{"url_path":"/sec/epsn/10-q/2026/cover-page","section_key":"cover-page","section_title":"Cover Page","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-13","source_url":"https://www.sec.gov/Archives/edgar/data/1726126/0001104659-26-060245-index.html","accession_number":"0001104659-26-060245","cik":"0001726126","ticker":"EPSN","issuer_name":"Epsilon Energy Ltd.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1726126/0001104659-26-060245-index.html","primary_entity_key":"0001726126","primary_entity_name":"Epsilon Energy Ltd."},"word_count":1290,"has_tables":true,"body_markdown":"EPSILON ENERGY LTD._March 31, 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of Contents](#TOC)\n\n​\n\n​\n\n**UNITED STATES**\n\n**SECURITIES AND EXCHANGE COMMISSION**\n\n**Washington, D.C. 20549**\n\n**FORM ****10-Q**\n\n**☒****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**\n\n**For the quarterly period ended****March 31,****2026**\n\n**☐****  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**\n\n**For the transition period from to**\n\n**Commission file number:****001-38770**\n\n**EPSILON ENERGY LTD.**\n\n**(Exact name of registrant as specified in its charter)**\n\n​\n\n​\n\n​\n\n**Alberta, Canada**\n\n****​\n\n**98-1476367**\n\n(State or other jurisdiction of incorporation or organization)\n\n​\n\n(I.R.S Employer Identification No.)\n\n​\n\n**500 Dallas Street****,****Suite 1250**\n\n**Houston****,****Texas********77002**\n\n**(****281****)****670-0002**\n\n(Address of principal executive offices including zip code and\n\ntelephone number, including area code)\n\n**Securities registered pursuant to Section 12(b) of the Act:**\n\n​\n\n​\n\n​\n\n​\n\n**Title of each class**\n\n**Trading Symbol**\n\n**Name of each exchange on which registered**\n\nCommon Shares, no par value\n\nEPSN\n\nNASDAQ Global Market\n\n​\n\nIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.\n\nYes ⌧ No ◻\n\nIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).\n\nYes ⌧ No ◻\n\nIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nLarge accelerated filer ◻\n\nAccelerated filer ◻\n\nNon-accelerated filer ⌧\n\nSmaller reporting company ☒\n\nEmerging growth company ◻\n\n​\n\nIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.\n\nYes ☐ No ⌧\n\nIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).\n\nYes ☐ No ⌧\n\n​\n\nAs of May 11, 2026, there were 30,248,617 Common Shares outstanding.\n\n​\n\n​\n\n​\n\n​\n\n[Table of Contents](#TOC)\n\nTable of Contents\n\n​\n\n​\n\n​\n\n**Contents**\n\n**  ​ ​ ​**\n\n​\n\n​\n\n​\n\n​\n\n[FORWARD-LOOKING STATEMENTS](#FORWARDLOOKINGSTATEMENTS_228542)\n\n​\n\n4\n\n[PART I-FINANCIAL INFORMATION](#PARTI_196575)\n\n​\n\n5\n\n[ITEM 1. FINANCIAL STATEMENTS](#ITEM1FINANCIALSTATEMENTS_410834)\n\n​\n\n5\n\n[Unaudited Condensed Consolidated Balance Sheets](#UnauditedCondensedConsolidatedBalanceShe)\n\n​\n\n5\n\n[Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income](#StatementsofOperationsandComprehensiveIn)\n\n​\n\n6\n\n[Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity](#StatementsofChangesinShareholdersEquity_)\n\n​\n\n7\n\n[Unaudited Condensed Consolidated Statements of Cash Flows](#ConsolidatedStatementsofCashFlows_683339)\n\n​\n\n8\n\n[Notes to the Unaudited Condensed Consolidated Financial Statements](#NotestotheUnauditedCondensedConsolidated)\n\n​\n\n​\n\n[1.](#a1DescriptionofBusiness_628719)\n\n[Description