Fairborne Energy Ltd.

Fairborne Energy Ltd.

May 31, 2012 17:01 ET

Fairborne Energy Provides Update on Asset Sales and Operations

CALGARY, ALBERTA--(Marketwire - May 31, 2012) - Fairborne Energy Ltd. (TSX:FEL) ("Fairborne" or the "Company") provides the following update.

Asset Sales

During the second quarter Fairborne executed and closed on a non-core asset divestiture of 85 barrels per day of oil production in central Saskatchewan for proceeds of $11 million subject to closing adjustments.

On January 31, 2012 Fairborne announced that it had entered into an agreement for the sale of its Clive oil interests, subject to the purchaser obtaining the required financing, for proceeds on closing of $37.5 million and with a further $10 million payable upon certain conditions being met with regards to the CO2 project. The Company has been notified that the purchaser of the Clive assets was unsuccessful in obtaining the required financing for the purchase at the current time.

The Clive oil field (Fairborne working interest of 96%) has produced approximately 65 million barrels of oil to date and has remaining Proven plus Probable reserves of 0.8 million barrels of 38 degree API oil. To date there have been no Proven or Probable reserves assigned to the CO2 project as implementation has yet to commence. The project to CO2 flood the Clive field has a goal (based on internal estimates and detailed reservoir modeling) of increasing the field recovery factor from its current estimate of 42 percent to 57 percent.

Fairborne remains committed to this innovative and economic project and will evaluate its options to advance the project in the coming months.

Marlboro Area - Wilrich Update

The Wilirch play continues to deliver results at or above the Company's type curve with our latest downspace development well, which represents the third section to be downspaced to two wells per section, having a 30 day average initial production rate of 4.0 mmcf/d.

The Marlboro gas plant continues to perform as designed and has resulted in Fairborne's current operating costs at Marlboro falling to approximately $3.50 per boe. Fairborne has one (0.7 net) well at Marlboro that was drilled prior to spring break-up with completion operations scheduled to commence in late June.

For the remainder of the year the Company plans to drill two (1.5 net) Wilrich horizontals at Marlboro.

Greater Harlech Area - Cardium

During the first quarter of 2011 Fairborne drilled a horizontal Cardium well at Harlech located at 11-21-44-15W5 (the "11-21 horizontal well"). This well was tied-in and commenced production in March, 2012. To date the well has produced 290 million cubic feet of gas and 14,000 barrels of natural gas liquids of which 67 percent is condensate for a total liquids ratio of 50 barrels per million cubic feet. It should be noted that the liquids yield has remained constant since the well commenced production.

Fairborne's Cardium land base is approximately 65,000 net acres (102 net sections). As previously released the Company received a resource study prepared by GLJ Petroleum Consultants Ltd ("GLJ") which confirmed the Company's view of the potential of the Cardium play with a most likely case Economic Contingent Resource of 132 mmboe net to Fairborne's working interest. Please refer to Fairborne's press release of May 2, 2012 which provides detailed information on GLJ's resource study, the low, best and high case estimates of the resources, the contingencies and risk factors related thereto and the definitions utilized.

For the remainder of the year the Company plans to drill two (1.1 net) Cardium horizontal wells in the greater Harlech area.

Financial Position

Fairborne recently announced a credit facility of $220 million and does not anticipate any changes to that level. Current net debt is approximately $185 million and the Company anticipates that it will exit the second quarter of 2012 with net debt of $180 million.

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, field recovery factor after implementation of water flood and timing of completion operations and estimated net debt at the end of the second quarter of 2012 including drilling plans. 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. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of the 6:1 conversion ratio, utilizing the 6:1 conversion ratio may be misleading as an indication of value.


Reserve disclosure herein is based on the reserve evaluation prepared by GLJ effective December 31, 2011. The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.

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