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Epsilon Announces New Board of Directors, Confirms Management Team and Provides Board Update

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CONCORD, ONTARIO -- (Marketwired) -- 07/16/13 -- Epsilon Energy Ltd. ("Epsilon" or the "Company") (TSX: EPS) is pleased to announce its newly reconstituted board of directors, appointed yesterday, being Matthew W. Dougherty, John V. Lovoi, Adrian Montgomery, Ryan Roebuck and Ramik Arandjelovic (the "Board"). Biographies of the newly appointed directors are set out below.

Mr. Lovoi has been named the Chairman of the Board and the Interim Chief Executive Officer, until a search for a new CEO is concluded by the Board. Mr. Arandjelovic remains in the position of President of the Company, and Mr. Lane Bond remains as Chief Financial Officer.

The Board has appointed Mr. Roebuck as Chairman of the Audit Committee of the Board. The Board has also combined the functions of the Compensation Committee and the Nominating and Corporate Governance Committee into one Board committee for efficiency purposes. Mr. Dougherty has been appointed the Chairman of the Compensation, Nominating and Corporate Governance Committee.

Board Update

The newly reconstituted Board is excited about the opportunity to harvest Epsilon's meaningful value on behalf of all of its shareholders. The Company owns an upstream asset and a midstream asset in the heart of the Marcellus Shale, the premier natural gas development area in North America. These two integrated assets will be the singular focus of the new Board and senior management team of Epsilon going forward. To this end, the Board and management will immediately begin to consider paths to realizing maximum value for its non-Marcellus assets. The results of these non-core assets, which are primarily located in the Canadian provinces of Alberta and Saskatchewan, have been largely disappointing and, in the opinion of the Board, a distraction to Epsilon's employees and investors.

The Board intends to continue to encourage the development of Epsilon's non-operated position in the heart of the Marcellus Shale. As this valuable asset matures, the Board will explore opportunities to return the free cash flow from the Marcellus to shareholders in the most tax efficient manner possible, on a time frame to be determined depending on a number of factors, including the operator's pace of development at the field level.

The Company's upstream Marcellus asset consists of a 50% non-operated interest in 11,500 gross acres (5,750 net acres) located in Susquehanna County, Pennsylvania. Epsilon's net production from this asset was approximately 41 mmcf/d on July 15th, 2013. As previously disclosed, the Company's net proved reserves for this asset as at December 31st, 2012 was 146.2 Bcf with net present value of future net revenue discounted at 10% of approximately $180 mm, consisting of 54.6 Bcf of proved developed producing reserves (PDP), 7.6 Bcf of proved developed non-producing reserves (PDNP) and 84.1 Bcf of proven undeveloped reserves (PUD). Using offset operator spacing and per well recovery assumptions for analog leases, the Board and management believes there is significant potential for Epsilon's reserves to increase as the asset is developed.

Epsilon also owns a 35% interest in a gathering system that surrounds and services its upstream asset. This system is strategically located in a core area of the Marcellus and the Board and management believe that it is capable of gathering gas from a wider area than the area underlying the leases of the Company. The system has a gross gathering capacity of 550 mmcf/d, with current gross compression capacity of 300 mmcf/d. The system is currently gathering approximately 160 mmcf/d with the ability to increase the gathering capacity as volumes warrant.

There are a number of initiatives that the Board expects to undertake in coming weeks and months including: (1) a comprehensive review of the strategic process performed by Evercore Partners that was recently terminated by the prior Board and management; (2) a strategic alternatives process tied to the non-Marcellus assets referenced above; (3) the finalization of a credit facility for the Company; and (4) the establishment of a closer working relationship with the current operator of the Marcellus assets. The Board intends to be in a position to provide the market with a comprehensive strategic outlook for its two core assets in Marcellus, as well as an update on the other initiatives noted above in due course.

New Director Biographies

Matthew W. Dougherty is a Managing Director of Advisory Research, Inc. (Advisory Research), an investment management firm founded in 1974 with more than $10 billion in assets under management, a significant portion of which is invested in N. American E&P and midstream companies. As Managing Director, Mr. Dougherty oversees the firm's investments in oil and natural gas producers and has served as the Portfolio Manager of the Advisory Research Energy Fund, L.P. since 2005. In this capacity, Mr. Dougherty leads a team with significant expertise in unconventional oil and natural gas assets throughout North America. Mr. Dougherty holds a B.A. in Religious Studies from Saint Lawrence University and is a CFA charterholder. He resides in Chicago.

John V. Lovoi is the managing partner of JVL Advisors, LLC (JVL), a private oil and gas investment advisor and also a manager of Lobo Baya, LLC. Mr. Lovoi is a Director of Helix Energy Solutions Group, a NYSE-listed marine contractor and operator of offshore oil and gas properties and production facilities and Chairman of Dril-Quip, Inc., an NYSE-listed provider of subsea, surface and offshore rig equipment.

