Epsilon Energy Ltd.

The primary source of cash for Epsilon during the three and six months ended June 30, 2026 and 2025 was funds generated from operations. The primary uses of cash for the three and six months ended June 30, 2026 were the development of upstream properties, the reduction of the outstanding credit facility balance, and the distribution of dividends. The primary uses of cash for the three and six months ended June 30, 2025 were the development of upstream properties and the distribution of dividends.

At June 30, 2026, we had a working capital deficit of $1.3 million, a decrease of $8.9 million from the $7.6 million surplus at December 31, 2025. The Company anticipates its current cash balance, available borrowings, and cash flows from operations to be sufficient to meet its cash requirements for at least the next twelve months.

Six months ended June 30, 2026 compared to 2025

During the six months ended June 30, 2026, $22.4 million was provided by the Company’s operating activities, compared to $16.9 million during the same period in 2025, representing an 32% increase. The increase was primarily due to produced oil volumes from the acquired Wyoming assets and higher realized gas prices in Pennsylvania.

The Company used $6.4 million and $10.7 million of cash for investing activities during the six months ended June 30, 2026 and 2025, respectively. During the six months ended June 30, 2026, the Company had $net investments primarily in well and facilities costs and leasehold in Pennsylvania, Texas, and Wyoming offset by the ORRI sale in Pennsylvania. During the six months ended June 30, 2025, the Company had net investments primarily in well costs in Pennsylvania, Texas, and Canada.

The Company used $13.8 million and $2.8 million of cash for financing activities during the six months ended June 30, 2026 and 2025, respectively. During the six months ended June 30, 2026, this was spent on the repayment of the outstanding balance on the credit facility and dividend payments. During the six months ended June 30, 2025, this was spent on dividend payments.