversity, and we believe in equity and the value and voice of every employee. Regulation Environmental Regulation Epsilon is subject to various federal, state and local laws and regulations governing the handling, management, disposal and discharge of materials into the environment or otherwise relating to the protection of human health, safety and the environment. Numerous governmental agencies, such as the U.S. Environmental Protection Agency (“EPA”), or the Bureau of Land Management (“BLM”) issue regulations to implement and enforce such laws, which often require difficult and costly compliance measures that carry substantial administrative, civil and criminal penalties or that may result in injunctive relief for failure to comply. These laws and regulations may: ● require the acquisition of various permits before drilling commences; ● restrict the types, quantities and concentrations of various substances, including water and waste, that can be released into the environment; ● limit or prohibit activities on lands lying within wilderness, wetlands and other protected areas; and ● require remedial measures to mitigate pollution from former and ongoing operations, such as requirements to close pits and plug abandoned wells. 13 ​ ​ Compliance with environmental laws and regulations increases Epsilon’s overall cost of business, but has not had, to date, a material adverse effect on Epsilon’s operations, financial condition or results of operations. In addition, it is not anticipated, based on current laws and regulations, that Epsilon will be required in the near future to expend amounts (whether for environmental control facilities or otherwise) that are material in relation to its total exploration and development expenditure program in order to comply with such laws and regulations. However, given that such laws and regulations are subject to change, Epsilon is unable to predict the ultimate cost of compliance or the ultimate effect on Epsilon’s operations, financial condition and results of operations. Climate Change There is consensus in the international scientific community that increasing concentrations of greenhouse gas emissions (“GHG”) in the atmosphere will produce changes to global, as well as local, climate. Scientists project that increased concentrations of GHGs will cause more frequent, and more powerful storms, droughts, floods and other climatic events. If such effects were to occur, our development and production operations, as well as operations of our third-party providers and customers, could be adversely affected. To date, we have not developed a comprehensive plan to address potential impacts of climate change on our operations and there can be no assurance that any such impacts would not have an adverse effect on our financial condition and results of operations. Attempts to address GHGs, as well as climate change more generally, have taken the form of local, state, national and international proposals. Broadly speaking, examples include cap-and-trade programs, carbon tax proposals, GHG reporting and tracking programs, and regulations that directly limit GHGs from certain sources. In the United States, federal proposals are rooted in the EPA’s “endangerment finding,” that was upheld by the Supreme Court. Simply, the EPA has concluded that emissions of carbon dioxide, methane and other GHGs present an endangerment to public health and the environment. For example, the EPA adopted regulations that require Prevention of Significant Deterioration (“PSD”) construction under Title V operating permit reviews for GHG emissions from certain large stationary sources that constitute major sources of emissions. Facilities required to obtain PSD permits for their GHG emissions also will be required to meet “best available control technology” standards. Rules requiring the monitoring and reporting of GHG emissions from designated sources in the United States on an annual basis, including, oil and natural gas production facilities and processing, transmission, storage and distribution facilities, which include certain of our operations, have been adopted. The EPA has expanded the GHG reporting requirements to all segments of the oil and natural gas industry, including gathering and boosting facilities. Federal agencies also have begun directly regulating emissions of methane from natural gas operations. In 2016, the EPA published New Source Performance Standards (“NSPS”), known as Subpart OOOOa, that require certain facilities to reduce methane gas and volatile organic compound emissions. EPA published amendments to those regulations effective September 15, 2020. However, on January 20, 2021, President Biden issued an Executive Order directing EPA to consider suspending, revising or rescinding the September 15, 2020 amendments and also to consider proposing new regulations governing methane and volatile organic compound emissions from existing