Financial Data and Key Metrics Changes - The company reported a cash flow decrease of approximately 30% quarter over quarter due to significantly lower realized pricing for gas and oil [13] - Proved reserves increased by over 150% based on third-party reports, with liquids production rising by over 200% and priority inventory count increasing by over 600% [12] Business Line Data and Key Metrics Changes - The acquisition of the Peak Companies adds approximately 2,200 net barrels of oil equivalent daily production, with 56% being oil [15] - The company plans to develop three high working interest Parkman wells in the first quarter of the following year, subject to the closing timeline of the transactions [15] Market Data and Key Metrics Changes - Approximately 30% of the identified priority inventory is currently affected by a drilling permit moratorium in Converse County, Wyoming, but the company is optimistic about the moratorium being lifted soon [7] Company Strategy and Development Direction - The acquisition of the Peak Companies is seen as a strategic move to enhance the company's asset base and operational control, providing opportunities for both organic and inorganic growth [5] - The company aims to maintain its existing per share dividend while having sufficient discretionary cash flow to drive growth through a development plan covering multiple regions starting next year [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the regulatory environment and the potential lifting of the drilling permit moratorium, which would allow access to additional inventory [7] - The company anticipates that the addition of the Peak asset base will enhance capabilities and control to add per share value [7] Other Important Information - The transaction consideration includes the issuance of 6,000,000 Epsilon common shares and the assumption of approximately $49 million of long-term debt [9] - The company plans to file a proxy statement in the fall with additional details on the transaction and financial position of the pro forma business [12] Q&A Session Summary - No specific questions or answers were documented in the provided content, indicating that the Q&A session was brief or not detailed in the records [20]

Group 1: Earnings Performance - Epsilon Energy Ltd. reported quarterly earnings of $0.07 per share, missing the Zacks Consensus Estimate of $0.08 per share, representing an earnings surprise of -12.50% [1] - The company posted revenues of $11.63 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 1.9%, compared to year-ago revenues of $7.31 million [2] - Over the last four quarters, Epsilon Energy has surpassed consensus EPS estimates just once and topped consensus revenue estimates two times [2] Group 2: Stock Performance and Outlook - Epsilon Energy shares have added about 2.4% since the beginning of the year, underperforming the S&P 500's gain of 9.6% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $0.03 on $11.5 million in revenues, and $0.34 on $50.87 million in revenues for the current fiscal year [7] Group 3: Industry Context - The Zacks Industry Rank for Oil and Gas - Integrated - United States is currently in the bottom 17% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor decisions [5] - The estimate revisions trend for Epsilon Energy was unfavorable ahead of the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, suggesting expected underperformance in the near future [6]

[Membership Interest Purchase Agreement Overview](index=1&type=section&id=Membership%20Interest%20Purchase%20Agreement) This agreement outlines the sale of PEAK EXPLORATION & PRODUCTION, LLC's membership interests to EPSILON ENERGY USA, INC. [Parties to the Agreement](index=1&type=section&id=Parties%20to%20the%20Agreement) This section identifies the key parties to the agreement, including Sellers, Purchaser, and their respective parent entities - The agreement details the sale of **all issued and outstanding interests** of PEAK EXPLORATION & PRODUCTION, LLC[14](index=14&type=chunk) Key Parties in the Transaction | Role | Entity Name | | :--- | :--- | | **Sellers** | Various entities and individuals listed in Annex I | | **Company Being Sold** | PEAK EXPLORATION & PRODUCTION, LLC | | **Purchaser** | EPSILON ENERGY USA, INC. | | **Purchaser Parent** | EPSILON ENERGY LTD. | | **Sellers' Representative** | YORKTOWN ENERGY PARTNERS XI, L.P. | [ARTICLE 1: DEFINITIONS AND INTERPRETATION](index=8&type=section&id=ARTICLE%201%20DEFINITIONS%20AND%20INTERPRETATION) This article establishes the definitions for capitalized terms and provides rules for agreement interpretation [Section 1.1: Defined Terms](index=8&type=section&id=Section%201.1%20Defined%20Terms) This section specifies that capitalized terms are **primarily defined in Appendix A** and apply consistently throughout the document - Capitalized terms used in the agreement are **primarily defined in Appendix A**[17](index=17&type=chunk) [Section 1.2: References and Rules of Construction](index=8&type=section&id=Section%201.2%20References%20and%20Rules%20of%20Construction) This section provides guidelines for interpreting the agreement, covering references, common terms, and accounting principles - All references to Exhibits, Annexes, Schedules, and Appendices are incorporated into the agreement[19](index=19&type=chunk) - The term "made available to Purchaser" means documents were posted to the Data Room **at least two business days before the Execution Date**[19](index=19&type=chunk) [ARTICLE 2: PURCHASE AND SALE](index=9&type=section&id=ARTICLE%202%20PURCHASE%20AND%20SALE) This article details the core transaction of selling Company Interests and establishes the financial effective time [Section 2.1: Purchase and Sale](index=9&type=section&id=Section%202.1%20Purchase%20and%20Sale) This section outlines the core transaction where Sellers transfer Company Interests to Purchaser **free and clear of encumbrances** - Sellers agree to sell the Company Interests to the Purchaser, and the Purchaser agrees to buy them at Closing[21](index=21&type=chunk) [Section 2.2: Effective Time](index=9&type=section&id=Section%202.2%20Effective%20Time) This section establishes the financial effective time for asset transfer as **12:01 a.m., Mountain Time, on January 1, 2025** - The financial effective time of the transaction is set for **12:01 a.m., Mountain Time, on January 1, 2025**[22](index=22&type=chunk) [ARTICLE 3: PURCHASE PRICE](index=9&type=section&id=ARTICLE%203%20PURCHASE%20PRICE) This article defines the purchase price, its allocation for tax purposes, and various adjustments [Section 3.1: Purchase Price](index=9&type=section&id=Section%203.1%20Purchase%20Price) The purchase price is **5,800,000 common shares** of Purchaser Parent, subject to **proportionate adjustment** Unadjusted Purchase Price | Consideration Type | Amount | | :--- | :--- | | Purchaser Parent Common Stock | 5,800,000 shares | - The number of shares is subject to **proportionate adjustment** for events like stock splits, dividends, or mergers involving Purchaser Parent stock before closing[24](index=24&type=chunk)[25](index=25&type=chunk) [Section 