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1. Company Snapshot

1.a. Company Description

Epsilon Energy Ltd., a natural gas and oil company, engages in the acquisition, development, gathering, and production of oil and gas reserves in the United States.It operates through Upstream and Gathering System segments.The Company has natural gas production in the Marcellus in Pennsylvania; and oil, natural gas liquids (NGL), and natural gas production in the Anadarko Basin in Oklahoma.


As of December 31, 2021, it had total estimated net proved reserves of 110,969 million cubic feet of natural gas reserves, 819,726 barrels of NGL, and 305,052 barrels of oil and other liquids.Epsilon Energy Ltd.was incorporated in 2005 and is based in Houston, Texas.

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1.b. Last Insights on EPSN

Epsilon Energy Ltd.'s recent performance was driven by several positive factors. The company's Board of Directors declared a dividend of $0.0625 per share, providing a return to shareholders. Additionally, the Board approved a new one-year share repurchase program, authorizing the purchase of up to 2,200,876 common shares, representing 10% of outstanding shares, for an aggregate purchase price of not more than $13.0 million. This share buyback program is a positive event, as it reduces the number of outstanding shares and benefits shareholders. Strong cash flow and a healthy cash balance also contributed to the company's growth prospects.

1.c. Company Highlights

2. Epsilon Energy Q4 2025: A Surge in Production and Cash Flow

In 2025, Epsilon Energy delivered a record‑breaking year, with adjusted EBITDA soaring 75% and production up 54% YoY. Net earnings rose to $0.21 per share versus analyst consensus of $0.04, underscoring the company’s ability to convert operational upside into shareholder value. The company reported a single‑week gas sales haul of $4.8 million in Pennsylvania, a testament to its strategic pricing advantage. As cited by the management, “the favorable gas pricing in Pennsylvania has generated over $4,800,000 in net natural gas sales in a single week,” a clear driver of the robust cash flow profile. With reserves climbing to 156 Bcfe—primarily from the Powder River Basin acquisition—Epsilon’s asset base is expanding rapidly, positioning it for sustained growth. The P/E ratio of –27.77 reflects current losses, while an EV/EBITDA of 6.61 indicates moderate valuation relative to peers.

Publication Date: Apr -22

📋 Highlights
  • Adjusted EBITDA & Production Growth:: Achieved 75% year-over-year adjusted EBITDA growth and 54% production increase in 2025.
  • PEEP Acquisition Impact:: Added 78 Bcfe to total reserves (156 Bcfe total) and over 100 net high-return drilling locations in Powder River Basin.
  • Gas Pricing Performance:: Generated $4,800,000 in weekly net natural gas sales in Pennsylvania due to favorable pricing.
  • Inventory Returns at $75 WTI:: Parkman returns of 150% (10-month payout) and Converse returns exceeding 200% (8-month payout) projected.
  • Asset Optimization:: Selling a $3,000,000 office building (under contract) and testing Marcellus overriding royalty sales (1,000,000 cubic feet/day production).

Financial Highlights

Revenue growth was underpinned by a 60% hedge of PDP production, mitigating commodity risk. Net natural gas sales surged, and the company’s free cash flow yield stands at 3.76%, reinforcing its capacity to service debt and fund expansion. The negative P/E signals that earnings remain volatile, but the strong EBITDA margin of 18% suggests operational efficiency is improving.

Operational Momentum

Epsilon’s fourth‑quarter production was amplified by the completion of the PEEP acquisition, adding over 100 high‑rate drilling locations and a seasoned Powder River Basin team. The company is now executing two-mile Niobrara DUC completions with a net CapEx of $6 million, while planning three two‑mile laterals in Parkman, projected to go online in Q4. These initiatives are expected to accelerate throughput and enhance margin profiles.

Strategic Acquisitions

The acquisition of Powder River Basin assets added 78 Bcfe of reserves and positioned Epsilon in a high‑return play. The company’s focus on Parkman and Niobrara reflects a broader strategy to capitalize on the industry’s shift to longer laterals, which improves economics by up to 3x. The management also highlighted ongoing portfolio optimization, including the sale of an office building in the Peak deal for $3 million, freeing capital for core inventory.

Future Outlook

Looking ahead, Epsilon plans to accelerate development in the Permian Barnett and Marcellus basins while maintaining a 60% hedged position for the rest of the year. The Auburn Gathering System is expected to channel the majority of new volumes, driving capital‑efficient cash flow growth. Management anticipates that oil prices above $70 will significantly improve inventory returns, with Parkman projected to deliver 150% ROI over 10 months.

Valuation Considerations

Despite a negative P/E, the company’s EV/EBITDA of 6.61 suggests a modest premium for growth prospects. With a P/B ratio of 1.07 and a dividend yield of 2.09%, investors can view Epsilon as a potentially undervalued play in the energy sector, provided commodity prices remain supportive and execution on development plans continues unabated.

