Fairmount announces record quarterly cash flow and filing of quarterly financial statements



    
    /NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR FOR
    DISSEMINATION IN THE UNITED STATES OF AMERICA/
    

    CALGARY, Aug. 27 /CNW/ - Fairmount Energy Inc. ("Fairmount" or the
"Company") (TSX-V - FMT) is pleased to present a summary of its operating and
financial results for the three months ended June 30, 2008. For a complete
copy of Fairmount's quarterly financial statements and management's discussion
and analysis ("MD & A") please visit www.sedar.com. Certain information
contained in this news release, including reserves and present value of future
net revenues, development plans, drilling locations, anticipated production
from Gold Creek, and the sale of the Harmattan property, constitute
forward-looking information which are subject to risks and uncertainties. See
"Forward - Looking Information".

    
    Highlights:

    -   Cash flow for the quarter increased 76% to $683,357 as compared to
        $388,227 in the prior year period.

    -   Production for the three months ended June 30, 2008 was 404 boe/day
        in spite of reduced production due to plant turn-around operations at
        both Harmattan and Gold Creek.

    -   Subsequent to quarter end, Fairmount entered into agreements to sell
        approximately 210 boe per day of production at Crossfield and
        Harmattan for gross proceeds of $14.25 million.

    -   Excluding the Harmattan and Crossfield properties, Fairmount's
        productive capacity is currently estimated at 625 boe/day before the
        impact of our recent drilling program. However, production levels
        subsequent to June 30 have been impacted by the extended plant turn
        around and gathering and processing issues at Gold Creek. We
        anticipate Gold Creek production to be restored during September and
        at that time expect total corporate production to reach 675 boe/day
        following the tie in of the Thorsby well.

    -   Fairmount's five well (4.0 net) summer drilling program is underway
        with 2 wells (1.0 net) drilled and cased at Gold Creek, 2 wells
        (2.0 net) drilled and cased at Chin Coulee, and 1 well (1.0 net) at
        Thorsby planned for September. Completion programs are underway and
        the outcome of this program will direct the drilling for the balance
        of the year.


    Operations
    -------------------------------------------------------------------------

                                             Three Months Ended
                                 June       March      December   September
                                  30,         31,         31,         30,
                                 2008        2008        2007        2007
    -------------------------------------------------------------------------
    Wells drilled - gross              1           2           3           0
    -------------------------------------------------------------------------
    Wells drilled - net              0.5         1.0         1.8         0.0
    -------------------------------------------------------------------------
    Natural gas production
     - mcf/day                     1,412       1,439       1,307       1,333
    -------------------------------------------------------------------------
    Oil production bbl/day             7          12          13          19
    -------------------------------------------------------------------------
    NGL production bbl/day           162         162         138         116
    -------------------------------------------------------------------------
    Average daily production
     - boe/day                       404         414         369         357
    -------------------------------------------------------------------------
    Average selling price -
     natural gas $/mcf             $9.40       $7.94       $6.07       $5.17
    -------------------------------------------------------------------------
    Average selling price -
     oil $/bbl                   $123.35      $97.84      $86.70      $78.61
    -------------------------------------------------------------------------
    Average selling price -
     NGL's $/bbl                  $60.73      $52.91      $48.01      $40.26
    -------------------------------------------------------------------------
    Average selling price -
     $/boe                        $59.34      $51.16      $42.55      $36.51
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                             Three Months Ended
                                 June       March      December   September
                                  30,         31,         31,         30,
                                 2007        2007        2006        2006
    -------------------------------------------------------------------------
    Wells drilled - gross              1           3           6           5
    -------------------------------------------------------------------------
    Wells drilled - net              0.1         1.6         1.9         0.8
    -------------------------------------------------------------------------
    Natural gas production
     - mcf/day                     1,402       1,000         865         857
    -------------------------------------------------------------------------
    Oil production bbl/day            17          15          25          23
    -------------------------------------------------------------------------
    NGL production bbl/day           140         107         114          84
    -------------------------------------------------------------------------
    Average daily production
     - boe/day                       390         289         284         250
    -------------------------------------------------------------------------
    Average selling price -
     natural gas $/mcf             $7.06       $7.32       $6.85       $5.73
    -------------------------------------------------------------------------
    Average selling price -
     oil $/bbl                    $69.99      $66.68      $67.06      $78.64
    -------------------------------------------------------------------------
    Average selling price -
     NGL's $/bbl                  $41.99      $37.93      $32.86      $36.46
    -------------------------------------------------------------------------
    Average selling price -
     $/boe                        $43.41      $42.89      $40.09      $39.13
    -------------------------------------------------------------------------
    


