/NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES OF AMERICA./
CALGARY, Aug. 9 /CNW/ - Fairmount Energy Inc. ("Fairmount" or the "Company") (TSX-V - FMT) is pleased to present a summary of its operating and financial results for the three months ended June 30, 2007. For a complete copy of Fairmount's first quarter report including financial statements and management's discussion and analysis ("MD & A") please visit www.sedar.com. Certain information contained in this press release, including development plans, drilling locations, and capital expenditures, constitute forward looking statements which are subject to risks and uncertainties. See "Forward-Looking Statements".
Highlights:
- Production has increased 114% as compared to the first quarter of
last year from an average of 182 boe/day in the first quarter of last
year to 390 boe/day in the first quarter of this year, based on a
conversion rate of six thousand cubic feet of natural gas to one
barrel of oil.
- Eight consecutive quarters of production growth.
- Current production is estimated at 425 boe/day with another
300 boe/day estimated behind pipe awaiting tie-in this fall.
- Bank lines increased from $9.25 million to $14.0 million during the
quarter.
- 5 well drilling program to commence mid September
Operations
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Three Months Ended
June March December September
30, 31, 31, 30,
2007 2007 2006 2006
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Wells drilled - gross 1 3 6 5
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Wells drilled - net 0.1 1.6 1.9 0.8
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Natural gas production -
mcf/day 1,402 1,000 865 857
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Oil production bbl/day 30 15 25 23
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NGL production bbl/day 127 107 114 84
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Average daily production -
boe/day 390 289 284 250
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Average selling price -
natural gas $/mcf $7.06 $7.32 $6.85 $5.73
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Average selling price -
oil $/bbl $70.68 $66.68 $67.06 $78.64
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Average selling price -
NGL's $/bbl $38.95 $37.93 $32.86 $36.46
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Average selling price -
$/boe $43.41 $42.89 $40.09 $39.13
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Three Months Ended
June March December September
30, 31, 31, 30,
2006 2006 2005 2005
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Wells drilled - gross 13 4 7 8
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Wells drilled - net 5.6 1.2 1.2 0.8
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Natural gas production -
mcf/day 574 490 569 434
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Oil production bbl/day 19 13 24 13
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NGL production bbl/day 67 73 44 29
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Average daily production -
boe/day 182 167 163 115
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Average selling price -
natural gas $/mcf $5.90 $7.43 $11.38 $9.46
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Average selling price -
oil $/bbl $80.73 $68.71 $69.33 $78.63
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Average selling price -
NGL's $/bbl $33.96 $39.01 $44.97 $38.91
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Average selling price -
$/boe $39.58 $44.09 $62.08 $54.71
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Gold Creek
The Gold Creek area is located on the southern flank of the Peace River Arch, near Grande Prairie, Alberta. Fairmount has working interests ranging from 28% to 66% in 17 contiguous sections of land in the Gold Creek area. Fairmount is the operator of all of its Gold Creek wells.
In October 2006 Fairmount commenced a program to drill 4 (1.36 net) wells in succession on its Gold Creek property as a follow up to its previously announced (August 2006) Gold Creek discovery well. Three of the four wells were successful resulting in 3 cased petroleum and / or natural gas wells (1.08 net) and 1 dry and abandoned well (0.28 net).
The Company is very pleased with the success of this exploration drilling program and has the following production and test results to report:
The first well (0.28 net) was drilled completed in the fall of 2006. This well, along with our previously announced (August 2006) discovery well has been tied in and both wells started gas production in March, 2007. Currently, these wells are producing at a combined gross rate of 1,500 mcf/day plus approximately 110 bbls/day of natural gas liquids and 10 bbls/day of crude oil. Current production from these two wells is limited by the amount of compression capacity available on the existing gathering system. See additional details regarding the expansion of capacity below.
The second well (0.30 net) has been completed and tested in two prospective zones. Based on preliminary testing results, the first zone flowed at a final gas rate of 3.5 mmcf/day and 155 bbls/day condensate for a total of 738 boe/day (gross) after a 3 day period. The second zone flowed at a final gas rate of 3.0 mmcf/day and 180 bbls/day condensate for a total of 680 boe/day after a 4 day period. The combined total flow rates during the respective test periods was 6.5 mmcf/day of natural gas and 335 bbls/day of condensate for a total of approximately 1,400 boe/day (gross). Fairmount is currently awaiting the expansion of compression facilities to transport and process the production from this well. Fairmount, along with partners, has entered into an agreement with the current operator of the gathering and compression facilities to acquire a working interest in the compression facilities by paying to increase the compression and throughput capability of the facilities. Fairmount anticipates the additional compression and associated capacity to bring this well on production will be in place this fall.
