Epsilon Energy Ltd. Q1 FY2025 earnings call

• Company delivered strong Q1 results, primarily from Pennsylvania business. Marcellus upstream and midstream cash flows saw significant increases.
• Planning 0.5 net wells in Texas and Alberta with total capital expenditures of $9 million to $12 million over the balance of the year, including a $1.5 million drilling carry in Alberta; no additional investments expected in Pennsylvania this year.
• Marcellus has substantial undeveloped inventory (roughly 500,000 completed lateral length feed gross) expected to be developed late next year or early 2027.
• Hedged approximately 45% of forecasted PDP oil production for the remainder of the year at just over $71 WTI and ~30% of gas production at $3.33 in NYMEX; looking to add to gas hedges for winter 2026 and summer 2026 if prices are attractive.
• In Texas, 2 wells are planned to satisfy development obligations, with the first spudding late May and completing in Q3. In Canada, first two Mannville wells in Garrington area completed, production started in April, with efforts to optimize production via artificial lift and work ongoing for next two wells.

The company delivered strong results in the first quarter, primarily due to the Pennsylvania business. Marcellus upstream cash flows were up sequentially over 200% with a 58% increase in production and 70% increase in realized pricing. Midstream cash flows increased 140% sequentially on higher throughput volumes. In Texas, the Barnett type curve is economic, delivering above a 15% rate of return down to $55 WTI, with 2 wells planned for the remainder of the year, first spudding late May and completing in Q3. In Canada, the first two horizontal Mannville wells in the Garrington area were completed in Q1, with initial wells producing and sales commencing in April, and work ongoing for the next two wells in the project.

• Planning 0.5 net wells in Texas and Alberta with total capital expenditures of $9 million to $12 million over the balance of the year, including a $1.5 million drilling carry in Alberta.
• No additional investments expected in Pennsylvania this year.
• Hedging plans in place for oil and gas, with intention to add gas hedges if market conditions present attractive prices.

• Oil price volatility could impact near-term activity.
• Operator plans for development are subject to change based on gas market conditions and other factors.

Q: Good morning, and congratulations on the very strong production results at your Marcellus facet. I'm sure you're glad to get these curtailments behind you that you had to endure for most of the last year. You said there's not going to be any more development drilling in Marcellus this year. Do you want to offer any additional details on the first two wells in Alberta and how those are doing?

A: Hey, John, it's Jason. Thanks for the question. A little early to offer too much there. Other than to say we've got oil and gas started flowing that to sales in early April. So, we're kind of in that first 30 days. Working with the operator to get artificial lift installed and get some facilities tied down. So, I think probably the most helpful thing is, yeah, we're producing cash flow up there right now, but we're really going to have more definitive comments as we march through the second quarter into the third quarter. So, either -- if there's something meaningful on an interim basis, obviously, we'll communicate that with the market, but certainly, I expect a fulsome update on that for our next quarterly reward.