/NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES OF AMERICA/
CALGARY, July 3 /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, 2007. 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 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:
- Net income of $1,098,989 for the quarter ended March 31, 2007 and
$567,669 for the year ended March 31, 2007.
- Cash flow from operations increased by 85% over last year to
$1,351,645 for the year.
- Production has increased 92% over last year from an average of
131 boe/day in 2006 to 251 boe/day in 2007.
- Proved plus probable reserves increased by 1,011,000 boe or 116% over
the prior year.
- Proved reserves increased 679,000 boe or 111% over the prior year.
- Substantially all of the increase in reserves was achieved through
the drill bit.
- Production growth for seven consecutive quarters.
- Very successful exploration program during the year with the drilling
of 27 wells (9.9 net) with a success rate of 85%.
- Current production is estimated at 400 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 effective
June 20, 2007.
Operations
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Three Months Ended
Year Ended
March March December September June
31, 2007 31, 2007 31, 2006 30, 2006 30, 2006
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Wells drilled
- gross 27 3 6 5 13
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Wells drilled
- net 9.9 1.6 1.9 0.8 5.6
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Natural gas
production
- mcf/day 824 1,000 865 857 574
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Oil production
bbl/day 21 15 25 23 19
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NGL production
bbl/day 93 107 114 84 67
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Average daily
production - boe 251 289 284 250 182
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Average selling
price - natural
gas $/mcf $6.53 $7.32 $6.85 $5.73 $5.90
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Average selling
price - oil
$/bbl $73.37 $66.68 $67.06 $78.64 $80.73
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Average selling
price - NGL's
$/boe $35.31 $37.93 $32.86 $36.46 $33.96
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Average selling
price - $/boe $40.55 $42.89 $40.09 $39.13 $39.58
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Three Months Ended
Year Ended
March March December September June
31, 2006 31, 2006 31, 2005 30, 2005 30, 2005
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Wells drilled
- gross 23 4 7 8 4
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Wells drilled
- net 3.5 1.2 1.2 0.8 0.3
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Natural gas
production
- mcf/day 458 490 569 434 326
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Oil production
bbl/day 16 13 24 13 13
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NGL production
bbl/day 39 73 44 29 9
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Average daily
production - boe 131 167 163 115 77
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Average selling
price - natural
gas $/mcf $9.00 $7.43 $11.38 $9.46 $6.57
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Average selling
price - oil
$/bbl $71.04 $68.71 $69.33 $78.63 $68.84
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Average selling
price - NGL's
$/boe $40.31 $39.01 $44.97 $38.91 $32.61
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Average selling
price - $/boe $51.99 $44.09 $62.08 $54.71 $43.66
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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 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 completed and tested with the well flowing at a final gas rate of 3.4 mmcf/day and 204 bbls/day of condensate for a total of 770 boe/day (gross) after a 5 day period. 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. The well was brought on production for 7 days in April, 2007 at a rate of approximately 75 bbl/day (38 bbl/day net) of oil. Since April, this well has been shut in due to trucking restrictions on area roads caused by spring break up and rain conditions.
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 43 wells (3.7 net) at Harmattan as at March 31, 2007 with the Company estimating 5 to 10 additional locations remain for future development drilling. In the year ended March 31, 2007, Fairmount has drilled 12 wells (1.0 net) at Harmattan. Fairmount's share of production averaged 213 boe/day during fiscal 2007 as compared to 118 boe/day during fiscal 2006. Current production at Harmattan is estimated to be approximately 215 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 1 well (0.28 net) on production for the entire year ended March 31, 2007 and 1 well (0.50 net) completed as a natural gas well during fiscal 2006 and tied in and on stream during March, 2007. Current production from these two wells is approximately 40 boe/day.
Fairmount plans to drill 2 (1.0 net) wells offsetting our existing wells at Crossfield this fall.
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%.
In the fourth quarter of fiscal 2006, a well was drilled, cased and completed for 2 gas zones within the Mannville formation. This well was tied-in during the fall of 2006. Production from the well has been impaired by asphaltines in the reservoir which have restricted the flow rate of the well by reducing the effective permeability of the formation. As a result, production from this well has been disappointing relative to original expectations.
The Company drilled 1 well (0.50 net) in the second quarter of fiscal 2007 with the well cased and completed in the Edmonton sands in the third quarter. The well was tied in and placed on production in February, 2007. The well is currently producing approximately 25 boe/day (net).
