FairWest Energy Corporation
TSX VENTURE : FEC

FairWest Energy Corporation

December 31, 2010 13:43 ET

FairWest Energy Closes Private Placement, Reduces Short Term Debt and Seeks Approvals to Extend Terms on Debentures and Preferred Shares

CALGARY, ALBERTA--(Marketwire - Dec. 31, 2010) - FairWest Energy Corporation ("FairWest" or the "Company") (TSX VENTURE:FEC) announces that it closed its previously announced private placement offering of flow- through common shares on December 30, 2010. In the private placement, the Company raised aggregate proceeds of $1,337,300 through the issuance of 19,104,288 flow-through common shares at $0.07 per share. Insiders acquired 38% of the private placement. The common shares have been issued with a four month hold period pursuant to securities rules. The Company paid finders' fees of up to 10% to eligible dealers on a portion of the subscription amounts. The proceeds will be expended during 2010 and 2011 on exploration projects designed to increase production from FairWest's lands.

Effective December 30, 2010, FairWest repaid a $1.65 million short term demand promissory note (the "Note"), together with $0.15 million accrued interest. In order to repay the Note and accrued interest, FairWest collected $1.3 million of receivables from a related limited partnership and used working capital for the remaining $0.50 million. The proceeds from the Note were used in July 2010 to repay FairWest's bank debt to its previous lender.

In addition, the Company announces it is seeking approval to extend the terms of its Series 1 Debentures, Series 2 Debentures and Series 1 Preferred Shares. This initiative is a continuation of FairWest's plan to structure its financial affairs during this period of reduced natural gas prices to provide capital for growing FairWest production, reserves and cash flow. The Company's efforts during 2010 resulted in a strong working relationship with a new primary lender, a stronger balance sheet and an exciting prospect inventory of drilling and optimization projects on Company lands. The Company commenced a drilling program during the fourth quarter of 2010 after a lengthy suspension of these activities. Further information on the results of the drilling program is expected by mid-January 2011, following the completion of the Company's first horizontal liquids rich gas well cased on December 11, 2010, at Berry Creek Alberta.

Series 1 and Series 2 Debentures

The Company received approval from all of the Series 1 Debenture holders to extend the maturity date of $1,750,000 Series 1 Debentures from October 31, 2011 to December 31, 2012. In consultation with Olympia Trust Company, the Trustee of the Series 2 Debentures, the Company is seeking approval from Series 2 Debenture holders to approve an extension of $5,500,000 Series 2 Debentures from March 31, 2012 to December 31, 2012.

Series 1 Preferred Shares

Subject to regulatory and TSX Venture Exchange ("TSXV") approval and the consent of Series 1 Preferred Shareholders, the Company is proposing to amend the redemption date, retraction date and conversion price of the Preferred Shares. Each Preferred Share is currently convertible into 33.33 FairWest common shares and in the event that FairWest common shares trade at or above $0.30 per share for 10 consecutive days, the Company may convert all of the outstanding Preferred Shares into common shares. FairWest is proposing that each Preferred Share be convertible into 66.66 FairWest common shares and in the event that FairWest common shares trade at or above $0.15 per share for 10 consecutive days, the Company may convert all of the outstanding Preferred Shares into common shares. FairWest is also proposing that the redemption notice period be extended to July 1, 2012, and the retraction period be extended to December 31, 2012. The redemption right allows the Company to require the holders of the Preferred Shares to redeem all or part of the Preferred Shares. The retraction obligation allows the holders of the Preferred Shares to require the Company to redeem all or part of the Preferred Shares.

About FairWest Energy

FairWest (TSX VENTURE:FEC) is a Calgary, Alberta based junior oil and gas company engaged in the acquisition, exploration, development and production of crude oil, natural gas and natural gas liquids in the provinces of Alberta and Saskatchewan.

READER ADVISORY

This news release may contain certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances 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, including the amount of proceeds, that the Company will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

192,301,620 Common Shares Issued

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • FairWest Energy Corporation
    Vern Fauth
    Chief Executive Officer
    (403) 264-4949
    (403) 269-1761 (FAX)
    vfauth@fairwestenergy.com
    or
    FairWest Energy Corporation
    Douglas O. McNichol
    President and Chief Operating Officer
    (403) 264-4949
    (403) 269-1761 (FAX)
    dmcnichol@fairwestenergy.com
    or
    FairWest Energy Corporation
    Marion D. Mackie
    Chief Financial Officer
    (403) 264-4949
    (403) 269-1761 (FAX)
    mmackie@fairwestenergy.com