Financial Performance - Epsilon Energy Ltd. reported a net income of $5.8 million for the three months ended March 31, 2022, compared to $2.7 million for the same period in 2021, representing a 114.8% increase [117]. - The company's revenues increased by $5.2 million, or 61%, to $13.6 million for the three months ended March 31, 2022, compared to $8.4 million in the same period of 2021 [136]. - Adjusted EBITDA for the three months ended March 31, 2022, was $9.3 million, compared to $5.4 million for the same period in 2021, reflecting a 72.5% increase [134]. - Cash provided by operating activities increased by $2.1 million, or 38%, during the three months ended March 31, 2022, compared to the same period in 2021, driven by increased commodity prices [164]. Production and Pricing - Epsilon's realized natural gas price was $4.55 per Mcf, a 77% increase over the same period in 2021, while natural gas production remained flat at 2.4 Bcf [125]. - In Oklahoma, Epsilon's realized price for all production was $7.71 per Mcfe, a 117% increase over the same period in 2021, with total production of 0.17 Bcfe, a 141% increase [128]. - Upstream natural gas revenue increased by $4.4 million, or 69%, primarily due to higher natural gas prices, despite lower production volumes [138]. - Upstream oil and other liquids revenue surged by $0.7 million, or 625%, driven by increased production from new wells and higher prices [139]. Operating Costs - Operating costs for the three months ended March 31, 2022, totaled $1.93 million, with an upstream operating cost of $0.73 per Mcfe, compared to $1.78 million and $0.64 per Mcfe in the same period of 2021 [142]. - Upstream operating costs for the three months ended March 31, 2022 increased by $0.2 million, or 11%, compared to the same period in 2021, primarily due to rising service prices [143]. - Gathering system costs (net of intercompany elimination) for the three months ended March 31, 2022 decreased by $0.03 million, or 17%, compared to the same period in 2021, mainly due to a decrease in throughput volumes [146]. - DD&A expense decreased by $0.33 million, or 20%, for the three months ended March 31, 2022 compared to the same period in 2021, attributed to increased reserves and decreased production volumes [151]. - General and administrative expenses decreased by $0.2 million, or 14%, for the three months ended March 31, 2022, mainly due to reduced legal fees and stock-based compensation [155]. - Interest expense decreased by $0.01 million, or 43%, for the three months ended March 31, 2022, due to a reduction in the borrowing base on the line of credit [156]. Capital and Investment - The company had a working capital surplus of $27.6 million as of March 31, 2022, an increase of $3.5 million from December 31, 2021, due to cash generated from operations [163]. - The company used $2.9 million for investing activities during the three months ended March 31, 2022, primarily on leasehold and development costs [165]. - The company has a senior secured credit facility with a total commitment of up to $100 million, with a current effective borrowing base of $14 million [167]. Risk Management - The company hedged approximately 15% of its anticipated remaining 2022 production through NYMEX costless collars to mitigate price volatility [179]. - Natural gas prices are influenced by various economic and political factors, and the company has implemented a hedging strategy to manage commodity price risks [186]. Operational Strategy - The company aims to maintain or modestly grow production levels in 2022, contingent on sufficient natural gas prices and achieving internal return rates [122]. - The Auburn Gas Gathering System is located in the Marcellus Basin, known for high recoverable reserves and low production costs, indicating resilience against short-term low commodity prices [182]. - The company has a credit agreement that allows for fixing interest rates for up to three months, with no outstanding principal balance as of March 31, 2022 and 2021 [184].