Financial Results and selected financial information
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Three Months Ended
$ except Year Ended
number March March December September June
of shares 31, 2007 31, 2007 31, 2006 30, 2006 30, 2006
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Natural gas
sales 1,963,461 658,422 545,097 451,908 308,034
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Crude oil and
natural gas
liquids sales 1,751,500 455,324 501,836 447,225 347,115
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Interest
income 44,324 6,956 3,120 1,212 33,036
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Royalties (819,097) (321,739) (183,887) (153,217) (160,254)
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Revenue 2,971,815 806,166 873,118 752,819 539,712
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Production
expenses 758,662 262,958 207,473 168,924 119,307
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General and
administrative
expenses 781,288 220,661 170,267 231,169 159,191
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Depletion,
depreciation
& accretion 1,967,084 569,914 517,116 536,860 343,194
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Interest
expense 80,220 21,405 23,049 28,786 6,980
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Net income
(loss) before
income taxes (907,405) (376,085) (116,835) (284,342) (130,143)
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Recovery of
future income
taxes 1,475,074 1,475,074 - - -
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Net income
(loss) 567,669 1,098,989 (116,835) (284,342) (130,143)
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Net income
(loss) per
share
- basic $0.05 $0.08 $(0.01) $(0.03) $(0.01)
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- diluted $0.05 $0.08 $(0.01) $(0.03) $(0.01)
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Weighted
average
common shares
outstanding:
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- Basic 12,208,889 13,671,889 12,949,824 11,116,889 11,116,889
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- Diluted 12,460,796 13,920,761 12,949,824 11,116,889 11,116,889
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Three Months Ended
$ except Year Ended
number March March December September June
of shares 31, 2006 31, 2006 31, 2005 30, 2005 30, 2005
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Natural gas
sales 1,502,767 334,794 595,204 377,424 195,345
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Crude oil
and natural
gas liquids
sales 993,222 345,055 336,150 201,417 110,600
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Interest
income 119,728 42,076 25,749 20,622 31,281
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Royalties (615,006) (189,450) (225,954) (124,831) (74,771)
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Revenue 2,023,409 545,758 736,150 479,046 262,455
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Production
expenses 319,387 75,234 91,796 86,885 65,472
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General and
administrative
expenses 883,738 245,451 196,313 213,499 228,475
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Depletion,
depreciation
& accretion 896,180 274,213 291,857 196,568 133,542
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Interest
expense 90,693 16,547 14,837 25,174 34,135
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Net income
(loss) before
income taxes (439,569) (140,498) 92,855 (121,050) (270,876)
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Recovery of
future income
taxes 1,316,700 1,316,700 - - -
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Net income
(loss) 877,131 1,176,202 92,855 (121,050) (270,876)
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Net income
(loss) per
share
- basic $0.09 $0.10 $0.01 $(0.01) $(0.03)
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- diluted $0.09 $0.10 $0.01 $(0.01) $(0.03)
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Weighted
average
common shares
outstanding:
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- Basic 9,617,908 11,088,236 9,957,585 8,847,585 8,815,717
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- Diluted 10,071,035 11,433,660 10,386,819 8,847,585 8,815,717
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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
$ except Year Ended
per share March March December September June
amounts 31, 2007 31, 2007 31, 2006 30, 2006 30, 2006
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Net Income
(loss) 567,669 1,098,989 (116,835) (284,342) (130,143)
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Depletion,
depreciation
and accretion 1,967,084 569,914 517,116 536,860 343,194
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Stock-based
compensation 291,966 107,313 72,048 71,422 41,183
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Future income
taxes
(recovery) (1,475,074) (1,475,074) - - -
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Cash flow from
operations 1,351,645 301,142 472,329 323,940 254,234
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Cash flow per
common share:
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- Basic $0.11 $0.02 $0.04 $0.03 $0.02
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- Diluted $0.11 $0.02 $0.04 $0.03 $0.02
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Three Months Ended
$ except Year Ended
per share March March December September June
amounts 31, 2006 31, 2006 31, 2005 30, 2005 30, 2005
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Net Income
(loss) 877,131 1,176,202 92,855 (121,050) (270,876)
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Depletion,
depreciation
and accretion 896,180 274,213 291,857 196,568 133,542
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Stock-based
compensation 272,980 74,811 48,492 77,970 71,707
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Future income
taxes
(recovery) (1,316,700) (1,316,700) - - -
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Cash flow from
operations 729,591 208,526 433,204 153,488 (65,627)
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Cash flow per
common share:
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- Basic $0.08 $0.02 $0.04 $0.02 $(0.01)
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- Diluted $0.07 $0.02 $0.04 $0.02 $(0.01)
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Forward-Looking Statements
This press release contains forward-looking statements, including but not limited to estimated reserves and future net revenues, future exploration and development plans and anticipated production levels. Statements relating to reserves and related future net revenue are forward-looking statements as they involve 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. 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. Forward looking statements 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 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 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.