3. NewsRoom

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Epsilon Energy Ltd. Schedules First Quarter 2026 Earnings Release and Conference Call

Apr -23

Source: globenewswire.com

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Epsilon Energy Q4 Earnings Call Highlights

Mar -27

Source: defenseworld.net

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Epsilon Energy Ltd. (EPSN) Q4 2025 Earnings Call Transcript

Mar -25

Source: seekingalpha.com

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Epsilon Announces Full Year 2025 Results

Mar -24

Source: globenewswire.com

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Epsilon Energy: Rising Energy Prices Bode Well For Upcoming Q4 Earnings And Beyond

Mar -12

Source: seekingalpha.com

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Epsilon Energy (EPSN) to Release Quarterly Earnings on Wednesday

Mar -11

Source: defenseworld.net

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Epsilon Energy (NASDAQ:EPSN) Announces Share Repurchase Program

Feb -27

Source: defenseworld.net

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Epsilon Energy Ltd. Announces New Share Repurchase Program

Feb -26

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.79%)

6. Segments

Upstream

Expected Growth: 4.8%

Increasing global energy demand, advancements in drilling technologies, and rising investments in exploration and production activities drive growth in the upstream oil and gas segment.

Gas Gathering

Expected Growth: 4.8%

Increasing demand for natural gas, advancements in drilling technologies, and growing investments in midstream infrastructure drive the growth of the gas gathering segment. Epsilon Energy Ltd.'s strategic partnerships and expanding operations in key regions also contribute to the segment's growth.

Elimination

Expected Growth: 4.5%

Epsilon Energy Ltd.'s elimination of non-core assets is expected to drive growth through optimized operations, reduced costs, and improved profitability, leading to increased investor confidence and competitiveness in the energy market.

7. Detailed Products

Crude Oil

Epsilon Energy Ltd. extracts and refines crude oil for various industrial and commercial applications.

Natural Gas

Epsilon Energy Ltd. explores, produces, and distributes natural gas for power generation, industrial processes, and residential heating.

Petroleum Products

Epsilon Energy Ltd. refines and markets petroleum products such as gasoline, diesel, jet fuel, and lubricants.

Renewable Energy

Epsilon Energy Ltd. invests in and develops renewable energy sources such as wind, solar, and hydroelectric power.

Energy Storage

Epsilon Energy Ltd. develops and provides energy storage solutions for renewable energy systems and grid stabilization.

Energy Consulting

Epsilon Energy Ltd. provides energy consulting services for energy efficiency, sustainability, and risk management.

8. Epsilon Energy Ltd.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Epsilon Energy Ltd. is moderate due to the availability of alternative energy sources such as solar and wind power.

Bargaining Power Of Customers

The bargaining power of customers is low for Epsilon Energy Ltd. as the company operates in a niche market with limited competition.

Bargaining Power Of Suppliers

The bargaining power of suppliers is high for Epsilon Energy Ltd. as the company relies heavily on a few key suppliers for its operations.

Threat Of New Entrants

The threat of new entrants is low for Epsilon Energy Ltd. due to the high barriers to entry in the energy industry.

Intensity Of Rivalry

The intensity of rivalry is moderate for Epsilon Energy Ltd. as the company operates in a competitive market with several established players.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 0.56%
Debt Cost 5.87%
Equity Weight 99.44%
Equity Cost 5.87%
WACC 5.87%
Leverage 0.56%

11. Quality Control: Epsilon Energy Ltd. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Vitesse Energy

A-Score: 6.2/10

Value: 6.4

Growth: 7.1

Quality: 5.5

Yield: 10.0

Momentum: 2.0

Volatility: 6.3

1-Year Total Return ->

View Full Report
Stock-Card
Berry

A-Score: 5.5/10

Value: 8.7

Growth: 4.6

Quality: 4.4

Yield: 9.0

Momentum: 3.0

Volatility: 3.3

1-Year Total Return ->

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Stock-Card
PrimeEnergy Resources

A-Score: 5.3/10

Value: 7.1

Growth: 8.8

Quality: 6.8

Yield: 0.0

Momentum: 6.0

Volatility: 3.3

1-Year Total Return ->

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Stock-Card
PHX Minerals

A-Score: 5.3/10

Value: 4.9

Growth: 2.0

Quality: 6.9

Yield: 4.0

Momentum: 9.0

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
HighPeak Energy

A-Score: 5.1/10

Value: 8.4

Growth: 9.4

Quality: 5.6

Yield: 5.0

Momentum: 0.5

Volatility: 2.0

1-Year Total Return ->

View Full Report
Stock-Card
Epsilon Energy

A-Score: 4.9/10

Value: 5.8

Growth: 2.7

Quality: 6.4

Yield: 8.0

Momentum: 1.5

Volatility: 5.3

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

6.06$

Current Price

6.06$

Potential

-0.00%

Expected Cash-Flows