Financial Performance - Epsilon Energy Ltd. reported a net income of $11.6 million for 2021, a significant increase from $0.9 million in 2020[199]. - Total revenues for the year ended December 31, 2021, increased by $18.0 million, or 73.6%, reaching $42.4 million compared to $24.4 million in 2020[201]. - Adjusted EBITDA increased to $24,107,978 for the year ended December 31, 2021, from $15,690,955 in 2020, reflecting improved operational performance[226]. - Cash flow from operating activities increased by $5.2 million, or 35%, to $20.0 million for the year ended December 31, 2021, compared to $14.8 million in 2020[231]. - The company had a working capital surplus of $24.1 million as of December 31, 2021, an increase of $10.8 million from $13.3 million at the end of 2020[229]. Revenue Breakdown - Natural gas revenue rose to $31.7 million in 2021, up 108% from $15.2 million in 2020, driven by higher prices despite a decrease in production volume[202][204]. - The average price of natural gas increased from $1.36 per Mcf in 2020 to $3.10 per Mcf in 2021[202]. - Upstream oil and other liquids revenue surged by $2.5 million, or 736%, in 2021, attributed to increased production from new wells and higher oil prices[204]. Costs and Expenses - Operating costs for upstream activities decreased by $0.2 million, or 2.1%, in 2021, primarily due to lower production volumes[207]. - Depletion, depreciation, amortization, and accretion (DD&A) expenses decreased by $2.9 million, or 31%, in 2021, due to increased reserves and lower production volumes[213]. - General and Administrative (G&A) expenses increased by $1.2 million, or 22%, to $6,831,815 for the year ended December 31, 2021, compared to $5,589,963 in 2020[219]. - Interest expense decreased by $0.01 million, or 11%, to $101,382 for the year ended December 31, 2021, from $114,515 in 2020, due to a reduction in the borrowing base on the line of credit[220]. Asset Management - Epsilon's total estimated net proved reserves of natural gas increased by 22,311 MMcf to 110,969 MMcf as of December 31, 2021[199]. - The company uses the successful efforts method of accounting for natural gas and oil operations, capitalizing costs associated with successful exploratory and development wells[249]. - Proved natural gas and oil reserves are estimated according to SEC regulations, impacting financial accounting estimates such as depreciation and depletion[251]. - Unproved properties consist of costs incurred to acquire unproved leases, which are capitalized until leases expire or are identified for reversion[253]. - The company evaluates impairment of proved and unproved properties based on expected future cash flows compared to carrying values, with potential material revisions to reserve estimates[259]. Strategic Outlook - The company aims to maintain or modestly grow production levels in 2022, contingent on sufficient natural gas prices and achieving internal return rates[196]. - Capital expenditures commitments amounted to approximately $3.8 million, expected to be incurred in 2022[244]. - The company expects that its estimated net cash generated from operations will be adequate to meet liquidity needs for the next 12 months and beyond[245]. Risk Management - The company has established a hedging strategy to manage risks associated with changes in commodity prices, stabilizing cash flows and supporting capital spending[272]. - Changes in market prices of commodities significantly affect the company's earnings and cash flow, with fluctuations influenced by various economic factors[268]. - The carrying value of assets is reviewed for impairment when indicators suggest recoverability issues, such as changes in business plans or commodity prices[257]. - The company recognizes asset retirement obligations at fair value, which includes estimated future costs for plugging and abandonment of wells[264]. Debt and Financing - As of December 31, 2021, the outstanding principal balance under the credit agreement was nil, indicating no current debt obligations[271]. - The company has a senior secured credit facility with a total commitment of up to $100 million, with a current effective borrowing base of $14 million[234]. Other Income - Epsilon recorded a gain on the sale of properties amounting to $484,902 in 2021, compared to no sales in 2020[216][217]. - Net loss on commodity contracts was $4,482,909 for the year ended December 31, 2021, compared to a gain of $2,503,655 in 2020, with net cash settlements of $4,243,085 paid in 2021[221].