3.2: Allocation of Purchase Price](index=10&type=section&id=Section%203.2%20Allocation%20of%20Purchase%20Price) This section details the purchase price allocation for tax purposes, based on the **60-day volume-weighted average price (VWAP)** of Purchaser Parent stock - The purchase price will be allocated among the assets according to the methodologies in Schedule 3.2 and **IRS Code Section 1060**[26](index=26&type=chunk) - For tax purposes, the Purchaser Parent Common Stock will be valued using the **60-day volume-weighted average price (VWAP)** prior to the Closing Date[26](index=26&type=chunk) [Section 3.3: Adjustments to Purchase Price](index=10&type=section&id=Section%203.3%20Adjustments%20to%20Purchase%20Price) This section outlines upward and downward adjustments to the purchase price, converted into Purchaser Parent shares - The Unadjusted Purchase Price will be adjusted upward for the **appraised value of the Durango Building**[29](index=29&type=chunk) - Downward adjustments include reductions for title/environmental defects, suspense funds, leakage, company transaction expenses exceeding the Fee Cap, and the value of Purchaser's non-oil and gas real estate in Pennsylvania[29](index=29&type=chunk) - All dollar-based adjustments will be converted to an equivalent number of Purchaser Parent shares using the **60-day VWAP** prior to closing[28](index=28&type=chunk) [Section 3.4: Allocated Values](index=11&type=section&id=Section%203.4%20Allocated%20Values) This section specifies "Allocated Values" for assets, used for defect thresholds but not for purchase price adjustments - Allocated Values for assets are listed in Schedule 3.4 and are used to determine if the **Individual Defect Threshold** and **Aggregate Defect Deductible** are met[30](index=30&type=chunk)[31](index=31&type=chunk) - Sellers do not represent or warrant the accuracy of the Allocated Values[31](index=31&type=chunk) [ARTICLE 4: TITLE AND ENVIRONMENTAL MATTERS](index=12&type=section&id=ARTICLE%204%20TITLE%20AND%20ENVIRONMENTAL%20MATTERS) This article outlines the processes for identifying, notifying, and adjusting for title and environmental defects [Section 4.1: Sellers' and the Company Group's Title](index=12&type=section&id=Section%204.1%20Sellers'%20and%20the%20Company%20Group's%20Title) This section disclaims Sellers' title warranties, limiting Purchaser's **sole remedy** to the adjustment process or special warranty - Sellers expressly disclaim any representation or warranty regarding title to the assets, except for the special warranty in Section 6.25[32](index=32&type=chunk) - Purchaser's **sole remedy** for title defects is the adjustment process defined in this Article 4 before the Claim Date, and the special warranty thereafter[32](index=32&type=chunk) [Section 4.2: Notice of Title Defects; Title Defect Adjustments](index=13&type=section&id=Section%204.2%20Notice%20of%20Title%20Defects%3B%20Title%20Defect%20Adjustments) This section details the procedure for Purchaser to claim Title Defects, including notice, cure rights, and adjustment - Purchaser must deliver a Title Defect Notice to Sellers' Representative no later than **5:00 p.m. Mountain Time, 45 days after the Execution Date (the "Claim Date")**[35](index=35&type=chunk) - Sellers have a "**Cure Period**" ending **two business days before the Closing Date** to attempt to cure any asserted Title Defects at their own expense[36](index=36&type=chunk) - The "**Title Defect Amount**" is calculated based on specific methodologies, such as the cost to remove a lien or a formula based on the reduction in Net Revenue Interest or Net Mineral Acres[42](index=42&type=chunk)[43](index=43&type=chunk) [Section 4.3: Title Benefits](index=15&type=section&id=Section%204.3%20Title%20Benefits) This section allows Sellers to assert Title Benefits, which offset downward purchase price adjustments from Title Defects - Sellers can assert **Title Benefits** by delivering a **Title Benefit Notice** on or before the Claim Date[44](index=44&type=chunk) - Title Benefit Amounts are used only as an **offset against Title Defect Amounts** and do not result in an upward adjustment to the Unadjusted Purchase Price[46](index=46&type=chunk) [Section 4.4: Notice of Environmental Defects; Environmental Defect Adjustments](index=17&type=section&id=Section%204.4%20Notice%20of%20Environmental%20Defects%3B%20Environmental%20Defect%20Adjustments) This section outlines the process for addressing Environmental Defects, including notice, cure rights, and Purchaser's disclaimers - Purchaser must deliver an **Environmental Defect Notice** by the Claim Date, detailing the alleged defect, affected assets, and a calculation of the **Remediation Amount**[50](index=50&type=chunk) - The remedy for an uncured Environmental Defect is a reduction in the Unadjusted Purchase Price by the **Remediation Amount**, subject to applicable thresholds[56](index=56&type=chunk) - Purchaser acknowledges the assets have been used for **oil and gas operations** and may contain hazardous substances like **NORM and asbestos**, waiving claims except as provided in this article[59](index=59&type=chunk) [Section 4.5: Limitations on Applicability](index=20&type=section&id=Section%204.5%20Limitations%20on%20Applicability) This section establishes financial thresholds for Title and Environmental Defect claims, including **individual and aggregate deductibles** Defect Claim Thresholds | Threshold Type | Amount | Description | | :--- | :--- | :--- | | **Individual Defect Threshold** | **$75,000** | No adjustment for any single Title or Environmental Defect below this amount | | **Aggregate Defect Deductible** | **$1,000,000** | No adjustments unless the total of all qualifying defects exceeds this amount. Purchaser is then entitled to adjustments only for the amount in excess of the deductible | [Section 4.6: Title and Environmental Disputes](index=20&type=section&id=Section%204.6%20Title%20and%20Environmental%20Disputes) This section provides an **exclusive dispute resolution mechanism** for title and environmental disagreements via a **neutral Consultant** - Disputes over title or environmental matters that cannot be resolved by the parties before Closing will be submitted to a **neutral Consultant** for a final and binding resolution[64](index=64&type=chunk) - The Consultant will be an experienced attorney for title disputes or an environmental attorney for environmental disputes[66](index=66&type=chunk) - The dispute resolution process is **not intended to delay the Closing**; adjustments for disputed matters will be made post-Closing based on the Consultant's decision[72](index=72&type=chunk) [Section 4.7: Casualty or Condemnation Loss](index=22&type=section&id=Section%204.7%20Casualty%20or%20Condemnation%20Loss) This section addresses **Casualty Losses**, requiring Purchaser to close without price reduction and receive related **insurance proceeds and condemnation awards** - If a **Casualty Loss** occurs before Closing, the Purchaser must still close the transaction with **no reduction to the purchase price**[73](index=73&type=chunk) - Upon