Epsilon Energy Ltd. (EPSN) presented its 2026 operational and financial outlook at the EnerCom Denver conference on Tuesday, emphasizing production growth, inventory depth, and capital discipline. The company projects full-year output to rise 18% from 2025 levels, with oil production expected to more than double.
Revenue for the trailing twelve months through June 2026 reached $67.66 million, up 54% year-over-year, while EBITDA totaled $29.24 million. Gross profit margins stood at 66%. The company’s stock was referenced at $5.58, up 4.89% during the session.
Epsilon operates across four core basins, with inventory sufficient for over a decade of development. The Powder River Basin holds approximately 40,000 net acres, of which 31,000 remain undeveloped, with 75% held by production and no continuous drilling requirements. In the first half of 2026, two Niobrara DUCs were completed, and three Parkman laterals were drilled in the second half. A Parkman 3-well pad in Converse County delivered first-year net production of 360,000 BOE and generated $18.5 million in operating cash flow on a $16.5 million net capital investment, achieving full capital recovery within 12 months.
The Permian Basin includes a 16,500-acre leasehold in Ector County, targeting the Barnett Shale, with 25% working interest and 13,000 undeveloped acres remaining. Firebird II serves as the operator. In the Marcellus Shale, Epsilon holds 5,100 net acres with an estimated 170 Bcf to 200 Bcf of undeveloped net reserves. A Marcellus Upper Shale 4-well pad produced 4.7 Bcf in its first year, generating $9.6 million in operating cash flow on a $10.8 million investment, with a 90% first-year capital recovery rate.
Midstream operations include a 35% undivided interest in the Auburn Gas Gathering System, which has processed 960 Bcf of gas since its 2013 launch and maintains 1 Tcf of dedicated reserves. The system operates at 94 MMcf/d throughput with a 150 MMcf/d compression capacity. EBITDA margins are estimated between 65% and 75%, supported by fixed-rate contracts escalating annually with CPI.
Epsilon employs 35 staff to manage approximately 7,800 wells, averaging 225 wells per employee. Since 2022, the company has reduced G&A costs per BOE while increasing production. Management highlighted lateral efficiency gains, noting that extending laterals from 2 miles to 4 miles reduces drilling and completion costs per foot by about 25%. Nearly 70% of 2026 wells exceed 3 miles in length, with average lateral lengths up 38% since 2022.
Executives emphasized capital discipline and hedging strategies to preserve cash flows for dividends and reinvestment. Andrew of Vitus Energy, a partner, noted that hedging protects cash flows supporting dividends and investment capacity through commodity cycles.