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The company's assets grew to $96.2M, with net income turning positive to $3.65M for the nine-month period Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $20,592,298 | $13,270,913 | | Total current assets | $28,664,894 | $17,778,069 | | Total property and equipment, net | $66,959,550 | $68,331,878 | | **Total assets** | **$96,192,178** | **$86,676,184** | | Total current liabilities | $12,628,525 | $4,510,380 | | Total liabilities | $25,165,376 | $17,656,741 | | **Total shareholders' equity** | **$71,026,802** | **$69,019,443** | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Total revenue | $28,632,220 | $18,517,244 | | Operating income (loss) | $11,723,863 | $(2,442,113) | | **Net income (loss)** | **$3,647,008** | **$(548,518)** | | Net income (loss) per share, diluted | $0.15 | $(0.02) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $13,526,750 | $12,093,463 | | Net cash used in investing activities | $(3,825,051) | $(5,491,616) | | Net cash used in financing activities | $(2,377,181) | $(9,078,522) | | **Increase (decrease) in cash** | **$7,323,261** | **$(2,468,384)** | [Note 1. Description of Business](index=10&type=section&id=1.%20Description%20of%20Business) Epsilon Energy is a US-based natural gas acquisition, development, and production company - The Company is engaged in the acquisition, development, gathering and production of primarily natural gas reserves in the United States[23](index=23&type=chunk) [Note 5. Revolving Line of Credit](index=12&type=section&id=5.%20Revolving%20Line%20of%20Credit) The credit facility maturity was extended to 2024, with the borrowing base reduced to $14M and no outstanding debt - On April 6, 2021, the credit agreement was amended to extend the maturity date to March 1, 2024, and the borrowing base was decreased from $23 million to **$18 million**[46](index=46&type=chunk) - On June 28, 2021, the borrowing base was further decreased from $18 million to **$14 million**[47](index=47&type=chunk) - As of September 30, 2021, there were **no borrowings** under the revolving line of credit and the company was in compliance with all financial covenants[49](index=49&type=chunk)[51](index=51&type=chunk) [Note 6. Shareholders' Equity](index=13&type=section&id=6.%20Shareholders%27%20Equity) The company repurchased 525,615 shares for $2.38M and recorded $738,789 in stock compensation expense Share Repurchase Activity (Jan 1, 2021 - Sep 30, 2021) | Period | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | **Total YTD** | **525,615** | **$4.52** | - The company's 2020 Equity Incentive Plan authorizes the issuance of up to **2,000,000 Common Shares** for compensation in the form of stock options, restricted stock, PSUs, and other awards[61](index=61&type=chunk) - Stock compensation expense for the nine months ended September 30, 2021, was **$738,789**, comprising $402,247 for Restricted Stock and $336,542 for PSUs[63](index=63&type=chunk)[75](index=75&type=chunk) [Note 7. Revenue Recognition](index=17&type=section&id=7.%20Revenue%20Recognition) Total operating revenue grew to $28.6M for the nine-month period, driven by a sharp rise in natural gas revenue Operating Revenue Breakdown (Nine Months Ended) | Revenue Source | September 30, 2021 | September 30, 2020 | | :--- | :--- | :--- | | Natural gas | $20,950,378 | $11,470,012 | | Natural gas liquids | $588,685 | $56,705 | | Oil and condensate | $1,201,289 | $190,180 | | Gathering and compression fees | $5,891,868 | $6,800,347 | | **Total operating revenue** | **$28,632,220** | **$18,517,244** | [Note 9. Commitments and Contingencies](index=20&type=section&id=9.%20Commitments%20and%20Contingencies) The company has $1.8M in capital commitments and is involved in ongoing litigation with Chesapeake Appalachia - As of September 30, 2021, the Company had commitments of **$1.8 million** for capital expenditures[98](index=98&type=chunk) - On March 10, 2021, Epsilon filed a complaint against Chesapeake Appalachia, LLC, claiming **breach of settlement and operating agreements** concerning the Auburn Development in Pennsylvania[99](index=99&type=chunk) [Note 11. Operating Segments](index=21&type=section&id=11.