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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's Q3 2025 Earnings: A Strategic Milestone

Epsilon Energy reported adjusted earnings of $0.09 per share, beating analyst estimates of $0.03 per share. The company's year-to-date adjusted earnings stand at $0.45 per share, driven by new wells in Pennsylvania. While revenue figures were not explicitly stated, the company's operational performance and strategic milestones suggest a strong financial foundation.

Publication Date: Dec -02

📋 Highlights
  • Powder River Basin Acquisition:: Epsilon to acquire Peak companies via 8.5M shares, adding 111 net priority locations and oil-weighted production, pending shareholder approval on November 12.
  • Permian Well Performance:: Eighth well generated $18M operating cash flow since inception, with $42M invested, starting production late Q3 2025.
  • 2026 Hedging Strategy:: 60% of PDP oil and 50% gas volumes hedged, supported by a new credit facility extending to Q4 2029.
  • Acquisition Value Metrics:: Purchase priced at < $900/acre or $300K/priority location, deemed a discount to market value.
  • Future Focus Areas:: 2026 integration efforts and 2027 transformational goals, with Marcellus holding >15 undrilled locations and Parkman conventional inventory prioritized.

Operational Highlights

The company participated in the drilling and completion of its eighth well in the Permian, which commenced production late in the quarter. The asset has generated over $18 million in operating cash flow since inception, with approximately $42 million invested. The acquisition of Peak companies with operated assets in the Powder River Basin is expected to add an experienced operating team, oil-weighted production, and a significant inventory of economic locations.

Strategic Acquisition

The acquisition of Peak companies is a significant strategic milestone for Epsilon Energy, with the deal expected to close shortly after the shareholder vote on November 12. The acquisition price of less than $900 per acre or $300,000 per priority location is seen as a discount to market value. The company plans to hit the ground running post-close, with a focus on optimizing production and reducing downtime in the Powder River Basin.

Valuation and Outlook

With a P/E Ratio of 20.56 and an EV/EBITDA of 4.36, Epsilon Energy's valuation suggests a moderate growth premium. Analysts estimate next year's revenue growth at 61.0%, which could potentially drive the stock's performance. The company's hedge book has been updated, with 60% of PDP oil volumes hedged, and 50% of gas hedged, providing a degree of protection against market volatility. The company's focus on integration and execution in 2026 is expected to set the stage for transformational results in 2027 under the right market conditions.

Management's Perspective

Epsilon's management team expressed excitement about the deal, citing a strong alignment of cultures with the Peak team and complementary skill sets. The company plans to begin planning for investments in the Marcellus position, which still holds over 15 gross undrilled locations. With a strong operating team and solid PDP, Epsilon Energy is well-positioned for future growth.

3. NewsRoom

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Epsilon Energy Ltd. Announces Quarterly Dividend

Nov -26

Source: globenewswire.com

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Epsilon Announces the Issuance of Contingent Shares as Consideration for the Acquisition of Peak BLM Lease LLC

Nov -20

Source: globenewswire.com

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Epsilon Announces the Closing of the Acquisitions of the Peak Companies With Assets in the Powder River Basin

Nov -14

Source: globenewswire.com

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Epsilon Energy Ltd. (EPSN) Q3 2025 Earnings Call Transcript

Nov -06

Source: seekingalpha.com

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Epsilon Energy Ltd. Schedules Third Quarter 2025 Earnings Release and Conference Call

Oct -23

Source: globenewswire.com

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3 Attractive Dividend Stocks To Buy Under $10

Oct -20

Source: 247wallst.com

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Epsilon Announces New and Revised Senior Secured Reserve-Based Revolving Credit Facility

Oct -13

Source: globenewswire.com

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Epsilon Energy Ltd. (EPSN) Q2 2025 Earnings Call Transcript

Aug -14

Source: seekingalpha.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: 6.1/10

Value: 6.1

Growth: 7.1

Quality: 5.9

Yield: 10.0

Momentum: 3.5

Volatility: 4.0

1-Year Total Return ->

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PHX Minerals

A-Score: 6.1/10

Value: 4.3

Growth: 2.0

Quality: 6.6

Yield: 7.0

Momentum: 9.0

Volatility: 7.7

1-Year Total Return ->

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Stock-Card
PrimeEnergy Resources

A-Score: 5.4/10

Value: 6.3

Growth: 8.9

Quality: 7.2

Yield: 0.0

Momentum: 7.0

Volatility: 2.7

1-Year Total Return ->

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Stock-Card
Berry

A-Score: 4.9/10

Value: 7.3

Growth: 4.6

Quality: 4.2

Yield: 9.0

Momentum: 1.5

Volatility: 3.0

1-Year Total Return ->

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Stock-Card
HighPeak Energy

A-Score: 4.8/10

Value: 7.7

Growth: 9.4

Quality: 5.5

Yield: 3.0

Momentum: 0.0

Volatility: 3.0

1-Year Total Return ->

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Stock-Card
Epsilon Energy

A-Score: 4.7/10

Value: 5.7

Growth: 2.7

Quality: 6.4

Yield: 7.0

Momentum: 1.0

Volatility: 5.7

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

4.95$

Current Price

4.95$

Potential

-0.00%

Expected Cash-Flows