/NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES OF AMERICA./
CALGARY, June 27 /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 year ended March 31, 2008. For a complete copy of Fairmount's annual financial statements and management's discussion and analysis ("MD & A") and Fairmount's Statement of Reserves Data in accordance with NI 51-101 with the related reports please visit www.sedar.com. Certain information contained in this news release, including reserves and present value of future net revenues, development plans, drilling locations, and anticipated production from Gold Creek and Harmattan, constitute forward looking information which are subject to risks and uncertainties. See "Forward - Looking Information".
Highlights:
- Cash flow from operations of $1,443,059 or $0.10 per share for the
year.
- Production has increased 53% over last year from an average of
251 boe/day in 2007 to 383 boe/day in 2008.
- Substantially all of the increase in reserves was achieved through
the drill bit.
- Before tax present value of Gross Proved plus Probable reserves
discounted at 10% and using forecast prices and costs increased 43%
from $29,658,000 at March 31, 2007 to $42,373,000 at March 31, 2008.
- Gross Proved plus Probable reserves increased 25% from 2,052,000 boe
at March 31, 2007 to 2,562,000 boe at March 31, 2008.
- Before tax present value of Gross Proved reserves discounted at 10%
and using forecast prices and costs increased 22% from $21,931,000 at
March 31, 2007 to $26,707,000 at March 31, 2008.
- Gross Proved reserves increased 16% from 1,293,000 boe at
March 31, 2007 to 1,495,000 boe at March 31, 2008.
Operations
-------------------------------------------------------------------------
Three Months Ended
Year Ended
March March December September June
31, 31, 31, 30, 30,
2008 2008 2007 2007 2007
-------------------------------------------------------------------------
Wells drilled
- gross 6 2 3 0 1
-------------------------------------------------------------------------
Wells drilled
- net 2.9 1.0 1.8 0.0 0.1
-------------------------------------------------------------------------
Natural gas
production
- mcf/day 1,370 1,439 1,307 1,333 1,402
-------------------------------------------------------------------------
Oil production
bbl/day 15 12 13 19 17
-------------------------------------------------------------------------
NGL production
bbl/day 139 162 138 116 140
-------------------------------------------------------------------------
Average daily
production
- boe/day 383 414 369 357 390
-------------------------------------------------------------------------
Average selling
price - natural
gas $/mcf $6.59 $7.94 $6.07 $5.17 $7.06
-------------------------------------------------------------------------
Average
selling price
- oil $/bbl $81.85 $97.84 $86.70 $78.61 $69.99
-------------------------------------------------------------------------
Average
selling price
- NGL's $/bbl $46.29 $52.91 $48.01 $40.26 $41.99
-------------------------------------------------------------------------
Average
selling price
- $/boe $43.67 $51.16 $42.55 $36.51 $43.41
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended
Year Ended
March March December September June
31, 31, 31, 30, 30,
2007 2007 2006 2006 2006
-------------------------------------------------------------------------
Wells drilled
- gross 27 3 6 5 13
-------------------------------------------------------------------------
Wells drilled
- net 9.9 1.6 1.9 0.8 5.6
-------------------------------------------------------------------------
Natural gas
production
- mcf/day 824 1,000 865 857 574
-------------------------------------------------------------------------
Oil production
bbl/day 21 15 25 23 19
-------------------------------------------------------------------------
NGL production
bbl/day 93 107 114 84 67
-------------------------------------------------------------------------
Average daily
production
- boe/day 251 289 284 250 182
-------------------------------------------------------------------------
Average selling
price - natural
gas $/mcf $6.53 $7.32 $6.85 $5.73 $5.90
-------------------------------------------------------------------------
Average selling
price - oil
$/bbl $73.37 $66.68 $67.06 $78.64 $80.73
-------------------------------------------------------------------------
Average selling
price - NGL's
$/bbl $35.31 $37.93 $32.86 $36.46 $33.96
-------------------------------------------------------------------------
Average selling
price - $/boe $40.55 $42.89 $40.09 $39.13 $39.58
-------------------------------------------------------------------------
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 84% in 13.75 contiguous sections of land in the Gold Creek area. Fairmount is the operator of all of its existing Gold Creek wells.
Gold Creek contributed an average of 132 boe/day of production for the year ended March 31, 2008, up from 4 boe/day during fiscal 2007 and accounting for most of the corporate increase in production. Subsequent to year end, May 2008 production from Gold Creek was approximately 300 boe/day. The Gold Creek plant has been shut down for scheduled annual maintenance and plant turn-around for about two weeks during June 2008. Once the plant re-starts, in early July 2008 we expect production from the area to be approximately 600 boe/day. Fairmount and partners own gathering and compression facilities sufficient to process 12.5 mmcf/day of raw gas allowing capacity for future wells in the Gold Creek area.
