Epsilon Energy Ltd.

Because the Company hadno cost basis in these wells, during the three and six months ended June 30, 2026, the proceeds are reported asGain on sale of oil and gas propertieson the Condensed Consolidated Statement of Operations and Comprehensive Income.

During the three and six months ended June 30, 2025, the Company hadno asset sales.

Property Impairment

We perform a quantitative impairment test whenever events or changes in circumstances indicate that an asset group's carrying amount may not be recoverable, over proved properties using the published NYMEX forward prices, basis differentials, timing, methods and other assumptions consistent with historical periods. When indicators of impairment are present, GAAP requires that the Company first compare expected future undiscounted cash flows by asset group to their respective carrying values. If the carrying amount exceeds the estimated undiscounted future cash flows, a reduction of the carrying amount of the properties to their estimated fair value is required. Additionally, if an exploratory well is determined not to have found proved reserves, the costs incurred, net of any salvage value, should be charged to expense.

During the three and six months ended June 30, 2026, no impairment was recorded.

During the three months and six months ended June 30, 2025, Epsilon recorded an impairment of $2.7 million fortwo wells drill in Alberta, Canada. For the year ended December 31, 2025, the Company recorded an impairment of $3.2 million on the Canadian wells (2 gross,0.5 net) and $0.7 million on the New Mexico wells (2 gross,0.2 net) due to low forward oil prices on December 31, 2025 (which are required to be used in impairment testing) and an offset frac hit impacting production and reserves in New Mexico.