Epsilon Energy Ltd. Releases First Quarter 2011 Results

CONCORD, ONTARIO--(Marketwire - May 9, 2011) - Epsilon Energy Ltd. ("Epsilon" or "Corporation")) (TSX:EPS) is pleased to announce today its 2011 first quarter results. Copies of these documents may be obtained on www.sedar.com or on Epsilon's website at www.epsilonenergyltd.com.

EPSILON ENERGY LTD. HIGHLIGHTS

Revenues have declined in the first quarter of 2011 due to a combination of factors. As of March 1, 2011, Chesapeake Energy Corporation ("Chesapeake"), Epsilon's joint venture partner, has reached its milestone of $25 million of capital expenditures net to Epsilon and earned 50 percent of revenues from the existing wells in accordance with the joint venture agreement signed February 1, 2010. As a result, Epsilon is only receiving 50 percent of the total production revenues starting March 1, 2011

Furthermore, revenue decreased due to a 7% decline in the price of gas and there has been a decrease in net production from 8 Mmcf/d in the quarter ended March 31, 2010 to 4 Mmcf/d during the first quarter of 2011.This decrease in production resulted from a workover on certain production wells during the period February 22, 2011 to March 17, 2011. Subsequent to March 17, 2011 gas production resumed at an average net production rate of 5 Mmcf/d.

Epsilon expects revenues to increase over time as the new gas wells being developed through the Chesapeake joint venture come on line. At the current time, two wells have been drilled and fractured and are currently awaiting completion of the pipeline. Chesapeake has voluntarily suspended all well completion procedures in Pennsylvania as of April 21, 2011 as a result of a well control incident it experienced on one of its wells in Bradford County, PA. If prolonged, this suspension might have an effect on completion dates of Epsilon's wells in Pennsylvania, for which completion procedures are scheduled to begin in July 2011.

Net income for the first quarter ended March 31, 2011 was $39, as compared to $10 for the first quarter of 2010. Net income was higher in the first quarter of 2011 as compared to the first quarter of 2010 even though revenue was lower, primarily due to approximately $1.0 million in fees related to the signing of the joint venture agreement with Chesapeake in 2010.

Net income in the first quarter of 2011 as compared to the fourth quarter of 2010 was lower primarily due to lower gas revenues as explained above.

International Financial Reporting Standards

These financial statements represent Epsilon's first application of International Financial Reporting Standards ("IFRS") as adopted in Canada on January 1, 2011. IFRS policies have been retrospectively and consistently applied to comparative periods except where specific exemptions permitted an alternative treatment upon transition to IFRS for first-time adopters. Accordingly, comparative results for 2010 may not correspond to the results previously reported.

The adoption of IFRS has not had a material impact on the Corporation's operations, strategic decisions, cash flows or capital expenditures.

Grant of stock options

On May 12, 2011, the Corporation will award 46,740 to directors and 750,000 options to employees in accordance with Epsilon's Stock Option Plan. These stock options are exercisable at the closing price on May 12, 2011. The directors' options will vest immediately. The employees options will vest only after the common shares trade at or above $8.00 per share on the Toronto Stock Exchange for a period of 20 consecutive trading days at any time in the 36 months from the date of grant of the options.

About Epsilon Energy Ltd.

Epsilon Energy Ltd. is engaged in the exploration and production of natural gas reserves. The Corporation also has participating interests and production sharing agreements in other natural gas and oil plays within North America and Africa. Established in 2005, the Corporation has been a producer of natural gas and oil since 2006. Epsilon's ongoing business strategy involves focused targeting of lower risk natural gas properties within the Marcellus Shale and other parts of Canada and the United States, as well as the high potential oil & gas properties in Africa.

Forward-Looking Statements

Certain statements contained in this news 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 assumption 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 the news release have not been registered under the United Stated 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.