%20Operating%20Segments) The Upstream segment drove performance with $13.0M in net earnings, while the Gas Gathering segment contributed $4.3M Segment Performance (Nine Months Ended Sep 30, 2021) | Segment | Operating Revenue | Net Earnings (Loss) | | :--- | :--- | :--- | | Upstream | $22,740,352 | $12,965,907 | | Gas Gathering | $7,088,836 | $4,333,909 | | Corporate | $0 | $(13,652,808) | - The company's reportable segments are **Upstream** (oil and gas production), **Gas Gathering** (midstream operations), and **Corporate**[107](index=107&type=chunk) [Note 12. Risk Management Activities](index=24&type=section&id=12.%20Risk%20Management%20Activities) The company recognized a $6.4M net loss on commodity derivative contracts used to manage price risk - For the nine months ended September 30, 2021, Epsilon recognized losses on commodity derivative contracts of **$6,417,123**, which included cash settlements of $2,488,702[119](index=119&type=chunk) Outstanding Derivative Contracts as of September 30, 2021 | Derivative Type | Volume (MMbtu) | Period | Fair Value (Liability) | | :--- | :--- | :--- | :--- | | Two-way costless collar | 610,000 | 2021 | $(1,589,765) | | Two-way costless collar | 900,000 | 2022 | $(2,338,656) | | **Total** | **1,510,000** | | **$(3,928,421)** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Higher commodity prices drove a 55% revenue increase and a return to profitability, with strong liquidity [Overview & Business Strategy](index=27&type=section&id=Overview%20%26%20Business%20Strategy) The company focuses on managing cash flow from its North American onshore assets to generate attractive returns - The company's business strategy is to manage cash flow from its producing leasehold and midstream assets to provide **attractive rates of return**[132](index=132&type=chunk) - Epsilon's primary area of operation is **Pennsylvania**, with assets concentrated in areas conducive to multi-well, repeatable drilling programs[129](index=129&type=chunk) [Operational Highlights](index=28&type=section&id=Operational%20Highlights) Q3 2021 saw significant realized price increases in both the Marcellus Shale (191%) and Anadarko Basin (511%) - **Marcellus Shale (Pennsylvania):** Realized natural gas price was **$3.43 per Mcf** in Q3 2021, a 191% increase over Q3 2020, while natural gas production was 2.6 Bcf[139](index=139&type=chunk)[140](index=140&type=chunk) - **Anadarko (Oklahoma):** Realized price for all production was **$6.17 per Mcfe** in Q3 2021, a 511% increase over Q3 2020, with total production increasing 444% to 0.37 Bcfe[142](index=142&type=chunk)[144](index=144&type=chunk) [Non-GAAP Financial Measures-Adjusted EBITDA](index=29&type=section&id=Non-GAAP%20Financial%20Measures-Adjusted%20EBITDA) Adjusted EBITDA for the nine-month period increased to $15.2M from $11.7M year-over-year Reconciliation of Net Income to Adjusted EBITDA | Period | Net Income (Loss) | Adjusted EBITDA | | :--- | :--- | :--- | | **Nine Months 2021** | **$3,647,008** | **$15,152,089** | | Nine Months 2020 | $(548,518) | $11,699,423 | | **Three Months 2021** | **$1,396,466** | **$6,787,384** | | Three Months 2020 | $(292,783) | $3,943,131 | [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Revenue rose 55% to $28.6M due to higher prices, while operating costs decreased and G&A expenses increased - For the nine months ended September 30, 2021, revenues increased **$10.1 million, or 55%**, to $28.6 million, primarily due to increased commodity prices[150](index=150&type=chunk) - Upstream operating costs for the nine months **decreased by $0.6 million (9.8%)** due to a reduction in the PA impact fee and lower discretionary maintenance spending[157](index=157&type=chunk) - DD&A expense **decreased by $2.59 million (33%)** for the nine months, mainly due to an increase in reported reserves and lower production volumes[166](index=166&type=chunk) - G&A expenses for the nine months **increased by $1.4 million (34%)** due to higher legal fees, CEO compensation, and stock-based compensation[171](index=171&type=chunk) [Capital Resources and Liquidity](index=34&type=section&id=Capital%20Resources%20and%20Liquidity) The company maintained strong liquidity with a $16.0M working capital surplus and no debt - At September 30, 2021, the company had a **working capital surplus of $16.0 million**, an increase of $2.7 million from December 31, 2020[180](index=180&type=chunk) - For the nine months ended September 30, 2021, cash provided by operating activities was **$13.5 