For the last 25 years, John Lovoi has held a number of positions in the global oil and gas business, primarily in the areas of investment banking and equity research. From December 2000 until August 2002, Mr. Lovoi served as Head of Morgan Stanley's Global Oil and Gas investment banking practice. He was responsible for managing a global franchise with professionals in Houston, New York, Canada, London and Singapore. Under Mr. Lovoi's leadership, Morgan Stanley generally led all important categories of oil and gas investment banking, most importantly mergers and acquisitions. While in this role, Mr. Lovoi established relationships with some of the most influential people in the global oil and gas business including senior officials at a number of the important National Oil Companies, both within and outside of OPEC.

For the five years prior to being named head of the firm's oil and gas investment banking practice, Mr. Lovoi served as Morgan Stanley's oilfield services and equipment equity research analyst and, from 1998 to 2000, as Head of Morgan Stanley's Global Oil and Gas Equity Research franchise. Mr. Lovoi distinguished himself in this role by being one of the fastest professionals at the firm to achieve a top-three ranking in the prestigious Institutional Investor equity research analyst poll in 1997 and held the number two ranking for the next three years. Throughout this period, Mr. Lovoi was consistently regarded as one of the most influential analysts in this sector and was well known for his stock picking capabilities. Prior to joining Morgan Stanley in 1995, he spent two years as a senior financial executive at Baker Hughes and four years as an energy investment banker with Credit Suisse First Boston.

Mr. Lovoi graduated from Texas A&M University in 1984 with a Bachelor of Science Degree in Chemical Engineering and received his Masters in Business Administration with an emphasis on finance and accounting from the University of Texas at Austin in 1988.

Adrian Montgomery is currently the Chief Investment Officer of Tuckamore Capital Management Inc. (formerly Newport Partners Income Fund) (Tuckamore), a TSX-listed company that has invested approximately $700 million in successful private businesses since its inception in 2005. Mr. Montgomery is a key member of the Tuckamore executive team that has reshaped the company over the past two years and was involved in the successful dispositions of Tuckamore's non-core operations, consolidation of minority positions in Tuckamore's core areas, securing new financing packages for Tuckamore, converting Tuckamore from an income trust to a corporation and engineering a total rebranding of the organization. Prior to Tuckamore, Mr. Montgomery headed business development at Rogers Media Inc. (Rogers), where he oversaw a number of initiatives in the fields of sports and entertainment. At Rogers, he spearheaded several landmark alliances with the National Football League, the International Olympic Committee, the FIFA World Cup, Live Nation Music and CBS Paramount. A lawyer and member of the New York State Bar, Mr. Montgomery is active in the political process and has served as a senior advisor to politicians at all levels of government. He is also involved in a number of charitable endeavours throughout Toronto and sits on the board of the Toronto East General Hospital Foundation.

Ryan Roebuck currently serves as a partner of XDR Capital Group (XDR), a private investment firm located in Toronto where he specializes in investing in public and private event driven and special situations in North America. Prior to joining XDR, Mr. Roebuck worked as an equity research analyst at M Partners where he covered companies in various sectors in North America including natural resource-focused companies. While at M Partners, Ryan was rated the number three overall stock picker in Canada by returns generated on the sell side by First Coverage in 2010.

About Epsilon:

Epsilon Energy Ltd. is a North American onshore exploration and production company with a current focus on the Marcellus Shale of Pennsylvania.

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.

The reserves and associated future net revenue information set forth in this news release are estimates only. In general, estimates of oil and natural gas reserves and the future net revenue therefrom are based upon a number of variable factors and assumptions, such as production rates, ultimate reserves recovery, timing and amount of capital expenditures, ability to transport production, marketability of oil and natural gas, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary materially from actual results. For those reasons, estimates of the oil and natural gas reserves attributable to any particular group of properties, as well as the classification of such reserves and estimates of future net revenues associated with such reserves prepared by different engineers (or by the same engineers at different times) may vary. The actual reserves of the Company may be greater or less than those calculated. In addition, the Company's actual production, revenues, development and operating expenditures will vary from estimates thereof and such variations could be material.

Statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and can be profitably produced in the future. There is no assurance that forecast price and cost assumptions will be attained and variances could be material.

Proved reserves are those reserves which are most certain to be recovered. There is at least a 90% probability that the quantities actually recovered will equal or exceed the estimated proved reserves. Undeveloped reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable) to which they are assigned. Proved undeveloped reserves are those reserves that can be estimated with a high degree of certainty and are expected to be recovered from known accumulations where a significant expenditure is required to render them capable of production.

The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties due to the effects of aggregation. The estimated future net revenues contained in this news release do not necessarily represent the fair market value of the Company's reserves.

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.



Contacts:
Epsilon Energy Ltd.
John V. Lovoi
Chairman of the Board of Directors and Interim CEO
(713) 579-2619
jlovoi@jvladvisors.com

Epsilon Energy Ltd.
Ramik Arandjelovic
President
(281) 670-0002
ramik@epsilonenergyltd.com
www.epsilonenergyltd.com



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