Epsilon Energy (NASDAQ:EPSN) outlined its multi-basin development strategy, inventory depth and expected production growth during a company presentation, highlighting operated Powder River Basin assets, expanded activity in the Permian Basin and renewed development in the Marcellus.
Andrew Williamson, CFO of Epsilon Energy, said the company recently issued third-quarter and full-year 2026 guidance alongside its second-quarter earnings. The midpoint of that guidance implies 18% year-over-year production growth, he said. Epsilon’s oil production has increased by nearly 200% year over year following the Peak acquisition and development activity in the Permian Basin, according to Williamson.
Inventory Across Three Core Areas
Henry Clanton, Epsilon’s COO, said the company has 115 net “priority one” drilling locations, representing more than a decade of development inventory under its internal criteria. Those locations span Epsilon’s non-operated Marcellus natural-gas position, non-operated Permian crude-oil interests and newly acquired operated oil and natural-gas targets in the Powder River Basin.
Clanton said Epsilon also has additional opportunities that fall outside its priority-one classification because they carry less than a 45% working interest. Those locations could potentially be advanced through trades or partnerships, he said. The company also sees an opportunity to move additional Powder River Basin shale inventory into its priority-one category through development-scale efficiencies.
Powder River Basin Operations
Epsilon acquired its Powder River Basin assets in late 2025, adding operated properties to its portfolio. The company holds about 40,000 net acres in the basin, including 31,000 undeveloped acres, according to Clanton. About 75% of the acreage is held by production and does not carry continuous-drilling clauses, which Clanton said provides flexibility to be selective and patient in development planning.
The assets are primarily in southern Campbell County, with an additional federal drilling and spacing unit in Converse County. The acreage is offset by operators including EOG, Devon and Anschutz Energy, Clanton said.
Epsilon retained an experienced management team with the acquisition. That team has drilled and completed more than 100 horizontal wells across five formations, Clanton said. During the first half of 2026, the company completed two Niobrara drilled-but-uncompleted wells that met or exceeded internal expectations. In the second half of the year, it drilled three Parkman laterals that are scheduled for completion during the month of the presentation.
The company also plans to begin construction of water facilities in Converse County to support future development there. Clanton said the Powder River Basin is expected to be an important producing area for Epsilon for years to come.
Permian Activity and Marcellus Development
Paul Atwood, Epsilon’s vice president of finance, said the company owns a 25% working interest in a 16,500-acre leasehold in Ector County, Texas, targeting the Barnett Shale. Epsilon has participated in nine well bores on the acreage, each of which met or exceeded pre-spud type curves, he said.
Of the 16,500 acres, approximately 13,000 remain undeveloped, with 30 gross Barnett locations remaining, Atwood said. The asset is now operated by Firebird II, which took over earlier in the year. Epsilon expects activity to increase while drilling and completion costs decline.
- Epsilon participated in one Barnett well during 2026.
- Two additional wells are expected to be drilled in the second half of the year and completed in the first quarter of 2027.
- Firebird drilled a Woodford test well on the leasehold during 2026. Epsilon did not participate in the well but retains exposure to the formation through its leases if the test is successful.
In the Marcellus, Epsilon holds a 5,100-net-acre position in southwestern Susquehanna County, Pennsylvania. Atwood said the company has participated in the development of 146 wells with operator Expand Energy over the past 15 years. Epsilon estimates it still has roughly 450,000 gross, or 100,000 net, lateral feet remaining to develop, representing an estimated 170 billion cubic feet to 200 billion cubic feet of undeveloped net reserves.
The company drilled five gross Marcellus wells during 2026, representing 0.4 net wells to Epsilon, and expects them to come online in the fourth quarter. Epsilon expects seven gross wells, or 1.4 net wells, in 2027.
Midstream Capacity and Development Economics
Epsilon also owns a 35% undivided interest in the Auburn Gas Gathering System in northeastern Pennsylvania. The system has processed 960 billion cubic feet of gas since its compression facility began operating in October 2013 and has more than 1 trillion cubic feet of reserves still dedicated to it, Atwood said.
The Auburn system operates under a fixed rate that escalates annually with the consumer price index, replacing its former cost-of-service arrangement. Atwood said the system’s EBITDA margins range from 65% to more than 75%, depending on throughput. Current compression capacity is 150 million cubic feet per day, and Epsilon is reviewing a possible expansion to accommodate development anticipated from 2028 onward.
Atwood also presented representative development economics for pads in each region. A four-well Upper Marcellus pad was expected to generate $9.6 million of operating cash flow in its first year at $3.50 Henry Hub natural gas pricing, recovering nearly 90% of a $10.8 million net capital investment. A representative four-well Barnett pad was projected to produce $10.8 million of operating cash flow in its first year at $70 crude oil and $3.50 natural gas, while a three-well Parkman pad in Converse County was projected to generate $18.5 million in first-year operating cash flow under the same price assumptions.
About Epsilon Energy (NASDAQ:EPSN)
Epsilon Energy (NASDAQ: EPSN) is an independent exploration and production company specializing in the acquisition, development and production of unconventional and conventional oil and natural gas properties. Originally founded as Brewster Energy in 2002 and rebranded to Epsilon Energy in 2011, the company pursues a disciplined approach to resource development, leveraging its technical expertise to optimize well performance and manage operational costs.
The company’s core asset base is concentrated in the Appalachian Basin, where it holds acreage in key shale formations across Pennsylvania, West Virginia and Ohio.
