Epsilon Energy Ltd.

News Release - Seite 2

To view the December 31, 2014 Net Reserves Summary and December 31, 2014 Net Present Value Summary tables, please visit the following link: http://media3.marketwire.com/docs/Epsilon-Energy-Tables-3215.pdf

Management Comment

Since assuming control of Epsilon in July 2013, the management team, employees and Board of Directors have accomplished many goals. First, we have narrowed our strategic focus to our core upstream and midstream assets in the Marcellus shale and have divested all non-core properties. Second, the organization has been downsized and high-graded with annual G&A costs declining from roughly $3.6 million to a current rate of $1.9 million. Third, and most importantly, our balance sheet and liquidity have improved significantly which is proving to be very constructive in today's environment. In mid-2013, the company had minimal cash, was free cash flow negative, had a negative working capital balance and had no access to a revolving line of credit. Epsilon now has $16 million in cash, generates significant free cash flow even under the current challenging price regime, and has $30 million available on its revolver (with the ability to increase the facility if management desires) - this is an impressive transformation and was accomplished concurrently with a stock repurchase program which retired $12.6 mm of our stock (3.5 mm shares). Fourth, we have implemented a number of initiatives operationally that have enhanced the value of core assets in the Marcellus. These initiatives include working with the operator of our upstream asset to encourage improvements in completion productivity. In addition, we have developed an active dialogue with our midstream partners with a view towards maximizing the long term value of our gathering assets.

With Epsilon now on much stronger footing, our future strategy will have two key tenets: maximize the value of our integrated Marcellus asset and return capital to shareholders. In the area of asset maximization, our most important initiative is the development of the upper Marcellus reservoir. We believe the upper Marcellus has the potential to meaningfully increase the company's current reserve value, and we are in the relatively early stages of exploring options to prove up this resource. Turning to the operating environment, it remains very challenging. The Marcellus Shale has proven to be the most attractive source of gas in the lower US. Over the last several years, productivity and wellhead deliverability have increased much faster than the required processing and takeaway infrastructure resulting in abnormally wide differentials to posted NYMEX Henry Hub gas prices. Our preference is to produce less rather than more gas in this environment given that our acreage is largely held by production. Fortunately, our operating partner shares this sentiment which will allow us to focus our capital towards incremental resource development, primarily in the upper Marcellus. Our expectation is that production will decline over the course of the year but our reserve value and reserve potential will increase.