oil and gas sector operations. In November 2016, the BLM published a final rule to reduce methane emissions by regulating venting, flaring, and leaking from oil and natural gas operations on public lands. A federal district court vacated much of that rule in October 2020 and that decision is now subject to an appeal. Internationally, in April 2016, the United States joined other countries in entering into a non-binding agreement in France for nations to limit their GHG emissions through country-determined reduction goals every five years beginning in 2020 (the “Paris Agreement”). Although the Trump Administration subsequently announced plans to withdraw from the Paris Agreement, on January 20, 2021, President Biden issued an Executive Order providing that he was accepting the Paris Agreement on behalf of the United States. In addition, recent activism directed at shifting funding away from companies with energy-related assets could result in limitations on certain sources of funding for the energy sector. Ultimately, this could make it more difficult to secure funding for exploration and production or midstream activities. Epsilon is unable to predict the timing, scope and effect of any currently proposed or future, laws, regulations or 14 ​ ​ treaties regarding climate change and GHG emissions. Any limits on GHG emissions, however, could adversely affect demand for the oil and natural gas that production operators produce, some of whom are our customers, which could thereby reduce demand for our gas gathering services. We are currently unable to calculate or predict the direct and indirect costs of GHG or climate change related laws, regulations and treaties, and accordingly, we cannot assure you that any such efforts will not have a material impact on our operations, financial condition and results. Hydraulic Fracturing Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons. The process involves the injection of water, sand and chemicals under pressure into formations to fracture the surrounding rock and stimulate production. The process is typically regulated by state oil and natural gas commissions. However, the EPA has asserted federal regulatory authority over certain hydraulic fracturing practices and has finalized a study of the potential environmental impacts of hydraulic fracturing activities. In 2014, the EPA issued an advanced notice of proposed rulemaking under the Toxic Substances Control Act of 1976 requesting comments related to disclosure for hydraulic fracturing chemicals. The Department of the Interior had released final regulations governing hydraulic fracturing on federal and Native American oil and natural gas leases which require lessees to file for approval of well stimulation work before commencement of operations and require well operators to disclose the trade names and purposes of additives used in the fracturing fluids. However, in December 2017, the BLM published a final rule rescinding the March 26, 2015 rule (“BLM 2015 Rule”), entitled “Natural gas and oil; Hydraulic Fracturing on Federal and Indian Lands.” The primary purposes of the BLM 2015 Rule were to ensure that wells were constructed so as to protect water supplies, to ensure environmentally responsible management of fluids displaced by fracturing, and to provide public disclosure of chemicals used in fracturing operations. The net effect of the December 2017 rule making is to return the affected sections of the Code of Federal Regulations to the language that existed before the BLM’s 2015 Rule. In addition, legislation has from time to time been introduced, but not adopted, in Congress to provide for additional federal regulation of hydraulic fracturing and to require additional disclosure of the chemicals used in the fracturing process. In addition, some states have adopted, and other states are considering adopting, regulations that could restrict hydraulic fracturing in certain circumstances. Epsilon is unable to predict the timing, scope and effect of any currently proposed or future laws or regulations regarding hydraulic fracturing in the United States, but there can be no assurance that the direct and indirect costs of such laws and regulations (if enacted) would not materially and adversely affect Epsilon’s operations, financial condition and results of operations. Gathering System Regulation Regulation of gathering facilities may affect certain aspects of Epsilon’s business and the market for Epsilon’s services. Historically, the transportation and sale for resale of natural gas in interstate commerce have been regulated by agencies of the U.S. federal government, primarily the Federal Energy Regulatory Commission, or the FERC. The FERC regulates interstate natural gas transportation rates, terms and conditions of service, which affects the marketing of natural gas produced by Epsilon, as well as the revenues received for sales of Epsilon’s natural gas. The transportation and sale for resale of natural gas in interstate commerce is regulated primarily under the Natural Gas Act, or the NGA, and by regulations and orders promulgated under the NGA by the FERC. In certain limited circumstances, intrastate transportation, gathering, and wholesale sales of natural gas may also be affected directly or indirectly by laws enacted by the U.S. Congress and by FERC regulations. ​ Market for Our Common Equity and Related Stockholder Matters Market Information. Commencing on February 19, 2019, the common shares of the Company trade on the NASDAQ Global Market with the ticker symbol ‘‘EPSN.’’ The last reported sales price of our common shares on the NASDAQ Global Market on March 23, 2026 was $6.00 per share. Shareholders. We had approximately 2,000 shareholders of record as of March 1, 2026. 15 ​ ​ Dividends. Epsilon made aggregate quarterly distributions of $6.0 million ($0.25 per share) during the year ended December 31, 2025. The dividend is well supported and the Company intends to maintain it going forward, subject to quarterly approval by the Board. Securities Authorized for Issuance under Equity Incentive Plans. The following tables set out the number of common shares available to be issued upon exercise of outstanding securities and the changes to the securities outstanding for the year pursuant to our equity compensation plans and the weighted average exercise price of outstanding securities for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Shares to be ​ ​ Weighted Average ​ Number of Shares Remaining ​ ​ Issued Upon Exercise ​ ​ Exercise Price of ​ Available for Future Issuance ​ ​ of Outstanding Options, ​ ​ Outstanding Options, ​ Under Equity Compensation Plans Plan Category ​ Warrants and Rights ​ ​ Warrants and Rights ​ (excluding shares in column (a)) Common shares under 2020 Equity Incentive Plan 781,792 ​ $ 5.15 140,637 ​ At December 31, 2025, under the 2020 Equity Incentive Plan (the “2020 Plan”) (See Note 7, “Shareholders’ Equity” of the Notes to the Consolidated Financial Statements), we are authorized to issue 2,000,000 common shares to employees and directors of the Company. As of that date, we had 1,859,363 common shares granted under the 2020 Plan. The following table sets out the number of time restricted common shares available to be issued upon vesting over the next three years and the changes during the year pursuant to our share compensation plans and the weighted average market price at date of issue for outstanding shares for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ As of ​ ​ December 31, 2025 ​ December 31, 2024 ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Number of ​ Average ​ Number of ​ Average ​ ​ Shares ​ Grant Date ​ Shares ​ Grant Date ​ ​ ​ ​ Outstanding ​ ​ ​ Market Price ​ ​ ​ Outstanding ​ ​ ​ Market Price Balance non-vested Restricted Stock at beginning of period 560,970 ​ $ 5.77 491,536 ​ $ 6.00 Granted 488,283 ​ ​ 4.77 ​ 300,052 ​ ​ 5.97 Vested (267,461) ​ ​ 5.60 (230,618) ​ 5.65 Balance non-vested Restricted Stock at end of period ​ 781,792 ​ $ 5.15 560,970 ​ $ 5.77 ​ ​ Recent Developments Business Combination ​ 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. The acquired Proved Reserves include 16.8 Bcf of natural gas, 8.2 MMBbls of oil, and 2.0 MMBbls of natural gas liquids, according to the report by Cawley Gillespie & Associates as of December 31, 2025. As part of the acquisition, the Company added 17 full-time employees from Peak. ​ The results of operations attributable to the Peak acquisition have been included in the Company’s consolidated financial statements as of the closing date of the acquisition. 16 ​ ​ ​ ​ Asset Sale ​ On December 11, 2025, Epsilon divested Dewey Energy Holdings, LLC, a wholly owned subsidiary of the Company to an undisclosed private buyer for $2.5 million. The assets sold included approximately 964 Mcfe/d (60% natural gas) of production (Q4 2025 figure) and approximately 6,400 net deep acres and 2,200 net shallow acres of leasehold, all located in Dewey County, Oklahoma. ​ Credit Facility ​ On October 10, 2025, the Company closed a new senior secured reserve based revolving credit facility with Frost Bank as administrative agent and Frost Bank and Texas Capital Bank as lenders. This replaced the Company’s previous credit facility. As of December 31, 2025, the borrowing base was $80 million, supported by the Company’s producing reserves and is subject to semi-annual redeterminations with a maturity date of October 10, 2029. Interest will be charged at the 3-month Term SOFR rate plus a margin of 3-4% (depending on facility utilization), payable quarterly. The facility is secured by the assets of the Company’s Epsilon Energy USA subsidiary. During March 2026, the Company made a $5 million repayment on the outstanding credit facility. The current balance as of March 25, 2026 is $45.5 million. ​ ​ ​ ​