of Business](#a1DescriptionofBusiness_628719)\n\n​\n\n9\n\n[2.](#a2BasisofPreparation_956539)\n\n[Basis of Preparation](#a2BasisofPreparation_956539)\n\n​\n\n9\n\n​\n\n[Interim Financial Statements](#Interim_Financial_Statements)\n\n​\n\n9\n\n​\n\n[Principles of Consolidation](#Principles_of_Consolidation)\n\n​\n\n9\n\n​\n\n[Use of Estimates](#Use_of_Estimates)\n\n​\n\n9\n\n​\n\n[Recently Issued Accounting Standards](#RecentlyIssuedAccountingStandards_67434)\n\n​\n\n9\n\n[3.](#Cash_Cash_Equiv)\n\n[Cash, Cash Equivalents, and Restricted Cash](#Cash_Cash_Equiv)\n\n​\n\n10\n\n[4.](#a5PropertyandEquipment_960871)\n\n[Property and Equipment](#a5PropertyandEquipment_960871)\n\n​\n\n10\n\n​\n\n[Property Impairment](#PropertyImpairment_365402)\n\n​\n\n11\n\n[5.](#a4RevolvingLineofCredit_826074)\n\n[Revolving Line of Credit](#a4RevolvingLineofCredit_826074)\n\n​\n\n11\n\n[6.](#a5ShareholdersEquity_406843)\n\n[Shareholders’ Equity](#a5ShareholdersEquity_406843)\n\n​\n\n11\n\n[7.](#Revenue_Recognition)\n\n[Revenue Recognition](#Revenue_Recognition)\n\n​\n\n13\n\n[8.](#note_9)\n\n[Accumulated Other Comprehensive Income](#note_9)\n\n​\n\n14\n\n[9.](#a7IncomeTaxes_32708)\n\n[Income Taxes](#a7IncomeTaxes_32708)\n\n​\n\n14\n\n[10.](#a8CommitmentsandContingencies_878495)\n\n[Commitments and Contingencies](#a8CommitmentsandContingencies_878495)\n\n​\n\n15\n\n[11.](#Leases)\n\n[Leases](#Leases)\n\n​\n\n16\n\n[12.](#a9NetIncomeLossPerShare_797914)\n\n[Net Income Per Share](#a9NetIncomeLossPerShare_797914)\n\n​\n\n17\n\n[13.](#a10OperatingSegments_215596)\n\n[Operating Segments](#a10OperatingSegments_215596)\n\n​\n\n17\n\n[14.](#a11RiskManagementActivities_515774)\n\n[Commodity Risk Management Activities](#a11RiskManagementActivities_515774)\n\n​\n\n20\n\n​\n\n[Commodity Price Risks](#Commodity_Price_Risks)\n\n​\n\n20\n\n​\n\n[Commodity Derivative Contracts](#Commodity_Derivative_Contracts)\n\n​\n\n20\n\n[15.](#a12AssetRetirementObligations_770024)\n\n[Asset Retirement Obligations](#a12AssetRetirementObligations_770024)\n\n​\n\n21\n\n[16.](#a13FairValueMeasurements_604335)\n\n[Fair Value Measurements](#a13FairValueMeasurements_604335)\n\n​\n\n22\n\n[ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](#ITEM2MANAGEMENTSDISCUSSIONANDANALYSISOFF)\n\n​\n\n23\n\n​\n\n[Overview](#Overview_500467)\n\n​\n\n23\n\n​\n\n[Business Strategy](#BusinessStrategy_579497)\n\n​\n\n23\n\n​\n\n[Operational Highlights](#OperationalHighlights_867385)\n\n​\n\n24\n\n​\n\n[Non-GAAP Financial Measures-Adjusted EBITDA](#NonGAAPFinancialMeasuresAdjustedEBITDA_7)\n\n​\n\n25\n\n​\n\n[Net Operating Revenues](#NetOperatingRevenues_227632)\n\n​\n\n26\n\n​\n\n[Operating Costs](#OperatingCosts_412420)\n\n​\n\n27\n\n​\n\n[Depletion, Depreciation, Amortization and Accretion](#DepletionDepreciationAmortizationAndAccr)\n\n​\n\n27\n\n​\n\n[General and Administrative](#GeneralAndAdministrative)\n\n​\n\n28\n\n​\n\n[Interest Income](#InterestIncome_67363)\n\n​\n\n29\n\n​\n\n[Interest Expense](#InterestExpense_569663)\n\n​\n\n29\n\n​\n\n[Gain (Loss) on Derivative Contracts](#NetGainLossonCommodityContracts_200794)\n\n​\n\n29\n\n​\n\n[Capital Resources and Liquidity](#CapitalResourcesandLiquidity_258361)\n\n​\n\n29\n\n[Table of Contents](#TOC)\n\n​\n\n[Cash Flow](#CashFlow_797571)\n\n​\n\n29\n\n​\n\n[Credit Agreement](#CreditAgreement_559080)\n\n​\n\n30\n\n​\n\n[Repurchase