FairWest Energy Corporation

FairWest Energy Corporation

April 24, 2008 12:24 ET

FairWest Energy Corporation: Strike Petroleum Ltd. Receives a Repayment Demand on Account of Its Outstanding Indebtedness With Its Secured Lender

CALGARY, ALBERTA--(Marketwire - April 24, 2008) - On April 18, 2008, Strike Petroleum Ltd. ("Strike"), a 100% subsidiary of FairWest Energy Corporation ("FairWest" or the "Company") (TSX:FEC) received a demand to repay its outstanding indebtedness with its secured lender ("Lender"). The Lender has informed Strike that as of April 17, 2008, Strike owed the Lender $10.63 million of principal and accrued interest of $0.17 million. If the amount due to the Lender is not paid, the Lender has the right to enforce its security.

Strike is a wholly owned subsidiary of FairWest and is solely responsible for its secured debt with the Lender. Negotiations between Strike and the Lender to date have not resulted in a mutually agreeable agreement between the two parties. FairWest and Strike intend to pursue ongoing negotiations with the Lender to find a satisfactory resolution to valuation differences. If we are unable to make a deal, FairWest and Strike will cooperate with the Lender to permit an orderly liquidation of the Strike assets.

Strike's estimated March 2008 working interest production of 172 barrels of oil equivalent per day ("BOE/D") represented 20.5% of FairWest's estimated March 2008 total production of 840 BOE/D. FairWest's discretionary cash flow will not be impacted materially if liquidation of Strike is the final remedy as the present free cash flow from the Strike assets is currently dedicated to the Lender.

The FairWest management team and board of directors anticipate that in the event the Strike assets are liquidated the result will be a significant reduction to the bank debt component of FairWest's consolidated working capital deficiency. The resolution of the Strike situation will free up management resources and cash flow to focus on production and reserve additions associated with its non-Strike assets. This will occur through a defined program of acquisition, exploitation, development and exploration opportunities.

FairWest has recently signed an Indicative letter to increase its credit facilities with a Canadian bank that is not related to Strike's Lender based on production success in other core areas. The proceeds of FairWest's increased bank financing will be used to make payments to FairWest's trade creditors.

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)