    Gold Creek

    The Gold Creek area is located on the southern flank of the Peace River
Arch, near Grande Prairie, Alberta. Fairmount has working interests ranging
from 30% to 84% in 13.75 contiguous sections of land in the Gold Creek area.
Fairmount is the operator of all of its existing Gold Creek wells.
    Gold Creek contributed an average of 225 boe/day of production for the
three months ended June 30, 2008, up from 107 boe/day during the prior year
period. The BP South Wapiti plant which processes approximately 290 mmcf of
natural gas per day was shut down for a scheduled plant turn-around for what
was anticipated to be a three week period in the first week of June, 2008.
While the main plant came back up following the scheduled shut down, there
were several mechanical problems which delayed production coming on stream
from the portion of the gathering system to which our wells are connected. Due
to the lengthened shut down of the gathering system, some wells which have
priority in the gathering system experienced a large build up in pressure, and
have effectively squeezed us out of the gathering system until such time as
their flush production has blown down. As a result, Fairmount's production at
Gold Creek has been nominal through all of July and is expected to remain that
way until early September. Once this flush production from other wells has
decreased, we expect production from the area will be approximately
600 boe/day. Fairmount and partners own gathering and compression facilities
sufficient to process 12.5 mmcf/day of raw gas allowing capacity for future
wells in the Gold Creek area.
    Fairmount participated in the drilling of one well (0.5 net) at Gold
Creek during the quarter and one well (0.5 net) immediately following the
first well during July as part of our summer drilling program. Both wells have
been cased and are awaiting completion operations. The Company plans to drill
up to three more wells (1.3 net) at Gold Creek this year.
    Based on the results of the nine wells drilled to date on this property,
geologic mapping, and/or 3D seismic Fairmount has identified an additional 4
to 8 drilling locations on existing Company lands.

    Harmattan

    In total Fairmount has drilled 47 wells (3.8 net) at Harmattan as at
June 30, 2008 with the Company estimating 12 additional locations (1.5 net)
remain for future development drilling. Harmattan averaged 138 boe/day of
production during the quarter as compared to 208 boe/day during the same
period last year. Production in the current year quarter was hampered by
scheduled maintenance and plant turnaround at Harmattan during the quarter.
    Subsequent to quarter end, On August 18, 2008 the Company entered into a
letter of intent to sell its interests in the Harmattan area for $12,000,000
before closing adjustments with an effective date of August 1, 2008 and an
anticipated closing date of September 18. The Harmattan property was assigned
528,000 boe of proved reserves with a net present value before tax discounted
at 10% of $10,556,000 in the Company's NI 51-101 compliant independent
reservoir engineering report as at March 31, 2008. Additional information
regarding the Company's reserves can be found in the Company's NI 51-101 F1
Statement of Reserves Data and Other Oil and Gas Information as filed on Sedar
at www.sedar.com.

    Crossfield

    Fairmount has a land position of approximately 5 sections with an average
working interest of approximately 47.5% in the Crossfield area, northwest of
Calgary. Fairmount is the operator of the Crossfield property with 2 wells
(0.78 net). During the quarter, Crossfield contributed 20 boe/day of
production. Subsequent to quarter end, on August 14, 2008 the Company sold its
interest in the Crossfield area for $2,250,000 before closing adjustments. The
Crossfield property was assigned 117,000 boe of proved plus probable reserves
with a net present value before tax discounted at 10% of $1,842,000 in the
Company's NI 51-101 compliant independent reservoir engineering report as at
March 31, 2008.

