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Engaged in the acquisition, exploration, development and production of oil and natural gas reserves in North America, the Middle East and Africa.

Message: NR further expansion oil southern US?

Epsilon Energy Ltd. Signs Letter of Intent with a Large US-based Private Land Owner for

the Development of Potential Oil Play in Southern United States

Concord, Ontario – August 26, 2010 –

Epsilon Energy Ltd. (“Epsilon” or the “Corporation”)

(TSX: EPS) is pleased to announce the execution of a letter of intent for the development of a

potential oil play in the southern U.S. with a large US-based private land owner (“land owner”).

Pursuant to the letter of intent, the parties will set out the details of their relationship in a joint

venture agreement, to be effective no later than October 1, 2010. Under the principal terms of

agreement, Epsilon is committed to drill a minimum of two wells at an estimated cost of US$10

million and, in turn, Epsilon will earn 60% of land owner’s available mineral interests in the

approximate 15,800 gross/13,600 net acres it owns or controls.

Zoran Arandjelovic, Epsilon’s Executive Chairman, President and CEO, stated, “We are

extremely pleased to be partnering with this large land owner and consider it a very

advantageous strategic move for Epsilon to better balance its oil and gas interests. The acreage

subject to the proposed joint operating agreement is in the immediate proximity of an existing

producing oil fairway. Epsilon will drill two lateral wellbores to test horizontal enhancement of the

oil play. We expect the expenditures on this project to commence in the second quarter of 2011.”

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

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