Closing, Purchaser becomes entitled to all **insurance proceeds and condemnation awards** related to the **Casualty Loss**[73](index=73&type=chunk) [ARTICLE 5: REPRESENTATIONS AND WARRANTIES OF SELLERS](index=22&type=section&id=ARTICLE%205%20REPRESENTATIONS%20AND%20WARRANTIES%20OF%20SELLERS) This article contains the Sellers' fundamental representations and warranties regarding their legal standing and the transaction [Sections 5.2-5.5: Existence, Power, Authorization, and Conflicts](index=23&type=section&id=Section%205.2%20-%205.5) These sections contain Sellers' representations that they are **duly formed and validly existing entities**, authorized, and the transaction has no conflicts - Each Seller warrants it is a **duly formed and validly existing entity**[76](index=76&type=chunk) - Sellers confirm they have the necessary power and authority to execute the agreement and that it is a **legally enforceable obligation**[77](index=77&type=chunk)[78](index=78&type=chunk) - The execution of the agreement will not conflict with Sellers' organizational documents, material contracts, or laws, except as disclosed in Schedule 5.5[79](index=79&type=chunk) [Section 5.6: Capitalization](index=24&type=section&id=Section%205.6%20Capitalization) Each Seller represents ownership of Company Interests **free of encumbrances**, transferring **good and valid title** to Purchaser at Closing - Each Seller warrants ownership of the Company Interests as detailed in Schedule 5.6, **free of encumbrances**[80](index=80&type=chunk) - At Closing, Purchaser will receive **good and valid title** to the Company Interests[81](index=81&type=chunk) [Sections 5.7-5.10: Brokers' Fees, Litigation, Bankruptcy, and Credit Support](index=24&type=section&id=Section%205.7%20-%205.10) These sections provide Sellers' warranties regarding brokerage fees, absence of litigation or bankruptcy, and credit support - Sellers are **responsible for their own brokerage or finder's fees**[82](index=82&type=chunk) - There are **no pending or threatened bankruptcy proceedings** against any Seller[83](index=83&type=chunk) - Schedule 5.10 provides a **complete list of all credit support** (bonds, letters of credit, etc.) posted by Sellers or their Affiliates for the Company Group[84](index=84&type=chunk) [ARTICLE 6: REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY GROUP AND THE ASSETS](index=24&type=section&id=ARTICLE%206%20REPRESENTATIONS%20AND%20WARRANTIES%20REGARDING%20THE%20COMPANY%20GROUP%20AND%20THE%20ASSETS) This article details the Company Group's representations and warranties concerning its operations, assets, and financial condition [Sections 6.2-6.5: Company Existence, Power, Authorization, and Conflicts](index=25&type=section&id=Section%206.2%20-%206.5) The Company represents its **validly existing LLC in good standing under Delaware law**, power, proper authorization, and absence of conflicts with its obligations - The Company is a **validly existing LLC in good standing under Delaware law**[86](index=86&type=chunk) - The agreement is a **valid and binding obligation of the Company**, duly authorized by all necessary company action[88](index=88&type=chunk) [Section 6.6: Capitalization](index=26&type=section&id=Section%206.6%20Capitalization) This section details the Company's capital structure, confirming **Sellers own all issued and outstanding Interests of the Company** Company Interests as of Execution Date | Interest Type | Amount | | :--- | :--- | | Common Units | **2,325,510** | | Preferred Units | **958,864** | | Tier I Profits Units | **0 outstanding** | | Tier II Profits Units | **0 outstanding** | - **Sellers own all issued and outstanding Interests of the Company**[91](index=91&type=chunk) - Except as listed in Schedule 6.6(c), there are **no outstanding options, warrants, or other rights** to acquire Company Interests[92](index=92&type=chunk) [Section 6.9: Taxes and Assessments](index=27&type=section&id=Section%206.9%20Taxes%20and%20Assessments) The Company represents **all material Tax Returns** are filed and paid, with **no pending or threatened tax audits or deficiencies** - **All material Tax Returns** for the Company Group have been **timely filed and are accurate, and all material Taxes have been paid**[98](index=98&type=chunk) - There are **no pending or threatened tax audits or deficiencies** against the Company Group, except as disclosed in Schedule 6.9[101](index=101&type=chunk)[102](index=102&type=chunk) - The Company has always been **classified as a partnership for federal income tax purposes**, and its **subsidiaries as disregarded entities**[106](index=106&type=chunk) [Section 6.12: Material Contracts](index=29&type=section&id=Section%206.12%20Material%20Contracts) This section defines and lists the Company's **Material Contracts**, warranting their validity and absence of default - Schedule 6.12 lists all **Material Contracts**, which include those with payments or revenues over **$100,000/year**, hydrocarbon sales agreements, and joint operating agreements[117](index=117&type=chunk)[118](index=118&type=chunk) - The Company warrants that there are **no material defaults under any Material Contract** by the Company Group or, to its knowledge, any other party[120](index=120&type=chunk) [Section 6.17: Environmental Matters](index=32&type=section&id=Section%206.17%20Environmental%20Matters) The Company represents **material compliance with Environmental Laws** and absence of **material Environmental Claims** - The Company Group and its assets are in **compliance with Environmental Laws in all material respects**[125](index=125&type=chunk) - There are **no pending or, to the Company's knowledge, threatened material Environmental Claims** against the Company Group or its assets[125](index=125&type=chunk) [Section 6.28: Employment Matters](index=35&type=section&id=Section%206.28%20Employment%20Matters) This section provides representations regarding Company employees, labor law compliance, and absence of labor agreements - Schedule 6.28(a)(i) **lists all Employees**, and Schedule 6.28(a)(ii) **lists all Contingent Workers**[138](index=138&type=chunk) - **No Employees are represented by a labor union**, and there are **no labor agreements in place**[139](index=139&type=chunk)[140](index=140&type=chunk) - The Company Group is in **material compliance with all applicable labor and employment laws**[141](index=141&type=chunk) [Section 6.39: Financial Statements](index=41&type=section&id=Section%206.39%20Financial%20Statements) The Company represents its financial statements are true, complete, **prepared in accordance with GAAP and fairly present the Company Group's financial condition** - Schedule 6.39 contains the Company Group's **audited annual financial statements for 2022, 2023, and 2024**, and **unaudited interim statements as of June 30, 2025**[169](index=169&type=chunk) - The financial statements were **prepared in accordance with GAAP and fairly present the Company Group's financial condition**[169](index=169&type=chunk) [ARTICLE 7: REPRESENTATIONS AND WARRANTIES OF PURCHASER](index=41&type=section&id=ARTICLE%207%20REPRESENTATIONS%20AND%20WARRANTIES%20OF%20PURCHASER) This