Epsilon Energy Ltd. Debt Disclosure
6. Revolving Line of Credit
The Company closed a new senior secured reserve based revolving credit facility on October 10, 2025 with Frost Bank as administrative agent and Frost Bank and Texas Capital Bank as lenders. As of December 31, 2025, the borrowing base was $80 million, supported by the Company’s producing reserves and is subject to semi-annual redeterminations with a maturity date of October 10, 2029. Interest will be charged at the 3-month Term rate plus a margin of 3-4% (depending on facility utilization), payable quarterly. The facility is secured by the assets of the Company’s Epsilon Energy USA subsidiary. During March 2026, the Company made a $5 million repayment on the outstanding credit facility.
Under the terms of the facility, the Company must adhere to the following financial covenants:
| ● | Current ratio of 1.0 to 1.0 (current assets / current liabilities) |
| ● | Leverage ratio of less than 2.5 to 1.0 (total debt / income adjusted for interest, taxes and noncash amounts) |
Additionally, the Company is required to hedge 50% of its forecasted Proved Developed Producing production over a rolling period. If the facility utilization drops below 50%, then the required hedging drops to 25% of Proved Developed Producing production for the last 6 months of the period.
We were in compliance with the financial covenants of the agreement as of December 31, 2025.
| Balance at | | Balance at | | | |||||||
December 31, | | December 31, | ||||||||||
| 2025 | 2024 | | Borrowing Base | | Interest Rate | ||||||
Credit facility payable | $ | 50,500,000 | $ | — | $ | 80,000,000 | SOFR + 3.25% | |||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 27, 2026 | Showing above |
| 2024 | Mar 19, 2025 | |
| 2023 | Mar 21, 2024 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.