0001104659-26-035794
SEC filingEpsilon Energy Ltd. reported a net loss of $5.8 million for FY 2025, a significant decline from net income of $1.9 million in FY 2024. This was driven by a $19.3 million loss on the sale of Oklahoma assets, partially offset by a $5.5 million gain on derivative contracts. Total revenue increased 64% to $51.6 million, primarily due to higher natural gas prices and volumes in Pennsylvania and the acquisition of Peak assets in Wyoming. Operating cash flow was strong at $20.6 million, supporting capital expenditures and dividends. The company's balance sheet shows total assets of $228.2 million, liabilities of $103.5 million, and shareholders' equity of $124.7 million as of December 31, 2025.
Epsilon Energy Ltd. reported mixed financial results for FY 2025. While revenue increased significantly by 64% to $51.6 million from $31.5 million in FY 2024, the company recorded a net loss of $5.8 million compared to net income of $1.9 million in the prior year. The loss was primarily driven by a $19.3 million loss on the sale of Oklahoma assets, which management noted provides potential tax benefits. Operating loss was $10.5 million compared to operating income of $3.4 million in FY 2024. Despite the net loss, operating cash flow remained strong at $20.6 million, a 23% increase from $16.8 million in FY 2024. The company paid $6.0 million in dividends during the year.
Revenue growth was driven by multiple factors across different geographic segments. Pennsylvania natural gas revenue increased 173% to $28.0 million due to higher prices ($2.98/Mcf vs $1.80/Mcf) and increased volumes (9,402 MMcf vs 5,699 MMcf). Gathering system revenue increased 21% to $6.7 million due to higher throughput and displacement of crossflow gas with Anchor Shipper gas. The Peak acquisition in Wyoming contributed $4.0 million in revenue during the partial period since the November 2025 closing. Permian Basin revenue declined 25% to $10.4 million primarily due to lower oil prices. The company divested its Oklahoma assets in December 2025, which had contributed $1.5 million in revenue for the year.
Operating costs increased significantly to $62.1 million from $28.1 million in FY 2024, resulting in negative operating margins. Key cost drivers included the $19.3 million loss on asset sale, $3.9 million impairment expense, $2.9 million transaction costs related to the Peak acquisition, and increased lease operating expenses of $12.5 million (up 72% from $7.3 million). Upstream operating costs per Mcfe increased to $1.06 from $0.95, primarily due to higher liquids proportion of total sales. General and administrative expenses increased 29% to $8.9 million, driven by higher compensation and stock-based compensation expenses. The company reported Adjusted EBITDA of $30.7 million, up 75% from $17.6 million in FY 2024.
Operating cash flow of $20.6 million was sufficient to fund capital expenditures and dividends. Investing activities used $61.6 million, primarily for the Peak acquisition ($49.8 million) and property additions. Financing activities provided $43.7 million, mainly from $50.5 million borrowings on the new credit facility, offset by $6.0 million in dividends paid. The balance sheet shows total assets of $228.2 million, including $181.0 million in net oil and gas properties. Total liabilities were $103.5 million, including $50.5 million in credit facility debt. Shareholders' equity increased to $124.7 million from $96.7 million, largely due to shares issued for the Peak acquisition. The company had a working capital surplus of $7.6 million at year-end.
The company anticipates current cash balance, available borrowings, and operating cash flows will be sufficient to meet cash requirements for at least the next twelve months. Strategic priorities include disciplined capital allocation, maintaining a strong balance sheet, and opportunistically investing in existing and new projects. Key risk factors include commodity price volatility, dependence on reserve replacement, operational hazards, regulatory changes, and geographic concentration in Pennsylvania and Wyoming. The company has a new $80 million credit facility with Frost Bank, requiring maintenance of a current ratio of 1.0:1.0 and leverage ratio below 2.5:1.0. Management noted the Oklahoma asset sale provides potential tax benefits that may be utilized going forward.