article outlines the Purchaser's representations and warranties regarding its legal standing, financial capacity, and independent evaluation [Sections 7.2-7.5: Existence, Power, Authorization, and Conflicts](index=41&type=section&id=Section%207.2%20-%207.5) Purchaser and Purchaser Parent represent they are **validly existing corporations in good standing**, power, authorization, and absence of conflicts - Purchaser and Purchaser Parent are **validly existing corporations in good standing**[172](index=172&type=chunk)[173](index=173&type=chunk) - The agreement has been duly authorized and is a **valid and binding obligation of the Purchaser and Purchaser Parent**[175](index=175&type=chunk) [Section 7.8: Independent Evaluation](index=43&type=section&id=Section%207.8%20Independent%20Evaluation) Purchaser acknowledges **independent due diligence** and relies **solely on express representations** in Articles 5 and 6 - Purchaser acknowledges it is a **sophisticated party capable of evaluating the assets** and has **relied solely on its own independent due diligence**[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) - Purchaser **explicitly disclaims reliance on any representation or statement other than those expressly contained in Articles 5 and 6** of the agreement[182](index=182&type=chunk) [Section 7.12: Capitalization](index=44&type=section&id=Section%207.12%20Capitalization) Purchaser Parent represents its capital structure and warrants that shares issued as purchase price will be **validly issued, fully paid, and nonassessable** Purchaser Parent Capitalization | Security Type | Amount Issued & Outstanding | | :--- | :--- | | Common Shares | **22,058,574** | | Preferred Shares | **0** | - The shares issued to Sellers as part of the purchase price will be **validly issued, fully paid, and nonassessable**[191](index=191&type=chunk) [Section 7.14: SEC Documents; Financial Statements; No Liabilities](index=46&type=section&id=Section%207.14%20SEC%20Documents%3B%20Financial%20Statements%3B%20No%20Liabilities) Purchaser Parent warrants **timely filed all required SEC documents since December 31, 2024**, compliance, and **GAAP-compliant financial statements fairly presenting its financial condition** - Purchaser Parent has **timely filed all required SEC documents since December 31, 2024**, which **complied with applicable regulations**[200](index=200&type=chunk) - The Purchaser Parent's financial statements were **prepared according to GAAP and fairly present its financial condition**[200](index=200&type=chunk) [ARTICLE 8: COVENANTS OF THE PARTIES](index=47&type=section&id=ARTICLE%208%20COVENANTS%20OF%20THE%20PARTIES) This article details the ongoing obligations and restrictions on the parties between signing and closing [Section 8.1: Access](index=47&type=section&id=Section%208.1%20Access) This section grants Purchaser **reasonable access to assets and records for due diligence**, prohibits **invasive environmental testing** without consent, and requires **Purchaser indemnification** - Sellers will provide Purchaser with **reasonable access to assets and records for due diligence** before closing[206](index=206&type=chunk) - **Invasive environmental testing (e.g., soil or water sampling) is not permitted without Sellers' consent**[207](index=207&type=chunk) - Purchaser must **indemnify and hold harmless the Sellers Group from any damages arising from its due diligence activities**[216](index=216&type=chunk) [Section 8.2: Operation of Business](index=49&type=section&id=Section%208.2%20Operation%20of%20Business) This section requires the Company Group to operate in the **Ordinary Course of Business** and restricts certain actions without consent - From signing to closing, the Company must conduct its business in the **Ordinary Course of Business**[217](index=217&type=chunk) - The Company is restricted from taking certain actions without Purchaser's consent, including: **proposing new capital expenditures over $50,000**, **entering into new material contracts**, **selling assets, or issuing any new interests**[218](index=218&type=chunk)[219](index=219&type=chunk) [Section 8.6: R&W Insurance Policy](index=53&type=section&id=Section%208.6%20R%26W%20Insurance%20Policy) This section confirms Purchaser's **R&W Insurance Policy**, requiring a **waiver of subrogation** and prohibiting **materially adverse amendments** - Purchaser has **procured a conditional binder for an R&W Insurance Policy**, attached as Exhibit E[227](index=227&type=chunk) - The **R&W Insurance Policy** must contain a **waiver of subrogation** against the Sellers Group, except in cases of **Fraud**[228](index=228&type=chunk) - Purchaser covenants **not to amend, modify, or terminate the policy in a manner that is materially adverse to the Sellers Group**[228](index=228&type=chunk)[229](index=229&type=chunk) [Section 8.7: Directors and Officers](index=54&type=section&id=Section%208.7%20Directors%20and%20Officers) This section ensures **All existing rights to indemnification and exculpation** for D&O for **at least six years** post-closing and requires a **six-year "D&O Tail Policy"** - **All existing rights to indemnification and exculpation** for the Company Group's directors and officers will **survive the Closing for at least six years**[231](index=231&type=chunk) - Prior to Closing, the Company Group must obtain and pay for a **six-year "D&O Tail Policy"** to cover claims arising from pre-closing events[235](index=235&type=chunk) [Section 8.13: Board Representation at Purchaser Parent](index=58&type=section&id=Section%208.13%20Board%20Representation%20at%20Purchaser%20Parent) This section grants Sellers the right to **appoint two designees to the Purchaser Parent's Board of Directors** at Closing - At Closing, Sellers will **appoint two designees to the Purchaser Parent's Board of Directors**[249](index=249&type=chunk) - These designees will be **nominated for re-election at the 2026 annual stockholders' meeting**[250](index=250&type=chunk) [ARTICLE 9: CONDITIONS TO CLOSING](index=60&type=section&id=ARTICLE%209%20CONDITIONS%20TO%20CLOSING) This article specifies the conditions that must be satisfied or waived by each party for the transaction to close [Section 9.1: Sellers' Conditions to Closing](index=60&type=section&id=Section%209.1%20Sellers'%20Conditions%20to%20Closing) This section lists Sellers' closing conditions, including **Purchaser's representations and warranties must be true and correct**, covenants, and **20% of the Unadjusted Purchase Price** impairment thresholds - **Purchaser's representations and warranties must be true and correct**[260](index=260&type=chunk) - **Purchaser must have performed its covenants in all material respects**[260](index=260&type=chunk) - The **total value of impairments (Title/Environmental Defects and Casualty Losses) must not exceed 20% of the Unadjusted Purchase Price**[261](index=261&type=chunk) - **Purchaser Parent must have received shareholder consent for the transaction**[261](index=261&type=chunk) [Section 9.2: Purchaser's Conditions to