million**, a 12% increase from the prior year[181](index=181&type=chunk) - Since January 1, 2021, Epsilon has repurchased **525,615 common shares for $2,377,181** under its share repurchase program[191](index=191&type=chunk) - The company has a senior secured credit facility with a current borrowing base of **$14 million** and no outstanding borrowings[184](index=184&type=chunk)[190](index=190&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is primarily exposed to commodity price risk, which it mitigates through derivative hedging contracts - The company's earnings and cash flow are significantly affected by changes in the market price of commodities like **natural gas and oil**[199](index=199&type=chunk) - Epsilon has established a hedging strategy and enters into **derivative financial instruments** to manage the risk associated with changes in commodity prices and stabilize cash flows[204](index=204&type=chunk) - **Interest rate risk is minimal** as the outstanding principal balance under the credit agreement was nil at September 30, 2021[203](index=203&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Disclosure controls were deemed ineffective due to a material weakness in recording realized hedge losses - Management concluded that as of September 30, 2021, **disclosure controls and procedures were not effective**[206](index=206&type=chunk) - The ineffectiveness was due to a **material weakness** in internal control over financial reporting related to the accounts payable/accrual function regarding the recording of realized hedge losses[206](index=206&type=chunk) - Management is developing a remediation plan which is expected to include incremental training and enhanced review of transactions and account reconciliations[208](index=208&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is in an ongoing legal dispute with Chesapeake Appalachia over development agreements - On March 10, 2021, Epsilon filed a complaint against Chesapeake Appalachia, LLC, claiming **breach of settlement and operating agreements** related to the Auburn Development in North-Central Pennsylvania[213](index=213&type=chunk) - The court granted Chesapeake's motion to dismiss on a narrow issue, but Epsilon has filed a motion for reconsideration, which was expected to be fully briefed by November 1, 2021[214](index=214&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to risk factors were reported since the company's 2020 Annual Report on Form 10-K - There have been **no material changes** from the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020[215](index=215&type=chunk) [Item 2. Unregistered Sale of Equity Securities and Use of Proceeds](index=38&type=section&id=ITEM%202.%20UNREGISTERED%20SALE%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased 525,615 common shares for $2.38M as part of its ongoing share buyback program Share Repurchase Summary (YTD as of Sep 30, 2021) | Metric | Value | | :--- | :--- | | Total shares purchased | 525,615 | | Average price per share | $4.52 | | Maximum shares remaining for purchase | 667,385 | - The share repurchase program commenced on January 1, 2021, and will end on December 31, 2021, unless terminated earlier, with purchases funded out of available cash[217](index=217&type=chunk) [Other Items (3, 4, 5, 6)](index=39&type=section&id=Other%20Items) Items 3, 4, and 5 were not applicable, while Item 6 lists the exhibits filed with the report - Items 3, 4, and 5 are noted as **'Not applicable'**[218](index=218&type=chunk)[219](index=219&type=chunk) - Item 6 lists the exhibits filed with the 10-Q, including SOX 302 and 906 certifications and Inline XBRL documents[221](index=221&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-38770 EPSILON ENERGY LTD. (Exact name of registrant as specified in its charter) Alberta, Canada 98-1476367 (State or other ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 ◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-38770 EPSILON ENERGY LTD. (Exact name of registrant as specified in its charter) Alberta, Canada 98-1476367 (State or other ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020. OR ◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-38770 EPSILON ENERGY LTD. (Exact name of registrant as specified in its charter) Alberta, Canada 98-1476367 (State or Other Jurisdiction of Incorporation or Organizat ...