Fairmount drilled 2 wells (0.8 net) at Gold Creek during the year. One well (0.50 net) was dry and abandoned and one well (0.30 net) was successfully completed in three different zones and placed on production during March. Subsequent to year end, Fairmount commenced drilling 1 (0.5 net) of 2 wells (1.0 net) planned at Gold Creek as part of our summer drilling program.
Based on the results of the seven wells drilled to date on this property, geologic mapping, and/or 3D seismic Fairmount has identified an additional 6 to 10 drilling locations on existing Company lands.
Harmattan
Fairmount's Harmattan property is located approximately 105 kilometres north west of the city 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 47 wells (3.8 net) at Harmattan as at March 31, 2008 with the Company estimating 12 additional locations (1.5 net) remain for future development drilling. Harmattan averaged 191 boe/day during fiscal 2008 as compared to 213 boe/day during fiscal 2007 due to normal declines from what was partly flush initial production from some new wells. Current production at Harmattan is estimated at 180 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 5 sections with an average working interest of approximately 47.5% in the Crossfield area, north west of Calgary. Fairmount is the operator of the Crossfield property with 2 wells (0.78 net) on production during the year ended March 31, 2008. Production from these two wells averaged approximately 35 boe/day for the year ended March 31, 2008 as compared to 14 boe/day for the year ended March 31, 2007.
Thorsby
The Thorsby property is located in West Central Alberta, approximately 32 kilometres southwest of Edmonton. Fairmount drilled a successful exploratory well in January 2008, and as a result earned a 100% working interest in 2 sections of land, with drilling options on additional lands. The well was completed in 3 zones and will be placed on production during summer 2008. As part of our summer drilling program, Fairmount intends to drill 1 well (1.0 net) at Thorsby this August.
Chin Coulee
The Chin Coulee property is located in southern Alberta, approximately 50 kilometres east of Lethbridge. Fairmount plans to drill two wells (2.0 net) on these lands in July, 2008. These wells are targeting oil in the Sawtooth formation based on the Company's assessment of bypassed oil pay in other nearby wells and geological interpretation.
Financial Results and selected financial information
-------------------------------------------------------------------------
Three Months Ended
Year Ended
$ except March March December September June
number of 31, 31, 31, 30, 30,
shares 2008 2008 2007 2007 2007
-------------------------------------------------------------------------
Natural gas
sales 3,303,683 1,039,287 729,918 633,856 900,622
-------------------------------------------------------------------------
Crude oil
and natural
gas liquids
sales 2,808,915 888,314 714,465 565,123 641,013
-------------------------------------------------------------------------
Interest
income 12,129 111 3,511 3,840 4,667
-------------------------------------------------------------------------
Royalties (1,621,296) (537,145) (317,908) (345,581) (420,662)
-------------------------------------------------------------------------
Revenue 4,493,474 1,351,713 1,142,088 865,907 1,133,766
-------------------------------------------------------------------------
Production
expenses 1,148,054 328,057 288,903 315,449 215,645
-------------------------------------------------------------------------
General and
adminis-
trative
expenses 1,290,150 303,737 247,875 344,248 394,290
-------------------------------------------------------------------------
Depletion,
depreciation
& accretion 3,296,528 907,170 834,993 764,453 789,912
-------------------------------------------------------------------------
Interest
expense 656,560 176,920 164,867 179,169 135,604
-------------------------------------------------------------------------
Net income
(loss) before
income
taxes (2,197,035) (408,837) (463,674) (820,840) (503,684)
-------------------------------------------------------------------------
Recovery of
future income
taxes 1,402,166 1,402,166 - - -
-------------------------------------------------------------------------
Net income
(loss) (794,869) 993,329 (463,674) (820,840) (503,684)
-------------------------------------------------------------------------
Net income
(loss) per
share
- basic $(0.05) $0.06 $(0.03) $(0.06) $(0.04)
-------------------------------------------------------------------------
- diluted $(0.05) $0.06 $(0.03) $(0.06) $(0.04)
-------------------------------------------------------------------------
Weighted
average
common
shares
outstanding:
-------------------------------------------------------------------------
- Basic 15,008,384 17,241,614 15,457,889 13,671,889 13,671,889
-------------------------------------------------------------------------
- Diluted 15,008,384 17,241,614 15,457,889 13,671,889 13,671,889
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended
Year Ended
$ except March March December September June
number of 31, 31, 31, 30, 30,
shares 2007 2007 2006 2006 2006
-------------------------------------------------------------------------
Natural gas
sales 1,963,461 658,422 545,097 451,908 308,034
-------------------------------------------------------------------------
Crude oil
and natural
gas liquids
sales 1,751,500 455,324 501,836 447,225 347,115
-------------------------------------------------------------------------
Interest
income 44,324 6,956 3,120 1,212 33,036
-------------------------------------------------------------------------
