FairWest Energy Corporation
TSX : FEC

FairWest Energy Corporation

August 14, 2006 15:44 ET

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

CALGARY, ALBERTA--(CCNMatthews - Aug. 14, 2006) - FairWest Energy Corporation ("FairWest") (TSX:FEC) is pleased to announce operating and financial results for the second quarter of 2006. FairWest's planned drilling program commenced in May 2006. To date, the Company has drilled 8 exploratory and 5 development wells, resulting in 10 natural gas wells. Production testing and analogs for the 10 wells drilled and completed to date will add approximately 2,150 mmcf per day of natural gas (360 barrels of oil equivalent) to the Company's production by the end of October 2006.

FairWest's business strategy is to execute the drilling, completion and facilitation components of its business plan following breakup to freeze up. This gives the Company capital cost advantages in its core operating areas. During the winter months, the Company carries on its business development activities in preparation for the next drilling season.



A summary of operational highlights follows:

March 31, June 30, June 30,
2006 2006 2006
Highlights of Operations, 2006 (3 Months) (3 Months) (6 Months)
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Natural gas
Natural gas sales ($) 824,820 798,609 1,623,429
Volume - mcf 104,369 124,906 229,275
Volume - mcf/day 1,160 1,373 1,267
$/mcf 7.90 6.39 7.08
Oil and NGLs
Oil and NGL sales ($) 287,424 339,172 626,596
Volume - bbl 5,134 5,050 10,184
Volume - bbl/day 57 55 56
$/bbl 55.98 67.16 61.53
Barrel of oil equivalent
Total sales ($) 1,112,244 1,137,781 2,250,025
Volume - boe 22,529 25,868 48,397
Volume - boe/day 250 284 267
$/boe 49.37 43.98 46.49


Financial Results

During the quarter, petroleum and natural gas sales increased 39% to $1,122,561 compared to $802,586 in the first quarter. Average production increased 14% to 284 BOE/D of oil and gas production compared to 250 BOE/D in the first quarter. Additional production volumes will be reported in the fourth quarter as wells drilled, completed, and optimized during the balance of the year are tied in to facilities for delivery to the market place.

Natural gas prices decreased in the three months ended June 30, 2006 from those realized in the three-month period ended December 31, 2005 and March 31, 2006. Management expects that natural gas and oil prices will be higher for the fourth quarter of 2006 and the first quarter of 2007. FairWest is reviewing the opportunity to hedge up to 40% of its anticipated natural gas production. The exact manner, volume and term are a function of available market conditions.

FairWest has a $5.9 million revolving non-reducing demand loan with the National Bank of Canada. Credit Facility A has an interest rate of prime plus 0.75%. Management intends to ask the National Bank to increase FairWest's credit facilities based on the results of its drilling and optimization programs. In July 2005 the National Bank provided FairWest with a Credit Facility B acquisition loan of $2.0 million. Credit Facility B has an interest rate of prime plus 1.00% . FairWest has not drawn down on this credit facility but intends to use this facility to finance the acquisition of the Berry Creek gas plant and gas gathering system.

During the quarter, FairWest raised $844,474 by way of a private placement offering of flow through common shares at $0.60 per share. In total, FairWest has raised $1,880,000 during 2006 to be expended on our exploratory and development drilling. The Company intends to seek approval to raise a further $3,000,000 of equity of which $2,000,000 will be flow through financing.



A historical summary of financial highlights follows:

March 31, June 30, June 30,
2006 2006 2006
Financial Highlights, 2006 (3 Months) (3 Months) (6 Months)
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$ $ $
Revenue
Petroleum and natural gas
sales, net of royalties 802,586 1,122,561 1,925,147
Other income 347,894 - 347,894
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Total revenue 1,150,480 1,122,561 2,273,041
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Expenses
Depletion, depreciation and
amortization 722,127 697,487 1,419,614
Operating costs 315,547 473,522 789,069
Interest and bank charges 39,538 69,422 108,960
General and administrative
expense 317,326 281,771 599,097
Part XII.6 tax 32,421 43,814 76,235
Future income tax (recovery) (1,866,461) - (1,866,461)
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Total expenses (439,502) 1,566,016 1,126,514
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Net income (loss) 1,589,982 (443,455) 1,146,527
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Funds flow from operations 97,754 326,370 424,124
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Capital expenditures 465,684 895,911 1,361,595
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Basic earnings (loss) per
share $ 0.029 $ (0.008) $ 0.021
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Diluted earnings (loss) per
share $ 0.029 $ (0.008) $ 0.021
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Share Data: Common shares
outstanding 53,848,687 55,256,144 55,256,144
Warrants 3,000,000 3,000,000 3,000,000
Options 374,116 4,674,116 4,674,116


Outlook

The Board of Directors has approved a 2006 capital budget of $8.79 million. The budget will be financed from cash flow from operations, bank financing, an equity offering and sales of non-core properties. The capital budget has been increased to drill and tie in up to 28 wells (11.4 net wells) in FairWest's core areas.

Based on the Company's current production, expected results from its production optimization program and its capital program the Company is forecasting that production will average between 409 to 448 BOE/D for the year. Based on the same criteria, FairWest's plan is to exit December 31, 2006 at 1,000 BOE/D. Drilling and completion results and matters that are beyond our control will affect these estimates.

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

Contact Information

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