/NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES OF AMERICA/
CALGARY, Nov. 28 /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 and six months ended September 30, 2007. For a complete copy of Fairmount's second 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 43% as compared to the second quarter of
last year from an average of 250 boe/day in the second quarter of
last year to 357 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.
- Current production is estimated at 360 boe/day with another
290 boe/day estimated behind pipe awaiting tie-in this fall.
- Infrastructure program at Gold Creek largely complete with all wells
tied in and compression expansion scheduled for completion by
mid-January.
- Increased ownership at Gold Creek by acquiring the working interest
share of a minor partner in two wells and some land in the Gold Creek
area.
- Subsequent to quarter end, on November 15, 2007, completed a private
placement of 3,572,000 common shares on a flow-through basis at a
price of $1.40 per Flow-Through Share for gross proceeds of
$5,000,800.
Operations
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Three Months Ended
September June March December
30, 30, 31, 31,
2007 2007 2007 2006
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Wells drilled - gross 0 1 3 6
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Wells drilled - net 0.0 0.1 1.6 1.9
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Natural gas production
- mcf/day 1,333 1,402 1,000 865
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Oil production bbl/day 19 17 15 25
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NGL production bbl/day 116 140 107 114
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Average daily production
- boe/day 357 390 289 284
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Average selling price
- natural gas $/mcf $5.17 $7.06 $7.32 $6.85
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Average selling price
- oil $/bbl $78.61 $69.99 $66.68 $67.06
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Average selling price
- NGL's $/bbl $40.26 $41.99 $37.93 $32.86
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Average selling price
- $/boe $36.51 $43.41 $42.89 $40.09
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Three Months Ended
September June March December
30, 30, 31, 31,
2006 2006 2006 2005
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Wells drilled - gross 5 13 4 7
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Wells drilled - net 0.8 5.6 1.2 1.2
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Natural gas production
- mcf/day 857 574 490 569
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Oil production bbl/day 23 19 13 24
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NGL production bbl/day 84 67 73 44
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Average daily production
- boe/day 250 182 167 163
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Average selling price
- natural gas $/mcf $5.73 $5.90 $7.43 $11.38
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Average selling price
- oil $/bbl $78.64 $80.73 $68.71 $69.33
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Average selling price
- NGL's $/bbl $36.46 $33.96 $39.01 $44.97
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Average selling price
- $/boe $39.13 $39.58 $44.09 $62.08
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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 30% to 66% in 15.25 contiguous sections of land in the Gold Creek area. Fairmount is the operator of all of its Gold Creek wells.
During the quarter the Company increased its ownership at Gold Creek by acquiring the working interest share of a minor partner in two wells and some land in the Gold Creek area for approximately $1,500,000 before closing adjustments.
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 (0.40 net) was drilled and 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 1,000 mcf/day plus approximately 90 bbls/day of natural gas liquids and 10 bbls/day of crude oil.
The second well (0.30 net) was completed and tested in two zones. The combined total flow rates during the three and four day 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 completed the tie in of the well into the existing compression facilities during October 2007 and continues to face third party delays on the installation of additional compression. All major equipment components have been manufactured and on site construction is currently underway to accommodate the delivery of the assembled equipment packages. Fairmount is anticipating a mid-January 2008 completion date for the infrastructure expansion.
The third well (0.50 net) was cased and completed in January, 2007 as an oil well. This well has was placed on continuous production during the quarter.
Gold creek contributed 103 boe/day of production for the quarter ended September 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.
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 September 30, 2007 with the Company estimating 8 to 10 additional locations remain for future development drilling. Current production at Harmattan is estimated at 190 boe/day and the Company expects to maintain production at about this level for the next two to three years as additional wells are drilled and re-completions are performed.
Crossfield
Fairmount has a land position of approximately 6 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 September 30, 2007. Production from these two wells averaged approximately 40 boe/day for the quarter.
Financial Results and selected financial information
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Three Months Ended
$ except September June March December
number of 30, 30, 31, 31,
shares 2007 2007 2007 2006
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Natural gas sales 633,856 900,622 658,422 545,097
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Crude oil and natural
gas liquids sales 565,123 641,013 455,324 501,836
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Interest income 3,840 4,667 6,956 3,120
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Royalties (345,581) (420,662) (321,739) (183,887)
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Revenue 865,907 1,133,766 806,166 873,118
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Production expenses 315,449 215,645 262,958 207,473
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General and
administrative
expenses 344,248 394,290 220,661 170,267
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Depletion, depreciation
& accretion 764,453 789,912 569,914 517,116
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Interest expense 179,169 135,604 21,405 23,049
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Net income (loss)
before income taxes (820,840) (503,684) (376,085) (116,835)
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Recovery of future
income taxes - - 1,475,074 -
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Net income (loss) (820,840) (503,684) 1,098,989 (116,835)
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Net income (loss) per
share - basic $(0.06) $(0.04) $0.08 $(0.01)
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- diluted $(0.06) $(0.04) $0.08 $(0.01)
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Weighted average common
shares outstanding:
- Basic 13,671,889 13,671,889 13,671,889 12,949,824
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- Diluted 13,671,889 13,671,889 13,920,761 12,949,824
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Three Months Ended
$ except September June March December
number of 30, 30, 31, 31,
shares 2006 2006 2006 2005
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Natural gas sales 451,908 308,034 334,794 595,204
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Crude oil and natural
gas liquids sales 447,225 347,115 345,055 336,150
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Interest income 1,212 33,036 42,076 25,749
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Royalties (153,217) (160,254) (189,450) (225,954)
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Revenue 752,819 539,712 545,758 736,150
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Production expenses 168,924 119,307 75,234 91,796
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General and
administrative expenses 231,169 159,191 245,451 196,313
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Depletion, depreciation
& accretion 536,860 343,194 274,213 291,857
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Interest expense 28,786 6,980 16,547 14,837
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Net income (loss) before
income taxes (284,342) (130,143) (140,498) 92,855
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Recovery of future
income taxes - - 1,316,700 -
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Net income (loss) (284,342) (130,143) 1,176,202 92,855
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Net income (loss) per
share - basic $(0.03) $(0.01) $0.10 $0.01
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- diluted $(0.03) $(0.01) $0.10 $0.01
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Weighted average common
shares outstanding:
- Basic 11,116,889 11,116,889 11,088,236 9,957,585
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- Diluted 11,116,889 11,116,889 11,433,660 10,386,819
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Forward - Looking Statements
This press release contains forward-looking information, including but not limited to future exploration and development plans and anticipated production levels. This information relates 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 information 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 information 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.