Closing](index=62&type=section&id=Section%209.2%20Purchaser's%20Conditions%20to%20Closing) This section lists Purchaser's closing conditions, mirroring Sellers' regarding **Sellers' and Company's representations and warranties must be true and correct**, covenants, and **20% of the Unadjusted Purchase Price** impairment thresholds - **Sellers' and Company's representations and warranties must be true and correct**[263](index=263&type=chunk) - **Sellers must have performed their covenants in all material respects**[263](index=263&type=chunk) - The **total value of impairments (Title/Environmental Defects and Casualty Losses) must not exceed 20% of the Unadjusted Purchase Price**[263](index=263&type=chunk) [ARTICLE 10: CLOSING](index=63&type=section&id=ARTICLE%2010%20CLOSING) This article outlines the procedures, deliverables, and settlement process for the transaction's closing [Section 10.1: Time and Place of Closing](index=63&type=section&id=Section%2010.1%20Time%20and%20Place%20of%20Closing) This section sets the time and place for the electronic closing of the transaction, contingent on condition fulfillment - The Closing will take place on the **later of October 27, 2025, or two business days after all conditions in Article 9 are satisfied or waived**[267](index=267&type=chunk) [Section 10.2: Obligations of Sellers' Representative at Closing](index=63&type=section&id=Section%2010.2%20Obligations%20of%20Sellers'%20Representative%20at%20Closing) This section lists the documents and actions Sellers' Representative must deliver at Closing, including agreements and certificates - **Deliver executed Assignment Agreements and Registration Rights Agreement**[267](index=267&type=chunk)[268](index=268&type=chunk) - **Provide a certificate confirming that Sellers' representations are true and covenants have been performed**[267](index=267&type=chunk) - **Deliver written resignations of officers and directors listed in Schedule 10.2(e)**[267](index=267&type=chunk) [Section 10.3: Obligations of Purchaser at Closing](index=64&type=section&id=Section%2010.3%20Obligations%20of%20Purchaser%20at%20Closing) This section lists Purchaser's obligations at Closing, primarily **Deliver the Adjusted Purchase Price via issuance of the Purchaser Parent Common Stock to Sellers** and confirming conditions - **Deliver the Adjusted Purchase Price via issuance of the Purchaser Parent Common Stock to Sellers**[269](index=269&type=chunk) - **Provide evidence that the Company's Existing Secured Credit Facility has been paid off**[269](index=269&type=chunk) - **Deliver a certificate confirming that Purchaser's representations are true and covenants have been performed**[269](index=269&type=chunk) [Section 10.4: Settlement Statement](index=65&type=section&id=Section%2010.4%20Settlement%20Statement) This section describes the process for finalizing purchase price adjustments via a Settlement Statement and dispute resolution - **Sellers' Representative will prepare a draft Settlement Statement calculating the Adjusted Purchase Price five business days before Closing**[272](index=272&type=chunk) - **If there are disputes over the adjustments, they will be submitted to an Independent Accountant for a binding resolution**[273](index=273&type=chunk) [ARTICLE 11: TERMINATION](index=66&type=section&id=ARTICLE%2011%20TERMINATION) This article defines the conditions under which the agreement can be terminated and the consequences of such termination [Section 11.1: Termination](index=66&type=section&id=Section%2011.1%20Termination) This section outlines conditions for agreement termination, including **mutual written consent of the parties**, legal prohibition, **material, uncured breach by the other party**, or **Outside Date** - The agreement can be terminated by **mutual written consent of the parties**[278](index=278&type=chunk) - Either party can terminate if there is a **material, uncured breach by the other party**[278](index=278&type=chunk) - Any party can terminate if the Closing does not occur by the **Outside Date, which is 180 days after the Execution Date**[278](index=278&type=chunk) [Section 11.2: Effect of Termination](index=67&type=section&id=Section%2011.2%20Effect%20of%20Termination) This section details termination consequences, specifying **exclusive remedies** for breach and a **Termination Fee of $750,000** for lack of consent - Upon termination, the **agreement becomes void, except for certain specified surviving sections**[280](index=280&type=chunk) - In the event of a failure to close due to a breach, the **non-breaching party's exclusive remedies are to either seek specific performance or terminate the agreement**[281](index=281&type=chunk)[282](index=282&type=chunk) - If Sellers' Representative terminates because Purchaser Parent fails to get shareholder approval, **Sellers' sole remedy is to receive a Termination Fee of $750,000**[283](index=283&type=chunk)[491](index=491&type=chunk) [ARTICLE 12: INDEMNIFICATION](index=68&type=section&id=ARTICLE%2012%20INDEMNIFICATION) This article establishes the post-closing indemnification obligations and procedures for claims between the parties [Section 12.1: Indemnification](index=68&type=section&id=Section%2012.1%20Indemnification) This section establishes post-closing indemnification, with the **R&W Insurance Policy** as the primary remedy, except for **Fraud** - **Purchaser indemnifies Sellers for breaches of Purchaser's covenants and warranties**[287](index=287&type=chunk) - **Sellers indemnify Purchaser for breaches of Sellers' covenants**[288](index=288&type=chunk) - This article provides the **sole and exclusive remedy for the parties post-closing, except for claims of Fraud and rights under the R&W Insurance Policy**[288](index=288&type=chunk) [Section 12.2: Indemnification Actions](index=69&type=section&id=Section%2012.2%20Indemnification%20Actions) This section sets forth procedures for making and resolving indemnification claims, including **Claim Notice** and defense control - An indemnification claim is initiated by the Indemnified Person sending a **Claim Notice** to the Indemnifying Person[292](index=292&type=chunk) - For third-party claims, the **Indemnifying Person has the right to control the defense if it admits its obligation to indemnify**[294](index=294&type=chunk) [Section 12.3: Limitations on Actions](index=71&type=section&id=Section%2012.3%20Limitations%20on%20Actions) This section establishes survival periods for representations and covenants, limiting Purchaser's recourse post-closing - **Sellers' and Company's representations and warranties terminate at the Closing Date**; **Purchaser's recourse is through the R&W Insurance Policy**[299](index=299&type=chunk) - **Purchaser's representations and warranties survive for twelve months following the Closing Date**[299](index=299&type=chunk) - **Purchaser explicitly waives all rights and claims against Sellers relating to the subject matter of the agreement, except for Fraud and indemnification for covenant breaches**[301](index=301&type=chunk) [ARTICLE 13: TAX MATTERS](index=74&type=section&id=ARTICLE%2013%20TAX%20MATTERS) This article addresses tax