Fortress Energy Inc.

Fortress Energy Inc.

May 28, 2012 18:03 ET

Fortress Energy Announces First Quarter 2012 Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - May 28, 2012) -

THIS NEWS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR TO ANY UNITED STATES NEWS SERVICES.

Fortress Energy Inc. ("Fortress" or the "Company") (TSX:FEI) today announces its financial and operating results for the three months ended March 31, 2012. The Company's financial statements, management's discussion and analysis and notes to the financial statements for the three months ended March 31, 2012 are available on the Company's website (www.fortressenergy.ca) or SEDAR (www.sedar.com).

Financial and Operating Summary
Three months ended March 31 ,
($000's except per share amounts) 2012 2011
Financial
Natural gas sales 258 78
Funds from (used in) operations (1) (1,003 ) (671 )
Per share - basic (0.02 ) (0.01 )
Per share - diluted (0.02 ) (0.01 )
Net loss (1,579 ) (1,185 )
Per share - basic (0.03 ) (0.02 )
Per share - diluted (0.03 ) (0.02 )
Working capital (deficiency) (1) (3,585 ) 4,166
Operations
Average production:
Natural gas (Mcf/d) 655 137
Natural gas liquids (bbl/d) 15 4
Total (Mcfe/d) 746 162
Average sales price:
Natural gas ($/Mcf) 2.41 3.90
Natural gas liquids ($/bbl) 82.43 78.08
Total ($/Mcfe) 3.80 5.32
Operating netback (1) ($/Mcfe) 1.21 1.49
(1) The terms "funds from operations", "operating netback" and "working capital" are not recognized measures under IFRS. Management believes that in addition to net income, funds from operations and operating netback are useful supplemental measures as they provide an indication of the results generated by the Company's principal business activities before the consideration of how those activities are financed. Investors are cautioned, however, that these measures should not be construed as alternatives to net income determined in accordance with IFRS. The Company's method of calculating funds from operations may differ from that of other companies, and, accordingly it may not be comparable to measures used by other companies. The Company calculates funds from operations by taking cash flow from operating activities as determined under IFRS before changes in non-cash operating working capital and abandonment expenditures. Operating netback is calculated on a per Mcfe basis taking petroleum and natural gas sales and deducting royalties, operating expenses and transportation expenses. Working capital is calculated as current assets less current liabilities.

CORPORATE HIGHLIGHTS

The following are the highlights to date:

On March 1, 2012, Fortress signed a formal purchase and sale agreement to acquire 100 percent of the shares of a Brazilian private oil and gas company for an acquisition price of up to US$37,000,000. The Company paid a deposit of US$1,000,000 (C$998,000) on signing of the purchase and sale agreement. The oil and gas interests to be acquired include a 100 percent working interest in 7 exploration blocks located in the Reconcavo Basin, covering an area of approximately 200 sq km and a 100 percent working interest in three onshore producing oil fields: Bom Lugar, located in the Reconcavo Basin, Jiribatuba, located in the Camamu Basin and Aracaju, located in the Sergipe Basin.

Closing of the acquisition is subject to receipt of all necessary regulatory approvals including the approval of ANP (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis) in Brazil to permit the Brazilian private company to complete a reorganization prior to the sale of the shares to Fortress, to permit Fortress to purchase and own the shares and to otherwise consummate the transaction. Closing is also subject to the satisfaction of the other conditions set out in the purchase and sale agreement.

To finance the acquisition, the Company entered into a letter of intent with a private equity syndicate to raise $55,000,000 to fund the acquisition price and a portion of the planned capital program. The Company expects to close this financing in June 2012, the funds of which will be held in trust pending the closing of the acquisition which is expected in July 2012. The Company had also entered into discussions with various investment banks to raise an additional $25,000,000 that will be directed to the capital program of the Brazilian business.

Natural Gas, Crude Oil and Natural Gas Liquids (NGL) Conversions

Certain crude oil and NGL volumes have been converted to cubic feet equivalent (cfe) on the basis of one barrel (bbl) to six thousand cubic feet (Mcf). Cfe may be misleading, particularly if used in isolation. A conversion ratio of one bbl to six Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent value equivalency at the well head.

Caution to Reader

This news release contains forward-looking information, including without limitation statements concerning the pending acquisition of the private Brazilian oil and gas company and the Company's ability to close the acquisition and complete the related financing, the ability to close the convertible debenture financing and continue as a going concern, reserves and net present values, natural gas prices, supply and demand. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable by Fortress at the time of preparation, may prove to be incorrect. The actual results achieved in future periods will vary from the information provided herein and the variations may be material. There are risks associated with the forward-looking statements including there can be no assurance that a suitable transaction will be identified. Consequently there is no representation by Fortress that it will complete a transaction or pursue any of the future courses of action or alternatives discussed herein.

The common shares of Fortress have not and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States or to any U.S. person except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. The common shares of Fortress have not and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold in the United States or to any U.S. person except in certain transactions exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.

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