Epsilon Energy Ltd. Q2 FY2025 earnings call

• Acquisition of Peak Companies: Adds oil-weighted production and a massive operated inventory in the Powder River Basin (PRB), with approximately 75% held by production. Near-term activities focus on the Parkman formation with estimated 14 net Parkman 2-mile laterals and 90 net 2-mile locations in the Niobrara and Mowry. - Second quarter: Production was flat, cash flows down 30% quarter-over-quarter due to lower realized pricing for gas and oil. - PRB assets: Add operational control and have a production base with relatively early-life producing wells (majority <10 years old) and a forecasted base annual decline rate of approx. 15%. - Marcellus: Expect drilling activity to restart in 2026 with 7 gross, 1.2 net wells on 2 pads, production in Q4 2026. - Permian Barnett: Eighth well in the project placed on production, with plans to drill at least 2 additional gross wells next year. - Joint venture: Impairment due to drilling and completion cost overruns and early well inflow performance below expectations, but ongoing technical collaboration for improved location selection and planning moving forward.

Production was roughly flat in the second quarter, driven by new production in the Marcellus starting in the first quarter. Realized pricing for gas and oil was down meaningfully quarter-over-quarter, leading to a roughly 30% quarter-over-quarter decline in cash flows. The acquisition of the Peak Companies added approximately 2,200 net barrels of oil equivalent of daily production, with 56% being oil and greater than 90% of the PDP value held within operated wells. In the Marcellus, drilling activity is expected to start again in 2026 with plans to drill 7 gross, 1.2 net wells on 2 pads, with production scheduled to come online in Q4 2026. In the Permian Barnett project, the operating partner has successfully drilled, completed, and placed on production the eighth well, and preliminary development plans for next year include drilling at least 2 additional gross wells.

• Post-acquisition, the leverage profile allows comfortably maintaining existing per share dividend and has sufficient discretionary cash flow to drive growth through a development plan covering Marcellus, Permian, and PRB starting next year. - Marcellus expects drilling activity to start in 2026. - Permian Barnett project plans to drill at least 2 additional gross wells in 2026.

• Converse County drilling permit moratorium: Approximately 30% of identified priority inventory is affected, with contingent consideration of up to 2.5 million Epsilon common shares payable when accessing affected acreage; if access is delayed beyond year-end '26, the contingent shares consideration will decrease. - Joint venture impairment: Drilling and completion cost overruns and early well inflow performance below expectations pose risks.