The third well (0.50 net) was cased and completed in January, 2007 as an oil well. From January to June the well was restricted or shut in due to trucking restrictions on area roads caused by spring break up and rain conditions. Subsequent to quarter end, the well has been placed on continuous production at a rate of approximately 20 boe/day net to Fairmount.
Gold creek contributed 107 boe/day of production for the quarter ended June 30, 2007.
Based on the results of the five wells drilled to date on this property, geologic mapping, and/or 3D seismic Fairmount has identified an additional 8 drilling locations on existing Company lands.
Harmattan
Fairmount's Harmattan property is located approximately 105 kilometers north west of Calgary. Fairmount has an interest in approximately 20 sections of land at Harmattan, with an average working interest of approximately 8%. Most wells at Harmattan are oil wells with associated gas and natural gas liquids production. Fairmount owns 10% of the gathering and field compression facilities at Harmattan. These gathering and field facilities are currently operating at or near capacity.
The Harmattan property has exceeded initial expectations with economic hydrocarbons being found in multiple formations over our lands. The initial target was the Lower Cardium formation, however, 20 wells have been successfully completed and are producing from the Upper Cardium. Fifteen of these wells are dual producers from both of these zones.
In total Fairmount has drilled 44 wells (3.8 net) at Harmattan as at June 30, 2007 with the Company estimating 8 to 10 additional locations remain for future development drilling. In the quarter ended June 30, 2007, Fairmount participated in the drilling of 1 well (0.1 net) at Harmattan. Current production at Harmattan is estimated to be approximately 200 boe/day and the Company expects to maintain production at about this level for the next two to three years as additional wells and re-completions are performed to keep the existing infrastructure at or near capacity.
Crossfield
Fairmount has a land position of approximately 6.0 sections with an average working interest of approximately 50% in the Crossfield area, north west of Calgary. Fairmount is the operator of the Crossfield property with 2 wells (0.78 net) on production for the quarter ended June 30, 2007. Current production from these two wells is approximately 40 boe/day.
Gilby
Fairmount has approximately 3.75 sections of land in the Gilby area, west of Red Deer, Alberta with an operated average working interest of 50% and 2 wells (1.0 net) on production during the quarter.
Warner
Our shallow gas property at Warner is located approximately 32 kilometres south east of Lethbridge in southern Alberta. Fairmount has an interest in approximately 17 contiguous sections of land at Warner, with an average working interest of approximately 50%. Fairmount also owns 50% of the gathering and field compression facilities which deliver gas into the ATCO South transmission system.
Gas production at Warner comes from the Medicine Hat and Barons formations. Effective April 1, 2007, Fairmount became the operator of the Warner property and facilities.
Financial Results and selected financial information
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Three Months Ended
June March December September
30, 31, 31, 30,
$ except number of shares 2007 2007 2006 2006
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Natural gas sales 900,622 658,422 545,097 451,908
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Crude oil and natural gas
liquids sales 641,013 455,324 501,836 447,225
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Interest income 4,667 6,956 3,120 1,212
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Royalties (420,662) (321,739) (183,887) (153,217)
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Revenue 1,133,766 806,166 873,118 752,819
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Production expenses 215,645 262,958 207,473 168,924
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General and administrative
expenses 394,290 220,661 170,267 231,169
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Depletion, depreciation &
accretion 789,912 569,914 517,116 536,860
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Interest expense 135,604 21,405 23,049 28,786
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Net income (loss) before
income taxes (503,684) (376,085) (116,835) (284,342)
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Recovery of future income
taxes - 1,475,074 - -
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Net income (loss) (503,684) 1,098,989 (116,835) (284,342)
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Net income (loss)
per share - basic $(0.04) $0.08 $(0.01) $(0.03)
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- diluted $(0.04) $0.08 $(0.01) $(0.03)
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Weighted average common
shares outstanding:
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- Basic 13,671,889 13,671,889 12,949,824 11,116,889
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- Diluted 13,671,889 13,920,761 12,949,824 11,116,889
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Three Months Ended
June March December September
30, 31, 31, 30,
$ except number of shares 2006 2006 2005 2005
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Natural gas sales 308,034 334,794 595,204 377,424
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Crude oil and natural gas
liquids sales 347,115 345,055 336,150 201,417
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Interest income 33,036 42,076 25,749 20,622
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Royalties (160,254) (189,450) (225,954) (124,831)
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Revenue 539,712 545,758 736,150 479,046
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Production expenses 119,307 75,234 91,796 86,885
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General and administrative
expenses 159,191 245,451 196,313 213,499
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Depletion, depreciation &
accretion 343,194 274,213 291,857 196,568
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Interest expense 6,980 16,547 14,837 25,174
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Net income (loss) before
income taxes (130,143) (140,498) 92,855 (121,050)
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Recovery of future income
taxes - 1,316,700 - -
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Net income (loss) (130,143) 1,176,202 92,855 (121,050)
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Net income (loss)
per share - basic $(0.01) $0.10 $0.01 $(0.01)
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- diluted $(0.01) $0.10 $0.01 $(0.01)
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Weighted average common
shares outstanding:
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- Basic 11,116,889 11,088,236 9,957,585 8,847,585
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- Diluted 11,116,889 11,433,660 10,386,819 8,847,585
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Reconciliation of cash flow from operations to net income (loss):
The terms "cash flow" or "cash flow from operations" as used below do not have any standardized meaning prescribed by GAAP and should not be considered an alternative to, or more meaningful than, cash flow from operating activities or net income (loss) as determined in accordance with GAAP as an indicator of the Company's performance. In addition, the Company's determination of cash flow from operations may not be comparable to that reported by other companies. The reconciliation between net income (loss) and cash flow from operations is set out below. Fairmount believes this measure is meaningful because it is an indicator of funding sources for on-going efforts to replace production volumes and increase reserve volumes. The Company also presents cash flow from operations per share which is calculated using the same methodology as earnings per share; however this measurement also does not correspond to GAAP.
