Revolving Line of Credit

3 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

Revolving Line of Credit

6. Revolving Line of Credit

The Company closed a senior secured reserve based revolving credit facility on June 28, 2023, with Frost Bank as issuing bank and sole lender. The current commitment and borrowing base is $35 million, supported by the Company’s upstream assets in Pennsylvania and subject to semi-annual redeterminations with a maturity date of the earlier of June 28, 2027 or the date that the commitments are terminated. Interest will be charged at the Daily Simple SOFR rate plus a margin

of 3.25%. The facility is secured by the assets of the Company’s Epsilon Energy USA subsidiary (Borrower) and guaranteed by the Company and the other wholly owned subsidiaries. There are currently no borrowings under the 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 non-cash amounts)

Additionally, if the Leverage ratio is greater than 1.0 to 1.0, or the borrowing base utilization is greater than 50%, the Company is required to hedge 50% of the anticipated production from PDP reserves for a rolling 24 month period.

We were in compliance with the financial covenants of the agreement as of March 31, 2024.

	Balance at		Balance at
	March 31,		December 31,		Current
	2024		2023		Borrowing Base		Interest Rate
Revolving line of credit	$	—	$	—	$	35,000,000		SOFR + 3.25%