Financial Performance - Total revenue for the three months ended September 30, 2020, was $5,810,611, a 11.3% increase from $5,219,194 in the same period of 2019[13] - Net income (loss) for the three months ended September 30, 2020, was $(292,783), compared to a net income of $1,453,298 for the same period in 2019[13] - Total operating revenue for the nine months ended September 30, 2020, was $18,517,244, a decrease from $19,928,780 in the same period of 2019, representing a decline of approximately 7.1%[108] - Net earnings for the nine months ended September 30, 2020, were a loss of $548,518, compared to a profit of $6,664,832 in the same period of 2019, indicating a significant downturn[108] - The company recorded a net loss available to shareholders of $292,783 for the three months ended September 30, 2020, compared to a net income of $1,453,298 for the same period in 2019[100] Assets and Liabilities - Total current assets decreased to $17,855,454 as of September 30, 2020, down 20.5% from $22,424,324 at December 31, 2019[12] - Total assets decreased to $87,339,453 as of September 30, 2020, down 10.6% from $97,669,203 at December 31, 2019[12] - Total liabilities decreased to $20,010,103 as of September 30, 2020, down 6.1% from $21,306,209 at December 31, 2019[12] - Total shareholders' equity decreased to $67,329,350 as of September 30, 2020, down 11.9% from $76,362,994 at December 31, 2019[12] Cash Flow and Capital Expenditures - Cash provided by operating activities for the nine months ended September 30, 2020, was $12,093,463, slightly up from $11,829,159 in the same period of 2019[23] - Capital expenditures for the nine months ended September 30, 2020, totaled $3,595,395, down from $8,336,192 in the same period of 2019, reflecting a reduction of approximately 56.8%[108] - The company utilized $1.4 million and $5.5 million for investing activities during the three and nine months ended September 30, 2020, primarily for leasehold and development costs[197] Shareholder Actions - The company executed a buyback of common shares totaling $9,078,522 during the nine months ended September 30, 2020[23] - As of September 30, 2020, the company had a total of 3,690,444 shares repurchased at an average price of $3.16 per share[64] - The company announced a substantial issuer bid to repurchase up to approximately $6.2 million of its common shares, ultimately accepting 2,337,034 shares for a total consideration of $7,151,324 at $3.06 per share[144] Impairments and Expenses - The company recognized an impairment of $1,760,000 on its proved properties due to historically low commodity prices[23] - The company reported impairment expenses of $1,760,000 for the nine months ended September 30, 2020, which were not present in the same period of 2019[108] - Stock-based compensation expenses for the nine months ended September 30, 2020, amounted to $585,105, compared to $401,161 in the same period of 2019[23] Market and Operational Conditions - The company did not incur significant disruptions to operations during the COVID-19 pandemic but recognized impairments on its legacy assets[25] - Epsilon is currently assessing the impact of adopting new accounting standards, including ASU 2016-13, effective January 1, 2023, which will change the measurement of credit losses[37] - The company expects local production to remain flat or decline modestly throughout the remainder of 2020 due to capital discipline pressures in the market[141] Revenue Breakdown - Natural gas revenue for the nine months ended September 30, 2020, was $11,470,012, a decrease of 9.7% from $12,698,643 in the same period of 2019[82] - Gathering and compression fees for the nine months ended September 30, 2020, were $6,800,347, down from $6,923,058 in the same period of 2019, reflecting a decrease of 1.8%[82] - Natural gas production for the three months ended September 30, 2020, was 3.0 Bcf, up from 1.8 Bcf in the same period in 2019, while total production for the nine months was 8.5 Bcf, compared to 5.4 Bcf in 2019[156] Derivative Contracts and Risk Management - The company engages in price risk management activities to mitigate exposure to fluctuations in commodity prices, securing fixed price contracts for a portion of expected sales volumes[116] - Epsilon recognized gains on commodity derivative contracts of $419,879 and $2,055,548 for the three and nine months ended September 30, 2020, respectively[120] - The company received net cash settlements of $1,657,323 and $4,035,092 from derivative contracts for the three and nine months ended September 30, 2020, respectively[188]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 ◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-38770 EPSILON ENERGY LTD. (Exact name of registrant as specified in its charter) Alberta, Canada 98-1476367 (State or other ...

Table of Contents Title of each class Trading Symbol Name of each exchange on which registered Common Shares, no par value "EPSN" NASDAQ Global Market UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file nu ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-38770 EPSILON ENERGY LTD. (Exact name of registrant as specified in its charter) Alberta, Canada 98-1476367 (State or Other Jurisdiction of Incorporation or Organizat ...