FairWest Energy Corporation
TSX : FEC

FairWest Energy Corporation

November 14, 2006 15:16 ET

FairWest Energy Corporation Announces Financial and Operating Results for Third Quarter 2006

CALGARY, ALBERTA--(CCNMatthews - Nov. 14, 2006) - FairWest Energy Corporation (TSX:FEC) ("FairWest") is pleased to provide financial and operating results for the third quarter of 2006. To date, FairWest has expended $5.7 million of its total $9.7 million budget for 2006. During the quarter, FairWest spent $4.3 million primarily on undeveloped land, 3D seismic, and drilling and completion costs. An additional $4.0 million will be spent in the fourth quarter on property acquisitions, drilling, completions, wellsite equipment and gathering system costs.

Completed capital expenditures will directly impact production for FairWest in December 2006 and the first quarter of 2007. FairWest expects to exit 2006 at 600 barrels of oil equivalent (boe/d) and average 270 boe/d of production during 2006. FairWest's property acquisition, production optimization, drilling and tie-in plans are likely to result in 1,000 boe/d of production by March 31, 2007. During the third quarter, FairWest averaged 259 boe/d of production.

A summary of operational and financial highlights follows:



March June September September
Highlights of 31, 2006 30, 2006 30, 2006 30, 2006
Operations, 2006 (3 Months) (3 Months) (3 Months) (9 Months)
----------------------------------------------------
Natural gas
Natural gas sales ($) 824,820 798,609 684,720 2,308,149
Volume - mcf 104,369 124,906 117,637 346,912
Volume - mcf/day 1,160 1,373 1,279 1,271
$/mcf 7.90 6.39 5.82 6.65
Oil and NGLs
Oil and NGL sales ($) 287,424 339,172 279,390 905,986
Volume - bbl 5,134 5,050 4,261 14,445
Volume - bbl/day 57 55 46 53
$/bbl 55.98 67.16 65.57 62.72
Barrel of oil equivalent
Total sales ($) 1,112,244 1,137,781 964,110 3,214,135
Volume - boe 22,529 25,868 23,867 72,264
Volume - boe/day 250 284 259 265
$/boe 49.37 43.98 40.40 44.48


March June September September
Financial Highlights, 31, 2006 30, 2006 30, 2006 30, 2006
2006 (3 Months) (3 Months) (3 Months) (9 Months)
----------------------------------------------------
$ $ $ $
Revenue
Petroleum and
natural gas sales,
net of royalties 802,586 1,122,561 1,236,102 3,161,249
Other income 347,894 - - 347,894
----------------------------------------------------
Total revenue 1,150,480 1,122,561 1,236,102 3,509,143
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Expenses
Depletion,
depreciation and
amortization 722,127 697,487 714,978 2,134,592
Operating costs 315,547 473,522 487,706 1,276,775
Interest and bank
charges 39,538 69,422 76,230 185,190
General and
administrative
expense 317,326 281,771 161,415 760,512
Part XII.6 tax 32,421 43,814 1,281 77,516
Future income tax
(recovery) (1,866,461) - 75,027 (1,791,434)
----------------------------------------------------
Total expenses (439,502) 1,566,016 1,516,637 2,643,151
----------------------------------------------------
Net income (loss) 1,589,982 (443,455) (280,535) 865,992
----------------------------------------------------
----------------------------------------------------
Funds flow from
operations 97,754 326,370 623,888 1,048,011
----------------------------------------------------
----------------------------------------------------
Capital expenditures 465,684 895,911 4,339,276 5,700,871
----------------------------------------------------
----------------------------------------------------
Basic earnings (loss)
per share $ 0.029 $ (0.008) ($0.004) $ 0.014
----------------------------------------------------
----------------------------------------------------
Diluted earnings
(loss) per share $ 0.029 $ (0.008) ($0.005) $ 0.016
----------------------------------------------------
----------------------------------------------------
Share Data:
Common shares
outstanding 53,848,687 55,256,144 60,962,044 60,962,044
Warrants 3,000,000 3,000,000 3,000,000 3,000,000
Options 374,116 4,674,116 5,899,116 5,899,116


Undeveloped Lands

At September 30, 2006 FairWest held working interests in 44,047 gross acres (18,526 net acres) of undeveloped land in FairWest's core operating areas. During the quarter, FairWest acquired undeveloped land at Antelope and Provost for $877,187.

Antelope, Alberta

FairWest has drilled 10 wells since starting work in this area. All 10 have been cased and nine have been completed for production. FairWest will operate all these wells. The Company also is constructing a 12 mile gathering system in Antelope, which will be completed in December 2006. Initial gross gas production is estimated to be 4.6 million (1.73 million net) cubic feet per day (mmscf/day).

