Fairmount Energy Inc.
TSX VENTURE : FMT

Fairmount Energy Inc.

June 11, 2009 17:46 ET

Fairmount Announces NI 51-101 Oil and Gas Reserves

CALGARY, ALBERTA--(Marketwire - June 11, 2009) - Fairmount Energy Inc. ("Fairmount" or the "Company") (TSX VENTURE:FMT) is pleased to announce Fairmount's oil and natural gas reserves as determined by GLJ Petroleum Consultants Ltd. ("GLJ") as at March 31, 2009. Fairmount has received its updated independent reserve evaluation report, compliant with National Instrument 51-101 ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH") from GLJ. Under NI 51-101 and COGEH, Proved reserve assignments are based on a 90 percent probability that total quantities actually recovered will equal or exceed Proved reserve estimates. Proved plus Probable reserves are the most likely case and are based on a 50 percent probability that the quantities actually recovered will equal or exceed the sum of Proved plus Probable reserve estimates. The reserves committee of Fairmount's board of directors, which is made up of independent directors, met with GLJ representatives and has reviewed the independent evaluator's reserves report. Summary information is presented below. Additional disclosure, in accordance with NI 51-101, will be provided in the company's NI 51-101 filings at a later date.

Certain information contained in this press release, including reserve estimations and related future net revenues, constitute forward looking information which are subject to risks and uncertainties. See "Forward – Looking Information".

Highlights

  • Before tax present value of Gross Proved plus Probable reserves discounted at 10% at March 31, 2009 was $27,116,000.
  • Gross Proved plus Probable reserves were 1,596,000 boe at March 31, 2009.
  • Before tax present value of Gross Proved reserves discounted at 10% was $15,272,000 at March 31, 2009.
  • Gross Proved reserves were 872,000 boe at March 31, 2009.
  • During the year ended March 31, 2009, Fairmount disposed of 939,000 Gross Proved plus Probable boe through the sale of it's interests in the Harmattan and Crossfield properties for aggregate gross proceeds of $14.25 million before closing adjustments.

As at March 31, 2009, Fairmount had 16,339,889 common shares outstanding and a working capital deficiency, including bank debt, of approximately $7.0 million. Fairmount currently has bank facilities providing for total borrowings of up to $11 million.

Reserves

The following information is extracted from the reserve report prepared for the Company by its independent reservoir evaluators, GLJ, as at March 31, 2009.

Net Present Value of Reserves (Before Tax) as at March 31, 2009 (1)

($ thousands) Undiscounted PV 5% PV 10% PV 12%
Proved Producing 17,304 14,281 12,138 11,451
Proved Non Producing 2,671 2,227 1,897 1,788
Proved Undeveloped 1,721 1,448 1,237 1,167
Total Proved 21,696 17,955 15,272 14,406
Total Probable 21,763 15,617 11,844 10,735
Total Proved & Probable 43,459 33,572 27,116 25,141

Net Present Value of Reserves After Tax as at March 31, 2009 (1)

($ thousands)

Undiscounted PV 5% PV 10% PV 12%
Total Proved 21,696 17,955 15,272 14,406
Total Probable 19,989 14,421 11,012 10,009
Total Proved & Probable 41,685 32,376 26,284 24,415

Reserves Summary as at March 31, 2009

  Light/
Medium
Oil
Gross
(mbbls)
Light/
Medium
Oil
Net
(mbbls)
Natural
Gas
Gross
(mmcf)
Natural
Gas Net
(mmcf)
NGLs
Gross
(mbbls)
NGLs
Net
(mbbls)
Total
Gross
(mboe)
Total
Net
(mboe)
Proved Producing 1.4 1.4 2,619 2,010 268 184 706 520
Proved Non Producing - - 337 290 38 28 94 76
Proved Undeveloped - - 252 214 30 24 72 60
Total Proved 1.4 1.4 3,209 2,515 336 236 872 656
Total Probable 0.8 0.8 2,522 2,013 303 219 724 555
Total Proved & Probable 2.2 2.1 5,730 4,528 639 455 1,596 1,212

Gross reserves are the total of the Company's working interest (operated or non-operated) share before deduction of royalties and without including any royalty interests of the Company. Net reserves are gross reserves net of royalty interests owned by others, plus the Company's royalty interests in reserves (if any).