Royalties (819,097) (321,739) (183,887) (153,217) (160,254)
-------------------------------------------------------------------------
Revenue 2,971,815 806,166 873,118 752,819 539,712
-------------------------------------------------------------------------
Production
expenses 758,662 262,958 207,473 168,924 119,307
-------------------------------------------------------------------------
General and
adminis-
trative
expenses 781,288 220,661 170,267 231,169 159,191
-------------------------------------------------------------------------
Depletion,
depreciation
& accretion 1,967,084 569,914 517,116 536,860 343,194
-------------------------------------------------------------------------
Interest
expense 80,220 21,405 23,049 28,786 6,980
-------------------------------------------------------------------------
Net income
(loss) before
income taxes (907,405) (376,085) (116,835) (284,342) (130,143)
-------------------------------------------------------------------------
Recovery of
future income
taxes 1,475,074 1,475,074 - - -
-------------------------------------------------------------------------
Net income
(loss) 567,669 1,098,989 (116,835) (284,342) (130,143)
-------------------------------------------------------------------------
Net income
(loss) per
share
- basic $0.05 $0.08 $(0.01) $(0.03) $(0.01)
-------------------------------------------------------------------------
- diluted $0.05 $0.08 $(0.01) $(0.03) $(0.01)
-------------------------------------------------------------------------
Weighted
average
common
shares
outstanding:
-------------------------------------------------------------------------
- Basic 12,208,889 13,671,889 12,949,824 11,116,889 11,116,889
-------------------------------------------------------------------------
- Diluted 12,460,796 13,920,761 12,949,824 11,116,889 11,116,889
-------------------------------------------------------------------------
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.
-------------------------------------------------------------------------
Three Months Ended
Year Ended
$ except March March December September June
per share 31, 31, 31, 30, 30,
amounts 2008 2008 2007 2007 2007
-------------------------------------------------------------------------
Net Income
(loss) (794,869) 993,329 (463,674) (820,840) (503,684)
Depletion,
depreciation
and
accretion 3,296,528 907,170 834,993 764,453 789,912
Stock-based
compensation 299,217 44,666 69,124 83,428 101,999
Loss on
forward
commodity
contracts 44,350 44,350 - - -
Future income
taxes
(recovery) (1,402,166) (1,402,166) - - -
-------------------------------------------------------------------------
Cash flow
from
operations 1,443,060 587,349 440,443 27,041 388,227
-------------------------------------------------------------------------
Cash flow per
common share:
-------------------------------------------------------------------------
- Basic $0.10 $0.03 $0.03 $0.00 $0.03
-------------------------------------------------------------------------
- Diluted $0.10 $0.03 $0.03 $0.00 $0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Months Ended
Year Ended
$ except March March December September June
per share 31, 31, 31, 30, 30,
amounts 2007 2007 2006 2006 2006
-------------------------------------------------------------------------
Net Income
(loss) 567,669 1,098,989 (116,835) (284,342) (130,143)
Depletion,
depreciation
and
accretion 1,967,084 569,914 517,116 536,860 343,194
Stock-based
compensation 291,966 107,313 72,048 71,422 41,183
Future income
taxes
(recovery) (1,475,074) (1,475,074) - - -
-------------------------------------------------------------------------
Cash flow
from
operations 1,351,645 301,142 472,329 323,940 254,234
-------------------------------------------------------------------------
Cash flow per
common share:
-------------------------------------------------------------------------
- Basic $0.11 $0.02 $0.04 $0.03 $0.02
-------------------------------------------------------------------------
- Diluted $0.11 $0.02 $0.04 $0.03 $0.02
-------------------------------------------------------------------------
Forward - Looking Information
This news release contains forward-looking information, including but not limited to estimated reserves and future net revenues, future exploration and development plans and anticipated production levels. Information relating to reserves and related future net revenue has been independently evaluated by GLJ Petroleum Consultants Ltd. and is forward-looking information as it involves the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Additionally, estimates of future net value involve assumptions relating to production rates, commodity prices and exchange rates, operating costs, capital expenditures and well abandonment costs. This information relates to future events or the Company's future performance. All statements and information other than statements of historical fact are forward-looking information. In some cases, forward-looking information 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. Forward looking information relating to reserves and future net revenue are estimates only. Actual reserves and future net revenues will differ from those estimated by GLJ Petroleum Consultants Ltd. and such differences may be material. 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 information will not occur. Forward-looking information is 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 information. 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 (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. Present values of future net revenue do not represent fair market value of Fairmount's reserves.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.