FairWest Energy Corporation

FairWest Energy Corporation

August 14, 2009 18:32 ET

FairWest Energy Corporation Announces Its Financial Results for the Period Ended June 30, 2009

CALGARY, ALBERTA--(Marketwire - Aug. 14, 2009) - FairWest Energy Corporation ("FairWest" or "the Company") (TSX:FEC) is pleased to announce its financial and operational results for the six months ended June 30, 2009. The following highlights should be read in conjunction with the Management's Discussion and Analysis and the associated Financial Statements for the periods, available at www.sedar.com, on FairWest's website at www.fairwestenergy.com, or by request at the offices of FairWest.

Readers are advised that the consolidated financial statements for the period have been prepared on a going concern basis which assumes that the Company will be able to recognize its assets and discharge its liabilities in the normal course of business for the foreseeable future. Further information is available in the Management's Discussion and Analysis and Notes to the Financial Statements.

Financial Highlights June 30, 2009 June 30, 2008
(6 Months) (6 Months)
Petroleum and natural gas sales, net of
royalties 4,899,121 7,538,241
Other income 67,761 115,940
Gain on disposal of assets - 25,626
Proceed on cancellation of contract 714,226 -
Unrealized loss on financial contract (108,730) -
5,572,378 7,679,807

General and administrative 688,359 833,571
Stock-based compensation 146,872 170,419
Operating 2,476,538 2,586,576
Depletion, depreciation and amortization 9,156,182 6,148,139
Interest 565,608 882,610
Part XII.6 tax (11,749) 68,807
13,021,810 10,690,122
Loss before income taxes (7,449,432) (3,010,315)
Future income tax recovery 1,537,700 950,825
Net loss (5,911,732) (2,059,490)

Funds flow from operations 1,962,352 3,282,617
Funds flow from operations ($/share) 0.018 0.030
Capital expenditures (1,496,991) (1,369,286)
Basic loss ($/share) (0.054) (0.021)

Operations Highlights June 30, 2009 June 30, 2008
(6 Months) (6 Months)
Natural gas
Natural gas sales ($) 3,806,114 6,874,211
Volume - mcf/day 3,956 4,188
$/mcf 5.32 9.02
Oil and NGLs
Oil and NGL sales ($) 1,548,183 1,860,042
Volume - bbl/day 122 107
$/bbl 70.33 95.45
Barrel of oil equivalent
Total sales ($) 5,354,297 8,734,253
Volume - boe/day 781 805
$/boe 37.88 59.61

We are pleased to report on the progress FairWest has made to June 30.

These statements contain a going concern note similar to the first quarter of 2009. I wish to address the language in this note and point out the significant progress made to raise capital and deal with issues that have been predominately caused by a significant reduction in gas prices. FairWest is 85% weighted towards gas in its core areas.

The solution to the issues raised in the going concern note was to sell 140 boepd for proceeds of $8.2 million to two limited partnerships. The first sale was to AltaEast Production Limited Partnership for $4.2 million and these funds were used to pay the Company's bank loan down from $12.5 million to $8.1 million at June 30th, 2009.

The second sale to Strategic Production Limited Partnership is for the remaining $4.0 million of these assets. To date Strategic has sold $1.6 million of LP units to various investors. These funds are being used to pay our service providers. FairWest plans to close the entire offering by September 30th, 2009.

The Company has also received cash of net $0.74 million from equity and $0.71 from the cancellation of a contract.

By September 30th, 2009, FairWest anticipates that it will be in compliance with banking covenants and be in a slightly positive working capital position, thereby resolving all issues raised in the going concern note.

Production during August 2009 is averaging 650 boepd. On August 13th, 2009, FairWest's Board of Directors ("the Board") approved capital expenditures of $800,000 to be used for field optimization which is expected to increase production to 1,000 boepd. This project will be implemented in the field once financing is in place and is expected to occur on or before September 30th, 2009. It is estimated that it will take about 45 days to complete the work in the field and realize the incremental production. The Board also approved $2.5 million in drilling and land acquisition capital, which is anticipated to increase production by another 250 boepd. These expenditures will be carried out in the fourth quarter, contingent upon funding being in place.

FairWest shares continue to languish in the market place due to lack of demand and an oversupply of gas weighted juniors in the public domain.

Staff have seen this as an opportunity to increase their ownership in the Company and have elected to contribute up to 10% of their salary every month pursuant to an Employee Stock Ownership Plan ("ESOP"). FairWest matches the employee's contributions to the ESOP.

Other gas weighted juniors like FairWest have also been impacted significantly by the 60% drop in gas prices since the second quarter of 2008. As a result, drilling for gas in Alberta has virtually stopped. Supply is dropping much faster than demand both in Canada and the U.S., which indicates there should be a price recovery early in 2010 as supply and demand reach an equilibrium. FairWest believes the market has overestimated the ability of tight gas supply to meet demand in the short term. Present gas prices do not support drilling tight gas resource type prospects.

In closing, I wish to thank the dedicated and talented men and women that work hard to create value for you as shareholders. I am privileged to work with these good people every day. Thank you to the staff, for your support, enthusiasm and will to get it done.

I would also like to thank our Board for their wisdom, faith and access to capital that has allowed this Company to move ahead in this interesting and volatile market.

Finally, I would like to thank you as shareholders who have journeyed with us so far. FairWest is sitting on a significant inventory of opportunities. These opportunities will be expanded upon and converted to value as markets improve and capital is available.

FairWest (TSX:FEC) is a Calgary, Alberta based junior oil and gas company engaged in the acquisition, exploration, development and production of crude oil and natural gas in the provinces of Alberta and Saskatchewan.

Statements in this release which describe FairWest's intentions, expectations or predictions, or which relate to matters that are not historical facts are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties which may cause the actual results, performances or achievements of FairWest to be materially different from any future results, performances or achievements expressed in or implied by such forward-looking statements. FairWest may update or revise any forward-looking statements, whether as a result of new information, future events or changing market and business conditions.

Contact Information

  • FairWest Energy Corporation
    James G. Gettis
    President and Chief Executive Officer
    (403) 264-4949
    (403) 269-1761 (FAX)
    FairWest Energy Corporation
    Marion D. Mackie
    Chief Financial Officer
    (403) 264-4949
    (403) 269-1761 (FAX)
    Website: www.fairwestenergy.com