Fairborne Energy Ltd.

Fairborne Energy Ltd.

March 22, 2011 19:38 ET

Fairborne Announces Closing of $125 Million Asset Divestiture and Provides Sinclair, Manitoba Operational Update

CALGARY, ALBERTA--(Marketwire - March 22, 2011) - Fairborne Energy Ltd. ("Fairborne" or the "Company") (TSX:FEL) is pleased to announce that it has closed its previously announced sale of properties in the Peace River Arch and Brazeau area of north and west central Alberta for $125 million, subject to closing adjustments. Proceeds from the divestiture were used to reduce bank indebtedness.


Fairborne is in the process of completion and tie-in operations on a number of wells drilled in the first quarter of 2011. As previously released, after reaching its exit target of 17,000 boe per day in December, production from its Marlboro area was restricted by approximately 1,100 boe per day. The restriction, along with natural declines, weather related freeze ups and operating delays resulted in January and February production averaging approximately 15,500 boe per day. On March 10, 2011 the Company was informed that production at Marlboro and its non-operated well at Tower Creek were required to be completely shut in due to a significant mechanical failure at the K3 Gas Plant. The failure resulted in the shut in of an additional 4,100 boe per day, bringing the total volumes shut in at Marlboro and Tower Creek to 5,200 boe per day. In addition, at Marlboro, Fairborne has one 100% working interest Wilrich well that is drilled and awaiting completion and one 47% working interest Wilrich well that is currently drilling and anticipated to commence completion operations after spring breakup.

Fairborne anticipates that net of natural declines, the asset divestiture, the tie-in of its first quarter drilling activity and once the Marlboro plant commences operations in late April resulting in Marlboro production no longer being restricted, that corporate production will be between 15,000 to 15,500 boe per day.

Sinclair Operations Update

At current crude oil prices, the Sinclair light oil property (40 degree API) represents a significant value upside for Fairborne as the Company receives exceptional netbacks of $80 to $90 per barrel.

The winter drilling program includes eight (6.7 net) horizontal wells that will follow up the initial success obtained on the three wells drilled in the fourth quarter of 2010, where the number of fracture stimulations was increased from the previous standard of eight to 12 per well to a range of 14 to 28 per well. The increase in fracture number is designed to investigate the level of enhanced production performance with increased stimulation over the Company's type well initial production rate of 60 bbls per day. Current production from the Sinclair property is 850 net bbls per day.

The following summarizes the results of the three wells drilled in the fourth quarter 2010 program.

The first well (60% WI) utilizing the increased fracture stimulation has been on production for six months. The well was fracture stimulated over 14 intervals and had an initial production rate of 75 bbls per day (a 25 % increase over the type well) and is currently producing 55 bbls per day (a 30 % increase over the type well).

The second and third wells (both 100% WI) drilled in the 2010 program were fractured 25 and 28 times respectively, equipped with standard pumpjacks and have stabilized production of 60 bbls per day of light oil after four months which is a 25% increase over the type well.

The winter program is focused on building higher initial production rates based on information gathered from the fourth quarter program.

The first well (47% WI) in the winter program was fracture stimulated over 23 intervals and was equipped for production using a jet pump, allowing for the production of significantly more fluid than a standard pumpjack system. This well has been on production for 30 days and is currently producing 200 barrels of oil per day.

The second well (100% WI) was fractured stimulated over 24 intervals and was equipped with a larger pumpjack, allowing for slightly higher total fluid production. This well has been on production for one week and is currently producing at 90 barrels of oil per day.

The remaining wells in the Sinclair winter program are at various stages of tie-in and completion with one well currently still drilling.

The recent success from the enhanced completion technique, combined with further upside from the use of jet pumps versus traditional pumpjacks has provided the first phase of success in the development of Sinclair. With 60 (55 net) sections of land at Sinclair and 39 producing wells, the Company has an identified drilling inventory in excess of 150 net wells. The second phase of development at Sinclair will involve drilling development wells at a spacing of four wells per section and the third phase will focus on the continued expansion of the already successful two section waterflood pilot which commenced in late 2009.

Fairborne is a crude oil and natural gas exploration, development and production company headquartered in Calgary, Alberta, Canada. Fairborne's common shares trade on the Toronto Stock Exchange under the symbol "FEL".

Forward-Looking Statements

Certain information set forth in this press release, contain forward-looking statements including management's assessment of future plans and operations, drilling plans, timing of completion of new wells, expected production once Marlboro plant commences operations in late April and timing of completion of the Marlboro gas plant.. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Fairborne's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, delays resulting from or the inability to obtain required regulatory approvals, inability to retain and delays in retaining drilling rigs and other services, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions and ability to access sufficient capital from internal and external sources. The foregoing list is not exhaustive. Additional information on these and other risks that could affect Fairborne's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), or at Fairborne's website (www.fairborne-energy.com). Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The actual results, performance or achievement of Fairborne could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Fairborne will derive therefrom. Fairborne disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

Barrels of Oil Equivalency

Natural gas volumes are converted to barrels of oil equivalent (boe) on the basis of 6,000 cubic feet (mcf) of gas for 1 barrel (bbl) of oil. The term "barrels of oil equivalent" may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf to 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.


Netbacks referred to herein are calculated by deducting royalties, operating expenses and transportation costs from revenue derived from petroleum and natural gas sales.

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