Epsilon Energy Ltd.
For the period ended Sep 30, 2025. Filed Nov 5, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 5, 2025
Extracted filing text, with the paragraph anchors used by the comparison.
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17. Fair Value Measurements
The methodologies used to determine the fair value of our financial assets and liabilities at September 30, 2025 were the same as those used at December 31, 2024.
Cash and cash equivalents, restricted cash, accounts receivable, and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments. The Company’s revolving line of credit has a recorded value that approximates its fair value since its variable interest rate is tied to current market rates and the applicable margins represent market rates. The revolving line of credit is classified within Level 2 of the fair value hierarchy.
Commodity derivative instruments consist of NYMEX HH swap, NYMEX HH option, and Tennessee Z4 basis swap contracts for natural gas, and NYMEX WTI CMA swap contracts for crude oil. The Company’s derivative contracts are valued based on a marked to market approach. These assumptions are observable in the marketplace throughout the full term of the contract, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace, and are therefore designated as Level 2 within the valuation hierarchy. The Company utilizes its counterparties’ valuations to assess the reasonableness of its own valuations.
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | September 30, 2025 | ||||||||||||||
| · Level 1 · · Level 2 · Level 3 · Effect of Netting · Net Fair Value | |||||||||||||||
| Assets · · · · · · · · · · | |||||||||||||||
| Derivative contracts | | $— | | $1,462,674 | | $— | | $(573,487) | | $889,187 | |||||
| Cash equivalents | | $262,894 | | $— | | $— | | $— | | $262,894 | |||||
| Liabilities | | | | | | | | | | | | | | | |
| Derivative contracts | | $— | | $573,487 | | $— | | $(573,487) | | $— | |||||
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| · · December 31, 2024 | |||||||||||||||
| · · Level 1 · · Level 2 · Level 3 · Effect of Netting · Net Fair Value | |||||||||||||||
| Assets · · · · · · · · · · | |||||||||||||||
| Derivative contracts | | $— | | $403,032 | | $— | | $(403,032) | | $— | |||||
| Cash equivalents | | $298,767 | | $— | | $— | | $— | | $298,767 | |||||
| Liabilities | | | | | | | | | | | | | | | |
| Derivative contracts | | $— | | $890,580 | | $— | | $(403,032) | | $487,548 | |||||
Non-Recurring Fair Value Measurements
The Company performed an impairment test on our oil and gas properties and it was determined that the carrying amount of the Canada asset exceeded the estimated undiscounted future cash flows resulting in a reduction of the carrying amount of the properties to their estimated fair values by $2.7 million during the nine months ended September 30, 2025. This nonrecurring fair value measurement is classified within Level 3 of the fair value hierarchy. For the year ended December 31, 2024, there was an impairment of $1.45 million.
The table below summarizes the fair value of the impaired assets at June 30, 2025, the measurement date for the impairment.
| · · · · · · · · · · · · | ||||||||
|---|---|---|---|---|---|---|---|---|
| · · · Quoted Prices · · Significant · · | ||||||||
| | | | | in Active | | Other | | Significant |
| | | | | Markets for | | Observable | | Unobservable |
| | | June 30, | | Identical Assets | | Inputs | | Inputs |
| · · 2025 · (Level 1) · (Level 2) · (Level 3) | ||||||||
| Nonrecurring fair value measurement · · · · · · · · · · · · | ||||||||
| Long-lived assets held and used (1) | | $1,342,942 | | $— | | $— | | $1,342,942 |
| Total Nonrecurring fair value measurement | | $1,342,942 | | $— | | $— | | $1,342,942 |
| (1) | At June 30, 2025, long-lived assets held and used with a carrying amount of $4.0 million were written down to their fair value of $1.3 million, resulting in an impairment charge of $2.7 million. |
The table below summarized the fair value of the impaired assets at December 31, 2024.
| · · · · · · · · · · · · | ||||||||
|---|---|---|---|---|---|---|---|---|
| · · · Quoted Prices · · Significant · · | ||||||||
| | | | | in Active | | Other | | Significant |
| | | | | Markets for | | Observable | | Unobservable |
| | | December 31, | | Identical Assets | | Inputs | | Inputs |
| · · 2024 · (Level 1) · (Level 2) · (Level 3) | ||||||||
| Nonrecurring fair value measurement · · · · · · · · · · · · | ||||||||
| Long-lived assets held and used | | $492,253 | | $— | | $— | | $492,253 |
| Total Nonrecurring fair value measurement | | $492,253 | | $— | | $— | | $492,253 |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.