Fairborne Energy Ltd.

Fairborne Energy Ltd.

May 16, 2012 18:30 ET

Fairborne Announces Closing of $80 Million Asset Divestiture

CALGARY, ALBERTA--(Marketwire - May 16, 2012) - 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 greater Sinclair area of south west Manitoba and south east Saskatchewan for $80 million, subject to closing adjustments. Proceeds from the divestiture were used to reduce bank indebtedness.

With the closing of the Sinclair asset sale and the scheduled closing next month of the previously announced $47.5 million Clive disposition, Fairborne is on track to complete its strategic asset sales which, including the Clive disposition, will have reduced net debt from $324 million at year end 2010 to $140 million by mid-year 2012. Combined with the previously disclosed capital program of $20 million for the second half of 2012, Fairborne forecasts exiting 2012 with net debt of $140 million and production of between 14,000 and 14,500 boe/d.

The significance, efficiency and impact of the debt reduction can be seen in the debt per flowing boe reduction from $20,200 in the fourth quarter of 2010 to approximately $10,000 forecast for year end 2012.

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 forecasts of year end net debt, production and the anticipated closing of the Clive disposition and the impact thereof. 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.

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