    Thorsby

    The Thorsby property is located in west central Alberta, approximately
32 kilometres southwest of Edmonton. Fairmount drilled a successful
exploratory well in January 2008, and as a result earned a 100% working
interest in 2 sections of land, with drilling options on additional lands. The
well was completed in 3 zones and is expected to be placed on production
during September 2008. As part of our summer drilling program, Fairmount
intends to drill 1 well (1.0 net) at Thorsby in September 2008.

    Chin Coulee

    The Chin Coulee property is located in southern Alberta, approximately
50 kilometres east of Lethbridge. Subsequent to quarter end, Fairmount drilled
and cased two wells (2.0 net) on these lands in July.

    
    Financial Results and selected financial information

    -------------------------------------------------------------------------
                                             Three Months Ended
                                 June       March      December   September
    $ except number of shares     30,         31,         31,         30,
                                 2008        2008        2007        2007
    -------------------------------------------------------------------------
    Natural gas sales          1,207,795   1,039,287     729,918     633,856
    -------------------------------------------------------------------------
    Crude oil and natural
     gas liquids sales           974,173     888,314     714,465     565,123
    -------------------------------------------------------------------------
    Interest income                    -         111       3,511       3,840
    -------------------------------------------------------------------------
    Royalties                   (614,863)   (537,145)   (317,908)   (345,581)
    -------------------------------------------------------------------------
    Revenue                    1,419,772   1,351,713   1,142,088     865,907
    -------------------------------------------------------------------------
    Production expenses          340,903     328,057     288,903     315,449
    -------------------------------------------------------------------------
    General and administrative
     expenses                    359,315     303,737     247,875     344,248
    -------------------------------------------------------------------------
    Depletion, depreciation
     & accretion                 886,186     907,170     834,993     764,453
    -------------------------------------------------------------------------
    Interest expense             197,207     176,920     164,867     179,169
    -------------------------------------------------------------------------
    Net income (loss) before
     income taxes               (479,032)   (408,837)   (463,674)   (820,840)
    -------------------------------------------------------------------------
    Recovery of future
     income taxes                      -   1,402,166           -           -
    -------------------------------------------------------------------------
    Net income (loss)           (479,032)    993,329    (463,674)   (820,840)
    -------------------------------------------------------------------------
    Net income (loss) per
     share - basic                $(0.03)      $0.06      $(0.03)     $(0.06)
    -------------------------------------------------------------------------
           - diluted              $(0.03)      $0.06      $(0.03)     $(0.06)
    -------------------------------------------------------------------------
    Weighted average common
     shares outstanding:
    -------------------------------------------------------------------------
      - Basic                 17,198,400  17,241,614  15,457,889  13,671,889
    -------------------------------------------------------------------------
      - Diluted               17,198,400  17,241,614  15,457,889  13,671,889
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                             Three Months Ended
                                 June       March      December   September
    $ except number of shares     30,         31,         31,         30,
                                 2007        2007        2006        2006
    -------------------------------------------------------------------------
    Natural gas sales            900,622     658,422     545,097     451,908
    -------------------------------------------------------------------------
    Crude oil and natural
     gas liquids sales           641,013     455,324     501,836     447,225
    -------------------------------------------------------------------------
    Interest income                4,667       6,956       3,120       1,212
    -------------------------------------------------------------------------
    Royalties                   (420,662)   (321,739)   (183,887)   (153,217)
    -------------------------------------------------------------------------
    Revenue                    1,133,766     806,166     873,118     752,819
    -------------------------------------------------------------------------
    Production expenses          215,645     262,958     207,473     168,924
    -------------------------------------------------------------------------
    General and administrative
     expenses                    394,290     220,661     170,267     231,169
    -------------------------------------------------------------------------
    Depletion, depreciation
     & accretion                 789,912     569,914     517,116     536,860
    -------------------------------------------------------------------------
    Interest expense             135,604      21,405      23,049      28,786
    -------------------------------------------------------------------------
    Net income (loss) before
     income taxes               (503,684)   (376,085)   (116,835)   (284,342)
    -------------------------------------------------------------------------
    Recovery of future
     income taxes                      -   1,475,074           -           -
    -------------------------------------------------------------------------
    Net income (loss)           (503,684)  1,098,989    (116,835)   (284,342)
    -------------------------------------------------------------------------
    Net income (loss) per
     share - basic                $(0.04)      $0.08      $(0.01)     $(0.03)
    -------------------------------------------------------------------------
           - diluted              $(0.04)      $0.08      $(0.01)     $(0.03)
    -------------------------------------------------------------------------
    Weighted average common
     shares outstanding:
    -------------------------------------------------------------------------
      - Basic                 13,671,889  13,671,889  12,949,824  11,116,889
    -------------------------------------------------------------------------
      - Diluted               13,671,889  13,920,761  12,949,824  11,116,889
    -------------------------------------------------------------------------
    


