Epsilon Energy Ltd

(a)Authorized shares

The Company is authorized to issue an unlimited number of Common Shares withno par value and an unlimited number of Preferred Shares withno par value.

(b)Purchases of Equity Shares

Normal Course Issuer Bid

On March 20, 2024, the Board of Directors authorized a new share repurchase program of up to 2,191,320 common shares, representing 10% of the outstanding common shares of the Company at such time, for an aggregate purchase price of not more than US $12.0 million. The program is pursuant to a normal course issuer bid and will be conducted in accordance with Rule 10b-18 under the Exchange Act. The program commenced on March 27, 2024 and will end on March 26, 2025, unless the maximum amount of common shares is purchased before then or Epsilon provides earlier notice of termination.

During the six months ended June 30, 2024, no shares have been repurchased under the new program.

The previous share repurchase program commenced on March 27, 2023 and ended on March 26, 2024. During the year ended December 31, 2023, we repurchased 968,149 common shares at an average price of $5.08 per share (excluding commissions) under the previous plan.

During the six months ended June 30, 2024, we repurchased andretired 248,700 shares at a price of $4.82 per share (excluding commissions) under the previous plan.

The following table contains activity relating to our acquisition of equity securities during the six months ended June 30, 2024:

(c)Equity Incentive Plan

Epsilon’s board of directors (the “Board”) adopted the 2020 Equity Incentive Plan (the “2020 Plan”) on July 22, 2020, and Epsilon’s shareholders approved the 2020 Plan at Epsilon’s 2020 Annual General and Special Meeting of Shareholders, which occurred on September 1, 2020 (the “Meeting”).

The 2020 Plan provides for incentive compensation in the form of stock options, stock appreciation rights, restricted stock and stock units, performance shares and units, other stock-based awards and cash-based awards. Under the 2020 Plan, Epsilon will be authorized to issue up to 2,000,000 Common Shares.

Restricted Stock Awards

For the six months ended June 30, 2024,63,980 restricted stock units with a weighted average price at the grant date of $5.08 were awarded to the Company’s board of directors. For the year ended December 31, 2023,358,546 restricted stock units with a weighted average price at the grant date of $5.42 were awarded to the Company’s management, employees, and board of directors. These units vest over a three-year period, with an equal number of common shares being issued per period on the anniversary of the award resolution. The vesting of the units (and corresponding issuance of shares) is contingent on the individuals’ continued employment or service. The Company determined the fair value of the granted restricted stock units based on the market price of the common shares of the Company on the date of grant.

The following table summarizes restricted stock unit activity for the six months ended June 30, 2024, and the year ended December 31, 2023:

Stock compensation expense for the granted restricted stock units is recognized over the vesting period. Stock compensation expense recognized during the three and six months ended June 30, 2024 was $313,589 and $635,158, respectively (for the three and six months ended June 30, 2023 was $165,064 and $330,128, respectively).

At June 30, 2024, the Company had unrecognized stock-based compensation related to the restricted stock units of $2,341,719 to be recognized over a weighted average period of 1.23 years (at December 31, 2023: $2,651,858 over 1.42 years).

Performance Share Unit Awards (“PSU”)

For the three and six months ended June 30, 2024, there wereno outstanding PSUs. For the year ended December 31, 2023, a total of 15,833 common shares vested and were issued.

The following table summarizes PSUs for the six months ended June 30, 2024 and the year ended December 31, 2023:

Stock compensation expense for the granted PSUs is recognized over the vesting period. Stock compensation expense recognized during the six months ended June 30, 2024 related to PSUs was $0 (for the three and six months ended June 30, 2023 related to PSUs was $14,684 and $29,368, respectively).

At June 30, 2024 and December 31, 2023, the Company hadno unrecognized stock-based compensation related to PSUs.

Stock Options

As of June 30, 2024, the Company hadno outstanding stock options. During the six months ended June 30, 2024 and the year ended December 31, 2023, the Company awardedno stock options.

The following table summarizes stock option activity for the six months ended June 30, 2024 and the year ended December 31, 2023:

At June 30, 2024, the Company had unrecognized stock-based compensation, related to these options, ofnil (at December 31, 2023: nil). The aggregate intrinsic value at June 30, 2024 wasnil (at December 31, 2023: $5,500).

(d)Dividends

On March 1, 2024 and May 30, 2024, the Board declared quarterly a dividend of $0.0625 per common share (annualized $0.25 per common share) totaling in aggregate an amount of approximately $2.7 million that has been paid for the six months ended June 30, 2024.