filing responsibilities and the agreed-upon tax treatment of the transaction [Section 13.1: Tax Filings](index=74&type=section&id=Section%2013.1%20Tax%20Filings) This section designates **Sellers' Representative will prepare all Pass-Through Tax Returns for pre-closing periods that are filed after Closing** and allocates **Deal-Generated Deductions** - **Sellers' Representative will prepare all Pass-Through Tax Returns for pre-closing periods that are filed after Closing**[313](index=313&type=chunk) - **Deal-Generated Deductions are to be allocated to the Pre-Closing Tax Period to the extent permitted by law**[313](index=313&type=chunk) [Section 13.5: Tax Treatment](index=75&type=section&id=Section%2013.5%20Tax%20Treatment) The parties agree on the U.S. federal income tax treatment, consistent with **IRS Revenue Ruling 99-6, Situation 2** - The transaction will be treated in a manner consistent with **IRS Revenue Ruling 99-6, Situation 2**[317](index=317&type=chunk) - For Sellers, the **transaction is a taxable sale of their Company Interests**[317](index=317&type=chunk) - For Purchaser, the **transaction is a purchase of all of the Company's Assets**[317](index=317&type=chunk) [ARTICLE 14: MISCELLANEOUS](index=76&type=section&id=ARTICLE%2014%20MISCELLANEOUS) This article covers general legal provisions, including governing law, dispute resolution, and limitations on damages [Section 14.4: Governing Law; Jurisdiction](index=77&type=section&id=Section%2014.4%20Governing%20Law%3B%20Jurisdiction) This section establishes **Texas law**, grants exclusive jurisdiction to **Harris County, Texas** courts, and includes a **trial by jury** waiver - The agreement is governed by the laws of the **State of Texas**[325](index=325&type=chunk) - Exclusive jurisdiction for disputes is granted to the federal or state courts in **Harris County, Texas**[326](index=326&type=chunk) - All parties waive their right to a **trial by jury** for any disputes related to the agreement[328](index=328&type=chunk) [Section 14.11: Limitation on Damages](index=79&type=section&id=Section%2014.11%20Limitation%20on%20Damages) This section limits damages, excluding **consequential, special, indirect, punitive, or exemplary damages**, with waivers - **Parties are not entitled to consequential, special, indirect, punitive, or exemplary damages from each other in connection with this agreement**[336](index=336&type=chunk) [Section 14.16: Specific Performance](index=80&type=section&id=Section%2014.16%20Specific%20Performance) This section grants **specific performance** rights, but **Sellers explicitly waive any right to specific performance to compel the Purchaser to close the transaction** - Parties are entitled to seek **specific performance** and injunctive relief for breaches of the agreement, as **monetary damages are considered inadequate**[341](index=341&type=chunk) - **Sellers explicitly waive any right to specific performance to compel the Purchaser to close the transaction**[341](index=341&type=chunk) [Section 14.20: Sellers' Representative](index=82&type=section&id=Section%2014.20%20Sellers'%20Representative) This section appoints **Yorktown Energy Partners XI, L.P.** as Sellers' Representative with **full authority to act on behalf of all Sellers**, which is **irrevocable** - **Yorktown Energy Partners XI, L.P.** is appointed as the Sellers' Representative with **full authority to act on behalf of all Sellers**[347](index=347&type=chunk)[348](index=348&type=chunk) - The **Representative's authority is irrevocable** and includes negotiating claims, executing amendments, and giving/receiving notices[348](index=348&type=chunk)[351](index=351&type=chunk) - **Purchaser is entitled to rely on all actions taken by the Sellers' Representative as binding on all Sellers**[350](index=350&type=chunk) [Appendices, Annexes, Exhibits, and Schedules](index=6&type=section&id=Appendices%2C%20Annexes%2C%20Exhibits%2C%20and%20Schedules) This section describes the supplementary documents providing detailed information and forms for the agreement [Ancillary Documents](index=6&type=section&id=Ancillary%20Documents) The agreement is supplemented by appendices, annexes, exhibits, and schedules providing detailed information and forms - **Appendix A contains the definitions** for capitalized terms used throughout the agreement[7](index=7&type=chunk) - **Annex I provides a complete schedule of all entities and individuals defined as "Sellers"**[7](index=7&type=chunk) - **Exhibits provide forms for critical legal documents**, including the Assignment Agreement (Exhibit B), Lock-Up Agreement (Exhibit C), and Registration Rights Agreement (Exhibit D)[9](index=9&type=chunk) - **Numerous Schedules provide detailed disclosures qualifying the representations and warranties** made in Articles 5, 6, and 7[9](index=9&type=chunk)[10](index=10&type=chunk)

PART I-FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Epsilon Energy reported significant financial growth for the six months ended June 30, 2025, with total revenues rising 82% to $27.8 million and net income increasing 140% to $5.6 million [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $123.6 million, with shareholders' equity rising to $100.2 million from $96.7 million at year-end 2024 Consolidated Balance Sheet Highlights (in thousands USD) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $9,907.7 | $6,519.8 | | Total current assets | $16,533.3 | $14,131.5 | | Total property and equipment, net | $106,037.5 | $104,526.0 | | **Total assets** | **$123,613.7** | **$120,454.8** | | **Liabilities & Equity** | | | | Total current liabilities | $7,403.4 | $6,980.0 | | Total liabilities | $23,423.4 | $23,726.7 | | Total shareholders' equity | $100,190.3 | $96,728.1 | | **Total liabilities and shareholders' equity** | **$123,613.7** | **$120,454.8** | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For Q2 2025, revenue increased 59% to $11.6 million and net income nearly doubled to $1.6 million, while six-month revenue surged 82% to $27.8 million and net income jumped 140% to $5.6 million Statement of Operations Summary (in thousands USD) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $11,624.7 | $7,307.8 | $27,787.9 | $15,294.6 | | Operating Income | $828.8 | $1,167.8 | $7,996.6 | $2,572.5 | | Net Income | $1,551.5 | $815.7 | $5,567.5 | $2,322.6 | | Diluted EPS | $0.07 | $0.04 | $0.25 | $0.11 | - A notable event in Q2 2025 was a **$2.7 million impairment expense**, which impacted operating income for the quarter, however, a **$2.6 million gain on derivative contracts** offset this, contributing to strong net income[19](index=19&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash from operating activities increased 87% to $16.9 million, while cash used in investing and financing activities totaled $10.7 million and $2.8 million respectively Cash Flow Summary (Six Months Ended June 30, in thousands USD) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $16,930.8 | $9,075.5 | | Net cash used in investing activities | ($10,665.9) | ($9,544.2) | | Net cash used in financing activities | ($2,751.4) | ($3,946.1) | | **Increase (Decrease) in cash** | **$3,387.9** | **($4,392.1)** | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, a **$2.7 million** impairment, the undrawn **$45 million** credit facility, shareholder equity activities, and the subsequent acquisition of Peak Exploration and Production LLC - During Q2 2025, Epsilon recorded a **$2.7 million impairment charge** for two wells in Alberta, Canada, due to lower than expected production, cost overruns, and lower forward commodity prices[45](index=45&type=chunk) - The company maintains a senior secured revolving credit facility with a borrowing base of **$45 million**, which remained undrawn as of June 30, 2025[47](index=47&type=chunk)[50](index=50&type=chunk) - The Board declared quarterly dividends of **$0.0625 per share**, totaling approximately **$2.8 million** paid during the first six months of 2025[62](index=62&type=chunk) - Subsequent to the quarter end, on August 11, 2025, Epsilon signed a definitive agreement to acquire Peak Exploration and Production LLC, with consideration including **6 million Epsilon common shares** and the assumption of approximately **$49 million in debt**[119](index=119&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes the 82% revenue growth to increased natural gas revenue, with Adjusted EBITDA more than doubling to **$18.0 million**, supported by strong liquidity and disciplined capital allocation - The company's business strategy is focused on disciplined capital allocation, shareholder returns (dividends and buybacks), and maintaining a strong balance sheet to fund investments in existing areas (Marcellus) and new projects (Permian, Canada)[125](index=125&type=chunk)[126](index=126&type=chunk) Adjusted EBITDA Reconciliation (in thousands USD) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net Income | $5,567.5 | $2,322.6 | | Adjustments | $12,437.5 | $6,176.0 | | **Adjusted EBITDA** | **$18,005.0** | **$8,498.6** | - For the six months ended June 30, 2025, revenues increased **82%** to **$27.8 million**, primarily due to a **$12.6 million (256%)** increase in upstream natural gas revenue from higher prices and volumes[140](index=140&type=chunk)[141](index=141&type=chunk) - The company's liquidity is strong, with a working capital surplus of **$9.1 million** as of June 30, 2025, and an undrawn **$45 million** revolving credit facility[164](index=164&type=chunk)[168](index=168&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces significant commodity price risk for natural gas and oil, which it mitigates using derivative contracts, and also has exposure to interest rate risk - The company's primary market risk is the fluctuation in commodity prices for natural gas and oil[178](index=178&type=chunk) - Epsilon utilizes a hedging strategy with derivative financial instruments to manage commodity price risk and stabilize cash flows[182](index=182&type=chunk) [Controls and Procedures](index=34&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[183](index=183&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[184](index=184&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=35&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company reported no legal proceedings during the period - None[187](index=187&type=chunk) [Risk Factors](index=35&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[188](index=188&type=chunk) [Unregistered Sale of Equity Securities and Use of Proceeds](index=35&type=section&id=ITEM%202.%20UNREGISTERED%20SALE%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company did not repurchase any of its equity securities during the six months ended June 30, 2025 - For the six months ended June 30, 2025, no shares were repurchased[190](index=190&type=chunk) [Defaults Upon Senior Securities](index=35&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) Not applicable [Mine Safety Disclosures](index=35&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Not applicable [Other Information](index=35&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Not applicable [Exhibits](index=36&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the report, including Sarbanes-Oxley certifications and Inline XBRL data files

Core Insights - Epsilon Energy Ltd. has entered into definitive agreements to acquire Peak Exploration and Production LLC and Peak BLM Lease LLC, which are majority owned by Yorktown Energy Partners LLC [1][2] - The total consideration for the acquisition includes 6 million common shares of Epsilon and the assumption of approximately $49 million in debt, with potential additional contingent consideration of up to 2.5 million shares [2][4] - The acquisition is expected to close in Q4 2025, pending shareholder approval [2] Transaction Highlights - The acquired Peak assets encompass 40,500 net acres in the Powder River Basin (PRB), with Q2 2025 production reported at 2.2 MBoepd, consisting of 56% oil and 44% gas [4] - The acquisition is projected to increase Epsilon's proved reserves by approximately 150%, totaling 21.5 MMBoe according to a third-party reserves report [4] - Epsilon estimates 111 net priority locations on the acquired PRB position, which are defined by specific economic criteria [5] Pro-Forma Company Overview - Post-acquisition, Epsilon will have four primary project areas: NEPA core Marcellus, Permian Barnett in Texas, WCSB in Alberta, and the newly acquired core PRB [6] - Pro-forma Q2 2025 production is expected to be 47 MMcfe, with a composition of 77% natural gas and 22% oil [6] - Pro-forma year-end 2024 proved reserves are estimated at 213 Bcfe, with 59% natural gas and 39% oil [6] Financial Considerations - The acquisition is considered attractively priced, equating to $1,100 per undeveloped acre or $340,000 per priority location based on Epsilon's stock price of $6.21 [9] - The transaction is expected to be accretive to forecasted 2025 and 2026 Adjusted EBITDA per share and cash flow per share [9] - Epsilon maintains a strong balance sheet, allowing for consistent dividend payouts and future dividend support [9] Operational Updates - Epsilon's capital expenditures for Q2 2025 were $4 million, primarily for drilling and completing wells in Texas and Alberta [11] - The company reported a $2.7 million impairment related to recently drilled wells in Alberta due to cost overruns and underperformance [12] - Epsilon's management remains optimistic about the potential of its assets, particularly in the Garrington and Harmattan areas [13] Current Financial Performance - For Q2 2025, Epsilon reported total revenues of $11.6 million, a 59% increase year-over-year [23] - The company achieved a net income of $1.55 million for Q2 2025, compared to $0.82 million in Q2 2024 [24] - Adjusted EBITDA for the first half of 2025 was $18 million, reflecting a significant increase from the previous year [29]

Long Player believes oil and gas is a boom-bust, cyclical industry. It takes patience, and it certainly helps to have experience. He has been focusing on this industry for years. He is a retired CPA, and holds an MBA and MA. Analyst's Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it ( ...