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Three Months Ended
June March December September
30, 31, 31, 30,
$ except per share amounts 2007 2007 2006 2006
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Net Income (loss) (503,684) 1,098,989 (116,835) (284,342)
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Depletion, depreciation
and accretion 789,912 569,914 517,116 536,860
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Stock-based compensation 101,999 107,313 72,048 71,422
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Future income taxes
(recovery) - (1,475,074) - -
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Cash flow from operations 388,227 301,142 472,329 323,940
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Cash flow per common share:
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- Basic $0.03 $0.02 $0.04 $0.03
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- Diluted $0.03 $0.02 $0.04 $0.03
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Three Months Ended
June March December September
30, 31, 31, 30,
$ except per share amounts 2006 2006 2005 2005
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Net Income (loss) (130,143) 1,176,202 92,855 (121,050)
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Depletion, depreciation
and accretion 343,194 274,213 291,857 196,568
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Stock-based compensation 41,183 74,811 48,492 77,970
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Future income taxes
(recovery) - (1,316,700) - -
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Cash flow from operations 254,234 208,526 433,204 153,488
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Cash flow per common share:
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- Basic $0.02 $0.02 $0.04 $0.02
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- Diluted $0.02 $0.02 $0.04 $0.02
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Forward-Looking Statements
This press release contains forward-looking statements, including but not limited to future exploration and development plans and anticipated production levels. These statements relate to future events or the Company's future performance. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Forward-looking statements are based on assumptions, including, among other things, the Company's ability to benefit from the combination of growth opportunities and the ability to grow through the capital markets; the Company's acquisition strategy, the criteria to be considered in connection therewith and the benefits to be derived therefrom; sustainability and growth of production and reserves through prudent management and acquisitions; the emergence of accretive growth opportunities; the impact of Canadian governmental regulation on the Company; the strategy of the Company regarding commodity price risk management, changes in oil and natural gas prices and the impact of such changes on financial performance; the level of capital expenditures devoted to development activity rather than exploration; the use of development activity and/or acquisitions to replace and add to reserves; the quantity of oil and natural gas reserves and oil and natural gas production levels; and currency, exchange and interest rates.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company can not guarantee future results, levels of activity, performance, or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Some of the risks and other factors, some of which are beyond the Company's control, which could cause results to differ materially from those expressed in the forward-looking statements contained in this press release include, but are not limited to, general economic conditions in Canada, the United States and globally; industry conditions, including fluctuations in the price of crude oil, natural gas and natural gas liquids and services used by the Company; uncertainties associated with estimating reserves; royalties payable in respect of oil and gas production; governmental regulation of the oil and gas industry, including income tax and environmental regulation; fluctuation in foreign exchange or interest rates; stock market volatility and market valuations; the impact of environmental events; the need to obtain required approvals from regulatory authorities; unanticipated operating events which can reduce production or cause production to be shut-in or delayed; failure to obtain industry partner and other third party consents and approvals, when required; and third party performance of obligations under contractual arrangements. Subject to the company's obligations under applicable securities laws, the Company is not under any duty to update any of the forward-looking statements after the date of this press release to conform such statements to actual results or to changes in the Company's expectations.
Per barrel of oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent (6:1). Barrel of oil equivalents ("boe") may be misleading, particularly if used in isolation. A boe conversion of ratio 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.