Fairborne Energy Ltd.
TSX : FEL

Fairborne Energy Ltd.

November 30, 2011 00:01 ET

Fairborne Energy Ltd.: Drilling and Activity Update

CALGARY, ALBERTA--(Marketwire - Nov. 30, 2011) - Fairborne Energy Ltd. (TSX:FEL) ("Fairborne" or the "Company") is pleased to provide the following update.

Highlights

  • Successful Cardium horizontal exploration well at the south end of the Greater Harlech area flowed at 2.3 mmcf/d and 126 bbls/d of total liquids (of which 60% is condensate) setting up potential for 200 follow up locations on Company lands
  • Estimated simple payout of a Cardium horizontal well is approximately one year (at current strip pricing)
  • Successful, multi-zone vertical exploration well at the north end of the Greater Harlech area proving up the Cardium fairway that is 25 miles long and 12 miles wide
  • Strategic joint venture land and drilling agreement in the Greater Harlech area executed with an industry leading, intermediate sized deep basin focused producer
  • Land position increased in the Greater Harlech area through recent crown purchases and pooling with the Company's new joint venture partner
  • Record current production levels of 16,000 boe/d achieved; and on track to meet 2011 exit rate production guidance of 16,500 boe/d
  • Marlboro (Wilrich) production reaches record levels of 7,100 boe/d
  • The Company's first Bluesky horizontal well at Marlboro has been drilled, with completion operations currently underway
  • Confirmation of repayment, in cash, of the principal amount of Fairborne's outstanding convertible debentures and accrued interest, which mature on December 31, 2011, using Fairborne's existing bank credit facilities

Recent Exploration Activity

Fairborne has successfully drilled and completed wells on two new exploration plays in its greater Harlech area; a Cardium horizontal discovery in the southern end and a multi-zone vertical discovery on the northern lands.

The Company's strategy, successfully executed in the Marlboro area for the Wilrich and repeated again in the Greater Harlech area for the Cardium, is to use vertical wells to test multiple horizons and identify candidates for horizontal drilling and multistage fracture stimulations.

Fairborne began work on these two new exploration plays in 2009, acquiring land positions in the Voyager area and adding to its already substantial land base in the Greater Harlech area in the deep basin of west central Alberta. Since 2009, oil and gas activity had slowed materially due to global economic concerns allowing Fairborne to accumulate significant lands at prices that were substantially less than current area prices. Fairborne's current land base in the Greater Harlech area now totals 124,800 net acres (195 net sections).

Greater Harlech Area - Cardium

During the first quarter of 2011, Fairborne recompleted a number of vertical wells on the southern portion of the Greater Harlech area in the Cardium Formation to test for flow capability as well as liquids yield.

Based on the encouraging vertical well results, the Company commenced drilling a horizontal Cardium well at Harlech located at 2-15-44-15W5 (the "2-15 horizontal well") in October 2011. The well reached a measured depth of 3,955 metres and was completed with a 10 stage, 30 tonne per stage fracture treatment. This well is currently being tied in and is expected to commence production in early December at an initial rate of 400 boe/d. With anticipated netbacks in excess of $34 per boe (strip pricing), on-stream costs of less than $15,000 per flowing boe, simple payout is expected in approximately one year.

The Company anticipates that, like the Wilrich at Marlboro, continued refinement of fracture stimulation treatments and completion fluids will result in enhanced flow results. Drilling and completion costs are also expected to decline as more Cardium wells are drilled. Plans for the first quarter of 2012 include the drilling of another Cardium horizontal well to continue to de-risk this condensate rich resource play.

Greater Harlech Area - Multizone Vertical

Fairborne has also drilled a vertical well on the north end of the property located at 16-36-45-18W5 (the "16-36 vertical well") with a total depth of 3,900 metres. The 16-36 vertical well is located approximately 20 miles north west of the 2-15 horizontal Cardium well.

The Company is pleased to report flow rates from the 16-36 vertical well of 1.1 mmcf/d, which is similar to average rates in over 40 vertical multizone wells along trend.

Positive flow results were achieved from the Cardium, Falher and Wilrich. Of particular significance is the flow rate achieved in the Cardium, confirming significant potential for this condensate rich gas reservoir over a trend that extends for 25 miles.

Strategic Land Deal

In order to increase exposure to the three prolific reservoirs (Cardium, Wilrich and Falher) encountered and tested in the 16-36 vertical well, Fairborne has entered into a strategic joint venture land and drilling agreement with an industry leading, intermediate sized, deep basin focused producer. This strategic arrangement increases Fairborne's land exposure from 31 sections to 59 (21 net) sections in the area around the 16-36 vertical well and extending to the northwest. The strategic joint venture also secures Fairborne's participation at 33.3% working interest in an Area of Mutual Interest (AMI) covering approximately six townships (216 sections) of highly prospective land in the core liquids rich deep basin fairway.

Fairborne and its joint venture partner participated jointly in the November 16th landsale and successfully purchased 22 gross (7.3 net) sections of land highly prospective for the Wilrich, Falher and Cardium bringing Fairborne's land position in the joint venture area to 81 gross (28.3 net) sections.

This successful purchase brings Fairborne's total exposure to the Cardium play to 170 gross (102 net) sections and in the Wilrich play to 99 gross (43 net) sections and gives Fairborne an inventory of in excess of 200 net Cardium and 86 net Wilrich and Falher locations to pursue.

Marlboro Area - Wilrich Development and Bluesky Success

Fairborne drilled the first horizontal Wilrich well in western Canada in March of 2009 and, since then has successfully drilled and completed a total of 18 wells (13.3 net) in the Marlboro/Pine Creek area of the deep basin.

The owned and operated Marlboro gas plant, built to handle Fairborne's growing Wilrich volumes, commenced operations in May 2011 and is currently processing gross volumes of 51 mmcf/d (39 mmcf/d net). The expansion of this facility to 60 million cubic feet per day is currently underway and is expected to be operational in late January 2012.

Fairborne's net production in the Company operated Marlboro area has grown from 1,700 boe/d in January, 2010 to current production in excess of 7,100 boe per day, made up of 41 million cubic feet per day plus liquids (approximately 10 barrels per million cubic feet), an increase of 320 percent net of declines. Marlboro makes up approximately 44% of Fairborne's total corporate production and at current strip pricing, generates an operating netback of approximately $19 per boe.

Of note, Fairborne's horizontal Wilrich well with the longest production history (the very first industry horizontal Wilrich well drilled) has been producing for 2.5 years and is still producing at a rate of 1.5 million cubic feet per day having produced a cumulative 1.7 Bcf of gas and 17,000 bbls of liquids to date.

The Marlboro/Pine Creek area has also seen significant industry activity targeting the Notikewin and Bluesky formations with horizontal wells. Fairborne has mapped both these plays on its existing land base and has an inventory of 19 Notikewin and 20 Bluesky locations. Fairborne's first Bluesky well has been successfully drilled with a horizontal length of 1,210 metres and is currently awaiting completion operations (FEL WI 83%).

Production

With the successful completion and tie in of the Company's most recent horizontal Wilrich well plus one vertical well at Harlech recently completed and tied in, current production is estimated to be 16,000 boe/d. Fairborne has two horizontal wells and one vertical well remaining to be tied in prior to year end and remains on track to achieve its 2011 production exit rate guidance of 16,500 boe/d.

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 results, operations, production estimates including 2011 year end guidance, drilling plans, estimated payout of Cardium wells and netbacks, plans for expansion at the Marlboro gas facility, the timing thereof and its capacity and effect and repayment of outstanding debentures . 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 there from. 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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