Epsilon Energy Ltd.

Epsilon Energy Ltd.

March 12, 2008 10:37 ET

Epsilon Energy Ltd. Provides Operational Update

CONCORD, ONTARIO--(Marketwire - March 12, 2008) - Epsilon Energy Ltd. ("Epsilon" or the "Company") (TSX:EPS) is pleased to provide an operational update on its ongoing oil and gas exploration and development programs.

Block 41, Republic of Yemen

The government owned Yemen Oil and Gas Company ("YOGC") has signed the Block 41 Joint Operating Agreement, which is now awaiting final approval by the Ministry of Minerals ("MOM") and Petroleum Exploration Production Authority ("PEPA"). Obtaining all of the necessary approvals can take up to 30 days. As a result of the delays in signing the Joint Operating Agreement, Yemen Drilling Rig #2 has been contracted to another Yemen Operator. Epsilon is in discussion with several other drilling companies that have rigs available and expects to contract with a rig as soon as it has obtained its operators license. The Company is investigating the option of adding an additional rig to catch up on its planned 2008 Yemen drilling program. The Al Waya 2, a step-out well to the Al Waya 1 discovery well, will be the first well in a series of wells drilled on Block 41 by Epsilon. Three known productive oil zones; the Naifa, Madbi and the Fractured Basement will be tested by the Al Waya 2.

Recently, Epsilon's management met in the Middle East with a number of parties regarding potential exploration opportunities in the Middle East. The meetings were positive and Epsilon expects to have further news from this region in the next ninety days.


Epsilon is currently pressure testing the Larue #1, a successful vertical exploratory gas well that was drilled in late 2007 on the Highway 706 project, where Epsilon has a 100% working interest. A rig has been secured and the first in a series of horizontal wells is scheduled to begin drilling in the next 30 days.

Baileys Mill

Epsilon's partner, Philips Production Company, has proposed another vertical test well in Baileys Mill and is expected to spud the well in late March. Epsilon is currently evaluating the proposal.

New York

Epsilon has settled with Chesapeake Energy Corporation ("Chesapeake") on its working interest participation interest in the Nowlan well. The Company now has a 3.6% working interest in this well, which is operated by Chesapeake. Further data on this well will be released as it becomes available from Chesapeake.

Pipeline construction has commenced on the Winter well in Tioga County. Recent pressure build up data was positive and it appears to be a strong well. The Winter well is expected to be on line by July 1st of this year.

Epsilon has received a number of working interest proposals on Marcellus test wells being drilled by other operators in New York and is currently evaluating whether to participate in such exploratory tests.

Yamaska project - Quebec, Canada

On the Yamaska project, Epsilon can elect to participate for up to 25% of Gastem, Inc's. (TSX: GMR) interest on an elective well-by-well basis. Canadian Forest Oil has notified Gastem of its election to exercise its Financial Commitment option on the Yamaska Property as per the January 2007 Agreement. According to the terms of the Agreement, Forest may earn up to a 60% interest in the Yamaska Property by undertaking the earn-in program.

The exercise of the option follows a hydraulic fracturing program undertaken in mid-December at the Gastem St-Francois-du-Lac #1 well. The frac stimulated an interval considered prospective within the Utica Shale sequence and identified during coring and logging operations in June 2007. Results to date have yielded new data with respect to frac design and potential gas flow rates. Further work is now anticipated in the coming months.

Director of Operations

Epsilon has hired David Matz, a registered petroleum engineer, to oversee the drilling and producing operations of its Appalachian Basin properties. Mr. Matz brings over 37 years of progressive operational experience within the Appalachian Basin to Epsilon.

About Epsilon Energy Ltd.

Epsilon is engaged in the acquisition, exploration, development and production of oil and natural gas reserves in the Middle East and North America. The Corporation has exploration, development and production rights to approximately 910,000 gross (274,000 net) leasehold acres in the United States and Canada and approximately 1,400,000 (791,000 net) leasehold acres in the Republic of Yemen.

Forward-Looking Statements

Certain statements contained in this new release constitute forward-looking statements. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in 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 news release should not be unduly relied upon.

Special note for news distribution in the United States

The securities described in this news release have not been registered under the United States Securities Act of 1933, as amended, (the "1933 Act") or state securities laws. Any holder of these securities, by purchasing such securities, agrees for the benefit of Epsilon Energy Ltd. (the "Corporation") that such securities may not be offered, sold, or otherwise transferred only (A) to the Corporation or its affiliates; (B) outside the United States in accordance with applicable state laws and either (1) Rule 144(as) under the 1933 Act or (2) Rule 144 under the 1933 Act, if applicable.

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