Epsilon Energy (NASDAQ:EPSN) management highlighted significant year-over-year growth in 2025 and laid out an expanded multi-basin development plan for 2026 and beyond, following the late-year acquisition of Peak Companies. On the company’s year-end earnings call, executives also discussed capital returns, hedging posture, asset sales designed to boost liquidity, and the evolving economics of its drilling inventory across the Powder River Basin, the Permian Barnett position, and the Marcellus.
2025 performance and reserve growth
Chief Executive Officer Jason Stabell said Epsilon delivered “a standout year,” with Adjusted EBITDA up 75% and production up 54% year-over-year. He attributed the company’s step-change in scale to a combination of development drilling and the Peak acquisition, which closed in the fourth quarter.
Peak acquisition integration and Powder River Basin focus
Chief Financial Officer Andrew Williamson provided additional detail on the Peak closing, noting it occurred on November 14, 2025, with release of contingent consideration a few days later. He said Bureau of Land Management permitting issues affecting acquired acreage in Converse County were resolved around closing, and that the BLM resumed approvals in the impacted area.
Williamson said Epsilon now has seven approved drilling permits providing access to Converse County acreage that management views as some of the best inventory in the basin. He said the company plans to begin developing the area next year, with certain front-end facilities work to be completed this year.
Stabell also reminded investors that, beyond the higher-return Parkman inventory discussed previously, Epsilon acquired “several hundred” locations in the Niobrara and Mowry formations. While management characterized average expected returns in those formations as currently below Parkman, Stabell said the inventory represents a “material wedge of value” acquired at less than $250,000 per location and could improve as the company scales operations and extends lateral lengths, particularly if oil remains above $70.
2026 development plans across key assets
Clanton outlined Epsilon’s planned 2026 activity by operating area:
- Powder River Basin (Wyoming): Epsilon has initiated completion operations on two 2-mile Niobrara wells (0.7 net working interest), with expected net capital expenditures of about $6 million including facility build-out. The fracture stimulation is scheduled for the second quarter. The company also plans to drill three 2-mile Parkman laterals (2.8 net) beginning in the third quarter, with production expected online in the fourth quarter, and estimated net CapEx of about $22 million.
- Parkman 2027–2028 preparation: To support a planned 2027–2028 program in Converse County that includes 12 gross wells, Epsilon expects to build a water supply and impoundment facility to reduce development costs.
- Permian Barnett asset: Management said project management and operatorship has changed, and the development plan is shifting toward three-mile laterals with four wells per pad along a development corridor. Clanton said the new operator is also planning a multi-well production battery and a water recycling facility, which Epsilon expects will drive cost savings. The first 3-mile Barnett well was drilled during the month of the call; completion planning is underway with the well expected online near mid-year. Net CapEx for drilling and completion of that well is expected to be approximately $4 million. Clanton said preliminary discussions indicate three additional wells (0.75 net) could be drilled in the second half of the year, including two Barnett 3-milers and a Woodford appraisal test that could expand inventory if successful.
- Marcellus: Development activity is restarting, with well proposals received for five wells (0.4 net) beginning in early second quarter. Completions are scheduled for the second half of the year, with expected net CapEx of about $4 million.
- Canada: No 2026 activity is planned.
Pricing, hedging, and operating cost initiatives
Management pointed to favorable early-2026 commodity realizations. Stabell said that in late January the company captured “extremely favorable” natural gas pricing in Pennsylvania, generating over $4.8 million in net natural gas sales in a single week, including one day with sales above $66 per MMBtu.
Stabell said current proved developed producing (PDP) volumes are about 60% hedged for the remainder of the year, while incremental oil volumes expected to be added beginning in the second quarter are unhedged, which he said provides upside exposure.
Clanton also described a lease operating expense optimization effort in Wyoming, including downsizing gas lift compressors (12 planned), reducing chemical treating costs per barrel, and optimizing power usage. He estimated monthly savings from the initiatives at $50,000 to $100,000 gross per month, with no expected impact to production.
Liquidity actions, one-time items, and capital return priorities
Williamson said 2025 results included several one-time items, including $6.9 million of transaction costs related to the Peak acquisition. He noted that about half of those costs were expenses assumed from Peak that were unrelated to the deal and were adjusted for in the share consideration issued at closing. He also cited impairments related to wellbores in Canada and New Mexico, attributing those impacts to the oil price strip used at year-end (sub-$60 WTI), reserve revisions tied to a “frack hit” in New Mexico (where the company holds 10% interests in two wellbores), and underperformance in Canada.
In Canada, Williamson said Epsilon spent $11 million over the past two years, including about $4.5 million to earn into a position of over 100,000 net acres that management views as having “great option value,” though he said the area does not currently compete for capital based on results to date.
Williamson also discussed the sale of Oklahoma assets, describing the loss on sale as a major adjustment to reported results, but stating that when combining cash received at closing with cash tax savings, the deal generated over 8x the expected 2026 cash flow from those assets. He said the company used proceeds to pay down debt, including a $5 million reduction in the first quarter.
Adjusting for the items described, Williamson said the company earned $0.92 per share in 2025. Looking ahead, he said Epsilon is pursuing steps to increase liquidity given a larger capital program, including marketing an overriding royalty interest package in the Marcellus and selling a Colorado office building acquired with Peak. Stabell added that the office building is under contract for $3 million and he expects it to close in the second quarter. On the royalty package, management characterized it as a small production interest (less than 1 MMcf/d) outside the core Auburn area, and said the company is conducting a market test and will evaluate bids before deciding whether to proceed.
Stabell also emphasized shareholder return priorities, noting the board declared its 17th consecutive quarterly dividend and renewed a share repurchase program covering up to 10% of shares outstanding. He said the company is targeting an average annual leverage ratio below 1.5x while maintaining a fixed dividend and pursuing per-share growth in EPS, EBITDA, and production over the next few years.
About Epsilon Energy (NASDAQ:EPSN)
Epsilon Energy (NASDAQ: EPSN) is an independent exploration and production company specializing in the acquisition, development and production of unconventional and conventional oil and natural gas properties. Originally founded as Brewster Energy in 2002 and rebranded to Epsilon Energy in 2011, the company pursues a disciplined approach to resource development, leveraging its technical expertise to optimize well performance and manage operational costs.
The company’s core asset base is concentrated in the Appalachian Basin, where it holds acreage in key shale formations across Pennsylvania, West Virginia and Ohio.