Transactions](#RepurchaseTransactions_77526)\n\n​\n\n30\n\n​\n\n[Derivative Transactions](#DerivativeTransactions_882905)\n\n​\n\n31\n\n​\n\n[Contractual Obligations](#ContractualObligations_256590)\n\n​\n\n31\n\n[ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](#ITEM3QUANTITATIVEANDQUALITATIVEDISCLOSUR)\n\n​\n\n32\n\n​\n\n[Gathering System Revenue Risk](#GatheringSystemRevenueRisk_435185)\n\n​\n\n32\n\n​\n\n[Interest Rate Risk](#InterestRateRisk_130125)\n\n​\n\n32\n\n​\n\n[Derivative Contracts](#CommodityContracts_729050)\n\n​\n\n32\n\n[ITEM 4. CONTROLS AND PROCEDURES](#ITEM4CONTROLSANDPROCEDURES_111398)\n\n​\n\n32\n\n​\n\n[Disclosure Controls and Procedures](#Disclosure_Controls_Procedures)\n\n​\n\n32\n\n​\n\n[Changes in Internal Control Over Financial Reporting](#Changes_Internal_Control)\n\n​\n\n33\n\n​\n\n[Inherent Limitations on Effectiveness of Controls](#Inherent_559749)\n\n​\n\n33\n\n[PART II OTHER INFORMATION](#PARTIIOTHERINFORMATION_816879)\n\n​\n\n33\n\n[ITEM 1. LEGAL PROCEEDINGS](#Item1Legal)\n\n​\n\n33\n\n[ITEM 1A. RISK FACTORS](#ITEM1ARISKFACTORS_805720)\n\n​\n\n34\n\n[ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS](#ITEM2UNREGISTEREDSALEOFEQUITYSECURITIESA)\n\n​\n\n34\n\n[ITEM 3. DEFAULTS UPON SENIOR SECURITIES](#ITEM3DEFAULTSUPONSENIORSECURITIES_177973)\n\n​\n\n34\n\n[ITEM 4. MINE SAFETY DISCLOSURES](#ITEM4MINESAFETYDISCLOSURES_659176)\n\n​\n\n34\n\n[ITEM 5. OTHER INFORMATION](#ITEM5OTHERINFORMATION_762259)\n\n​\n\n34\n\n[ITEM 6. EXHIBITS](#ITEM6EXHIBITS_418266)\n\n​\n\n35\n\n[SIGNATURES](#SIGNATURES_514977)\n\n​\n\n36\n\n​\n\n​\n\n​\n\n​\n\n[Table of Contents](#TOC)\n\nFORWARD-LOOKING STATEMENTS\n\n*Certain statements contained in this report constitute forward-looking statements. The use of any of the words ‘‘anticipate,’’ ‘‘continue,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘may,’’ ‘‘will,’’ ‘‘project,’’ ‘‘should,’’ ‘‘believe,’’ and similar expressions and statements relating to matters that are not historical facts constitute ‘‘forward looking information’’ within the meaning of applicable securities laws. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated. Such forward-looking statements are based on reasonable assumptions, but no assurance can be given that these expectations will prove to be correct and the forward-looking statements included in this report should not be unduly relied upon. These statements are made only as of the date of this report. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to natural gas and oil production rates, commodity prices for crude oil or natural gas, supply and demand for natural gas and oil; the estimated quantity of natural gas and oil reserves, including reserve life; future development and production costs, and statements expressing general views about future operating results — are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in our Annual Report on Form 10-K for the year ended December 31, 2025, and those described from time to time in our future reports filed with the Securities and Exchange Commission.* *You should consider carefully the statements under Item 1A. Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2025. Our Annual Report on Form 10-K for the year ended December 31, 2025 is available on our website at www.epsilonenergyltd.com.*\n\n​\n\n​\n\n4\n\n[Table of Contents](#TOC)\n\nPART I-FINANCIAL INFORMATION"}