Epsilon Energy has said, pursuant to the letter of intent signed in August 2010, the company has signed a definitive participation agreement for the development of an oil resource play in Clarke and Wayne Counties, Mississippi, with Black Stone Minerals Company.

As per the principal terms of the agreement, the company will drill a minimum of two horizontal wells at an estimated cost of $10,000,000 in return for a lease of 60% of Black Stone’s available mineral interests in the approximate 15,800 gross (13,600 net) acres it owns or controls.

During the first nine months of 2010, Epsilon continued to explore, develop and expand its oil and natural gas interests and generated a net income of $2m, as compared to a $14.5m net loss for the same period of 2009.

The company is proceeding with its drilling program in the Marcellus shale under the joint operating agreement with Chesapeake and StatOil in Pennsylvani.

The wells from the current drilling program are expected to commence production in the first quarter of 2011.

As a result, production increases will be staggered in large blocks as opposed to gradual increases. Currently, Epsilon’s daily gross production in Pennsylvania is approximately 8mmcf.

The company plans to drill three wells in Saskatchewan by the end of 2010.