Per barrel of oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil (6:1). Barrel of oil equivalents ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: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.

  1. Estimated values disclosed do not represent fair market value. The reserve values are based on the table of prices below. Prices at each property were adjusted for quality, heating content and transportation. Oil prices are the equivalent price of sweet light crude landed in Edmonton to that of West Texas Intermediate crude (WTI) in Cushing, Oklahoma after adjustments for transportation and the prevailing Canadian dollar exchange rate. Gas prices are based on the type of contract applicable.

Price and Exchange Rate Forecast

  $US/$CDN Exchange Rate Oil
($Cdn/bbl)
Gas (AECO-C)
($Cdn/mmbtu)
Ethane
($Cdn/bbl)
Pentanes +
($Cdn/bbl)
Propane
($Cdn/bbl)
Butane
($Cdn/bbl)
2009 – 9 mo. 0.810 66.79 4.73 16.46 68.13 42.08 52.10
2010 0.830 73.61 6.70 23.31 75.09 46.38 57.42
2011 0.850 81.29 7.47 25.99 82.92 51.22 63.41
2012 0.885 85.99 7.73 26.89 87.71 54.17 67.07
2013 0.925 90.92 7.92 27.56 92.74 57.28 70.92
2014 0.950 97.84 8.23 28.64 99.80 61.64 76.32
2015 0.950 99.82 8.50 29.58 101.81 62.89 77.86
2016 0.950 101.83 8.69 30.23 103.87 64.15 79.43
2017 0.950 103.89 8.88 30.90 105.97 65.45 81.03
2018 0.950 105.99 9.07 31.58 108.10 66.77 82.67
2019+ 0.950 +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr +2.0%/yr

Forward-Looking Information

This news release contains forward-looking information, including but not limited to estimated reserves and future net revenues which have been independently evaluated by GLJ. Information relating to reserves and related future net revenue are forward-looking information as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Additionally, estimates of future net value involve assumptions relating to production rates, production decline rates, ultimate recovery of reserves, commodity prices and exchange rates, operating costs, capital expenditures and well abandonment costs. This information relates to future events or the Company's future performance. All information other than statements of historical fact is forward-looking information. In some cases, forward-looking information can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. Forward looking information relating to reserves and future net revenue are estimates only. Actual reserves and future net revenues will differ from those estimated by GLJ and such differences may be material. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Forward-looking information is based on assumptions, including, among other things, the Company's ability to benefit from the combination of growth opportunities and the ability to grow through the capital markets; the Company's acquisition strategy, the criteria to be considered in connection therewith and the benefits to be derived therefrom; sustainability and growth of production and reserves through prudent management and acquisitions; the emergence of accretive growth opportunities; the impact of Canadian governmental regulation on the Company; the strategy of the Company regarding commodity price risk management, changes in oil and natural gas prices and the impact of such changes on financial performance; the level of capital expenditures devoted to development activity rather than exploration; the use of development activity and/or acquisitions to replace and add to reserves; the quantity of oil and natural gas reserves and oil and natural gas production levels; and currency, exchange and interest rates.

Although the Company believes that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. The Company can not guarantee future results, levels of activity, performance, or achievements. Some of the risks and other factors, some of which are beyond the Company's control, which could cause results to differ materially from those expressed in the forward-looking information contained in this news release include, but are not limited to, general economic conditions in Canada, the United States and globally; industry conditions, including fluctuations in the price of crude oil, natural gas and natural gas liquids and services used by the Company; uncertainties associated with estimating reserves; royalties payable in respect of oil and gas production; governmental regulation of the oil and gas industry, including income tax and environmental regulation; fluctuation in foreign exchange or interest rates; stock market volatility and market valuations; the impact of environmental events; the need to obtain required approvals from regulatory authorities; unanticipated operating events which can reduce production or cause production to be shut-in or delayed; failure to obtain industry partner and other third party consents and approvals, when required; and third party performance of obligations under contractual arrangements. Subject to the company's obligations under applicable securities laws, the Company is not under any duty to update any of the forward-looking information after the date of this news release to conform such information to actual results or to changes in the Company's expectations.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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