Core Viewpoint - Epsilon Energy Ltd. is set to release its second quarter 2025 earnings on August 13, 2025, and will host a conference call on August 14, 2025, to discuss the results [1]. Group 1: Earnings Release and Conference Call - The earnings release for the second quarter of 2025 will be issued after market close on August 13, 2025 [1]. - A conference call to discuss the financial and operating results will take place on August 14, 2025, at 10:00 a.m. Central Time [1]. Group 2: Participation Details - Interested parties in the U.S. and Canada can join the call toll-free at (833) 816-1385, while international participants can dial (412) 317-0478 [2]. - A webcast of the conference call will be available, and a replay can be accessed on the company's website after the call [2]. Group 3: Company Overview - Epsilon Energy Ltd. operates as a North American onshore natural gas and oil production and gathering company with assets located in Pennsylvania, Texas, New Mexico, Oklahoma, and Alberta, Canada [3].

Industry Overview - The Zacks Oil & Gas US Integrated industry includes companies involved in upstream and midstream energy businesses, focusing on oil and natural gas exploration and production, as well as transportation and refining activities [3] - The upstream business is closely linked to oil and gas prices, with midstream assets generating stable fee-based revenues [3] Current Trends - The pricing environment for crude oil is expected to soften significantly, with the U.S. Energy Information Administration projecting the West Texas Intermediate spot average price at $62.33 per barrel for this year, down from $76.60 the previous year, which will negatively impact upstream operations [4] - A slowdown in oil production growth is occurring due to shareholder demands for capital returns over production expansion, leading to reduced revenues as upstream operations rely heavily on volume [5] - Growing demand for renewable energy is creating uncertainty for integrated energy firms, as the shift towards solar and wind energy is expected to decrease reliance on fossil fuels [6] Industry Performance - The Zacks Oil & Gas US Integrated industry currently holds a Zacks Industry Rank of 204, placing it in the bottom 17% of over 250 Zacks industries, indicating a bearish outlook [7][8] - Over the past year, the industry has underperformed the broader Zacks Oil - Energy sector and the S&P 500, declining by 12.9% compared to a 0.3% gain for the sector and a 12.9% increase for the S&P 500 [10] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 4.79X, lower than the S&P 500's 17.49X but slightly higher than the sector's 4.78X [14] - Historically, the industry has traded between 3.36X and 14.40X over the past five years, with a median of 5.10X [14] Notable Companies - ConocoPhillips (COP) has a strong production outlook with lower debt exposure, positioning it well to handle adverse business conditions [17] - Occidental Petroleum (OXY) has a significant presence in key shale plays and achieved a reserve replacement rate of 230% in 2024 [20] - National Fuel Gas (NFG) is focused on developing resources in the Marcellus and Utica shale plays and has a long history of dividend payments [23] - Epsilon Energy (EPSN) is well-positioned to benefit from clean energy demand, with stable cash flows and no debt [26]

Core Viewpoint - The article emphasizes the importance of confirming the sustainability of a trend in short-term investing, highlighting that successful entry timing is crucial for capitalizing on price movements [1][2]. Group 1: Trend Analysis - The trend can reverse before exiting a trade, leading to potential short-term capital losses for investors, thus confirming sound fundamentals and positive earnings estimates is essential for maintaining stock momentum [2]. - A unique short-term trading strategy, referred to as the "Recent Price Strength" screen, helps identify stocks with sufficient fundamental strength to sustain their recent uptrends [3]. Group 2: Company Spotlight - Epsilon Energy Ltd. (EPSN) - Epsilon Energy Ltd. has shown a solid price increase of 7.9% over the past 12 weeks, indicating investor confidence in its potential upside [4]. - The stock has also increased by 2.6% over the last four weeks, suggesting that the price trend remains intact, and it is currently trading at 90.7% of its 52-week high-low range, indicating a potential breakout [5]. - EPSN holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, which are critical for near-term price movements [6]. Group 3: Market Sentiment - The Zacks Rank system, which categorizes stocks based on earnings estimates, has shown that Zacks Rank 1 stocks have generated an average annual return of +25% since 1988, indicating a strong historical performance [7]. - The Average Broker Recommendation for EPSN is also 1 (Strong Buy), reflecting high optimism from the brokerage community regarding its near-term price performance [7]. Group 4: Additional Opportunities - Besides EPSN, there are several other stocks that meet the criteria of the "Recent Price Strength" screen, suggesting potential investment opportunities for those looking to capitalize on similar trends [8].

Group 1 - The article discusses the analysis of oil and gas companies, specifically Epsilon Energy, focusing on identifying undervalued companies in the sector [1] - The analysis includes a breakdown of essential aspects such as balance sheets, competitive positions, and development prospects of these companies [1] - The author emphasizes the cyclical nature of the oil and gas industry, highlighting the need for patience and experience in navigating this market [2] Group 2 - The author has a beneficial long position in Epsilon Energy shares, indicating a personal investment interest in the company [3] - The article is presented as an independent opinion, with no external compensation influencing the analysis [3] - The content is part of a service that offers more in-depth analysis to members, suggesting a tiered approach to information dissemination [1]