Epsilon Signs Production Sharing Agreement in Ethiopia

Epsilon Energy Ethiopia Ltd., a subsidiary of Epsilon Energy Ltd. has signed a Production Sharing Agreement ("PSA") with the Ministry of Mines and Energy (the "Ministry") in Democratic Republic of Ethiopia. The PSA covers an area of 79,345 square kilometers in northwest Ethiopia. Terms of the PSA include an initial three-year exploration period that includes a commitment to drill one exploratory well and to acquire a minimum of 200 kilometers of 2D seismic. In the event the Company makes a commercial discovery, the initial percentage split of profit oil and/or gas will be 80% for Epsilon and 20% for the Ministry.

There have been virtually no prior oil and gas exploration activities within the boundaries of the PSA prior to the Northwest Area Study Agreement that Epsilon entered into with the Ministry in June 2008. Under the terms of the Northwest Area Study Agreement, Epsilon identified the acreage included within the PSA as prospective for oil and gas exploration by using a combination of satellite remote sensing, hydrology, gravity and magnetic technologies.

Fred Zaziski, Epsilon's President and CEO stated, "Our airborne gravity and magnetic study revealed a 20,000 meter deep basin that was previously unknown and is, on our opinion, prospective for oil and gas exploration. In places, the volcanic cover is thin and large structures have been delineated. To date, there has been no exploratory drilling or seismic surveys conducted over this acreage. As such, we consider this area to be frontier exploration and are very excited about the potential upside this could bring to Epsilon. However, in order to limit our risk and financial exposure the Company expects to bring in a partner to jointly explore this area."

The Hosan Field, located approximately 300 kilometers west in Sudan, is the nearest commercial oil and gas field, which reportedly has estimated recoverable gas reserves of approximately 350 BCFE. Other nearby Sudanese oil and gas fields have estimated recoverable oil reserve sizes ranging from 100 to 600 MMBO. The Company's Ethiopian acreage has technical similarities to the Sudan oil and gas fields. As compared to Sudan, the political risk in Ethiopia is drastically different, as the Ethiopian government appears to be much more stable, easy to work with and is encouraging foreign investment.


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