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
Contents
Commodity Derivative Contracts
The Company enters into certain commodity derivative instruments to mitigate commodity price risk associated with a portion of its future natural gas and oil production and related cash flows. The natural gas and oil revenues and cash flows are affected by changes in commodity product prices, which are volatile and cannot be accurately predicted. The objective for holding these commodity derivatives is to protect the operating revenues and cash flows related to a portion of the future natural gas and oil sales from the risk of significant declines in commodity prices, which helps ensure the Company’s ability to fund the capital budget.
Epsilon has historically elected not to designate any of its financial commodity derivative contracts as accounting hedges and, accordingly, accounts for these financial commodity derivative contracts using the mark-to-market accounting method. Under this accounting method, changes in the fair value of outstanding financial instruments are recognized as gains or losses in the period of change and are recorded asLoss on derivative contracts on the condensed Consolidated Statements of Operations and Comprehensive Income. The related cash flow impact is reflected in cash flows from operating activities. During the three and nine months ended September 30, 2025, Epsilon recognized gains on commodity derivative contracts of $964,307 and $2,076,000, respectively. These amounts included cash received of $807,648 and $699,265, respectively. For the three and nine months ended September 30, 2024, Epsilon recognized gains on commodity derivative contracts of $440,712 and $245,095, respectively. These amounts included cash received on settlements on these contracts of $485,389 and $1,245,931, respectively.
Commodity Derivative Contracts
At September 30, 2025, the Company had outstanding natural gas NYMEX Henry Hub (“HH”) swaps totaling 1.1 Bcf, natural gas NYMEX HH options totaling 2.19 Bcf, and crude oil NYMEX WTI CMA swaps totaling 30.8 MBbls.
| | | | | | | |
|---|---|---|---|---|---|---|
| · · Fair Value of Derivative Assets | ||||||
| · September 30, · December 31, | ||||||
| · · 2025 · · 2024 | ||||||
| Current · · | ||||||
| Henry Hub Nymex Swap | $595,521 | | $151,274 | |||
| Tennessee Z4 Basis swap | | — | | | 195,211 | |
| Henry Hub Nymex Option - Put | | 382,243 | | | — | |
| Crude Oil NYMEX WTI CMA | | | 155,529 | | | 56,547 |
| Long-term | | | | | ||
| Henry Hub Nymex Swap | | | 16,244 | | | — |
| Henry Hub Nymex Option - Put | | 313,137 | | | — | |
| | $1,462,674 | | $403,032 | |||
| | | | | | | |
|---|---|---|---|---|---|---|
| · · Fair Value of Derivative Liabilities | ||||||
| · September 30, · December 31, | ||||||
| · · 2025 · · 2024 | ||||||
| Current · · | ||||||
| Henry Hub Nymex Swap | $— | | $(448,852) | |||
| Tennessee Z4 Basis swap | | — | | | (441,728) | |
| Henry Hub Nymex Option - Call | | | (204,511) | | | — |
| Long-term | | | | | ||
| Henry Hub Nymex Option - Put | | — | | | — | |
| Henry Hub Nymex Option - Call | | (368,976) | | | — | |
| | $(573,487) | | $(890,580) | |||
| | | | | | | |
| Net Fair Value of Derivatives | $889,187 | | $(487,548) | |||
| | | | | | | |
| Net Current | | $928,782 | | $(487,548) | ||
| Net Long-term | $(39,595) | | $— | |||
The following table presents the changes in the fair value of Epsilon’s commodity derivatives for the periods indicated:
| · · · · · · · · · · · · | ||||||||
|---|---|---|---|---|---|---|---|---|
| · · Three months ended September 30, · · Nine months ended September 30, | ||||||||
| · 2025 · 2024 · 2025 · 2024 | ||||||||
| Fair value of asset (liability), beginning of the period | | $732,528 | | $144,096 | | $(487,548) | | $1,100,255 |
| Gain on derivative contracts included in earnings | | 964,307 | | 440,712 | | 2,076,000 | | 245,095 |
| Settlement of commodity derivative contracts | | (807,648) | | (485,389) | | (699,265) | | (1,245,931) |
| Fair value of asset, end of the period | | $889,187 | | $99,419 | | $889,187 | | $99,419 |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.