During August, FairWest completed a 3D seismic program over six sections of land. Based on seismic results, geology and prior drilling success, FairWest acquired 4.25 sections of land and plans to drill five additional wells commencing in November. FairWest expects to have these new wells tied into its gathering system in the first quarter of 2007.

Berry Creek, Alberta

Effective October 1, 2006, FairWest paid $630,000 to acquire a 100 percent interest in a gathering and gas processing facility at Berry Creek for $630,000 (the "Berry Creek Gas Plant"). FairWest became operator of the Berry Creek Gas Plant and the contract operator of 30 wells that are tied into the facilities. The Berry Creek Gas Plant currently has throughput of two mmscf/d and which can be increased to eight mmscf/d with a minor modification.

FairWest is currently evaluating the ongoing potential of the 30 wells tied into this plant. An increase in production from these wells would imply additional processing fees for FairWest.

FairWest has drilled five channel wells in Berry Creek, three of which were operated by FairWest. Two of these wells will be tied into the Berry Creek Plant during November and the third well has been fracture stimulated and tested. FairWest will evaluate the economics of this discovery and review exploitation opportunities for this system on company lands. These lands have been evaluated with 3D seismic. The other two wells have been perforated and equipped with tubing. FairWest is planning to drill two more wells in this area during December.

Provost, Alberta

Drilling in Provost has been postponed to June 2007. The 3D seismic programs completed last year have not identified drilling targets in the same manner as Antelope and Berry Creek. The seismic has, however, yielded valuable structural data. This data in conjunction with detailed geologic and engineering work will identify drilling prospects. FairWest has focused on upgrading production facilities, production optimization and operatorship.

To date, FairWest continues its optimization program at Provost. FairWest has now equipped seven Viking wells with new pumping and tank facilities to maximize production. The Company has designed and has installed an innovative, and cost-effective hydraulic pump jack on each well. The cost savings associated with these units considerably improve the economics of this Viking resource play. To date, our experience shows incremental production is being brought to market for a capital cost of only $7,500 per BOE.

Production optimization is part of an on-going exploration and production strategy that is managed in the field by our production superintendent and our field operators. Our efforts to optimize production have been further enhanced with the replacement of third party service providers by our own field operator.

Burstall, Saskatchewan

We believe that gross gas-in-place on company lands exceeds 100 billion cubic feet (BCF). Conventional production enhancement techniques would likely result in a recovery factor of less than 15 percent. However, FairWest has been conducting field testing of production equipment specifically designed to deal with some of the local challenges to production. This technology has proven to be effective on three wells and is scheduled to be installed on three additional wells in December 2006.

Normal Course Issuer Bid

Effective September 1, 2006, the Toronto Stock Exchange accepted FairWest's Notice to Make a Normal Course Issuer Bid (the "Bid") to purchase up to 4,553,600 common shares on the open market through the facilities of the Toronto Stock Exchange. The price that FairWest will pay for any shares purchased will be the prevailing market price of such shares on the Toronto Stock Exchange at the time of such purchase. Common Shares acquired under the Bid will be cancelled. The Bid commenced September 1, 2006 and will terminate August 31, 2007 or such earlier time as the Bid is completed or terminated at the option of FairWest. As of November 13, 2006 FairWest acquired 128,500 common shares for $59,760.

The management and directors of FairWest believe that the acquisition of common shares will increase the proportionate interest of, and be advantageous to, all remaining shareholders. In addition, the purchases by FairWest may increase liquidity on the stock.

Outlook

FairWest participated at the Small Explorers and Producers Association of Canada ('SEPAC") investment symposium on November 8 (Calgary) and will be participating on November 15 (Toronto). A webcast of FairWest's live presentation is available on FairWest's website at www.fairwestenergy.com.

During FairWest's presentation, FairWest provided a revised exit production rate of 600 boe/d for 2006 and a revised estimate of average production for 2006 of 270 boe/d. The revised 2006 estimates of average production and 2006 exit rate are not the result of any material change in FairWest's activities. The previously announced production rate of 1,000 boe/d is likely to be achieved during the 1st quarter of 2007.

Contact Information

  • FairWest Energy Corporation
    James G. Gettis
    President and Chief Executive Officer
    (403) 264-4949
    (403) 269-1761 (FAX)
    or
    FairWest Energy Corporation
    Marion D. Mackie
    Chief Financial Officer
    (403) 264-4949
    (403) 269-1761 (FAX)
    Website: www.fairwestenergy.com