    Reconciliation of cash flow from operations to net income (loss):

    The terms "cash flow" or "cash flow from operations" as used below do not
have any standardized meaning prescribed by GAAP and should not be considered
an alternative to, or more meaningful than, cash flow from operating
activities or net income (loss) as determined in accordance with GAAP as an
indicator of the Company's performance. In addition, the Company's
determination of cash flow from operations may not be comparable to that
reported by other companies. The reconciliation between net income (loss) and
cash flow from operations is set out below. Fairmount believes this measure is
meaningful because it is an indicator of funding sources for on-going efforts
to replace production volumes and increase reserve volumes. The Company also
presents cash flow from operations per share which is calculated using the
same methodology as earnings per share; however this measurement also does not
correspond to GAAP.

    
    -------------------------------------------------------------------------
                                            Three Months Ended
                                 June       March      December   September
    $ except per share amounts    30,         31,         31,         30,
                                 2008        2008        2007        2007
    -------------------------------------------------------------------------
    Net Income (loss)           (479,032)    993,329    (463,674)   (820,840)
    Depletion, depreciation
     and accretion               886,186     907,170     834,993     764,453
    Stock-based compensation     115,193      44,666      69,124      83,428
    Loss on forward commodity
     contracts                   161,010      44,350           -           -
    Future income taxes
     (recovery)                        -  (1,402,166)          -           -
    -------------------------------------------------------------------------
    Cash flow from operations    683,357     587,349     440,443      27,041
    -------------------------------------------------------------------------
    Cash flow per common share:
    -------------------------------------------------------------------------
      - Basic                      $0.04       $0.03       $0.03       $0.00
    -------------------------------------------------------------------------
      - Diluted                    $0.04       $0.03       $0.03       $0.00
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                            Three Months Ended
                                 June       March      December   September
    $ except per share amounts    30,         31,         31,         30,
                                 2007        2007        2006        2006
    -------------------------------------------------------------------------
    Net Income (loss)           (503,684)  1,098,989    (116,835)   (284,342)
    Depletion, depreciation
     and accretion               789,912     569,914     517,116     536,860
    Stock-based compensation     101,999     107,313      72,048      71,422
    Future income taxes
     (recovery)                        -  (1,475,074)          -           -
    -------------------------------------------------------------------------
    Cash flow from operations    388,227     301,142     472,329     323,940
    -------------------------------------------------------------------------
    Cash flow per common share:
    -------------------------------------------------------------------------
      - Basic                      $0.03       $0.02       $0.04       $0.03
    -------------------------------------------------------------------------
      - Diluted                    $0.03       $0.02       $0.04       $0.03
    -------------------------------------------------------------------------
    


    Forward - Looking Information

    This news release contains forward-looking information, including but not
limited to estimated reserves and future net revenues, future exploration and
development plans and anticipated production levels. Information relating to
reserves and related future net revenue has been independently evaluated by
GLJ Petroleum Consultants Ltd. and is forward-looking information as it
involves 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, 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 statements and
information other than statements of historical fact are 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
Petroleum Consultants Ltd. 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 information 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; commodity prices, 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. Moreover,
neither the Company nor any other person assumes responsibility for the
accuracy and completeness of the forward-looking information. 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 statements contained in this press 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. Additionally, completion of the sale of the Company's Harmattan
property is subject to negotiation of a mutually acceptable definitive
agreement, customary due diligence procedures and satisfaction of customary
conditions to closing. Certain of these factors are beyond the control of the
Company and thus completion of this sale is subject to the risk of
non-completion. 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 statements to actual results or to changes in the Company's expectations.
    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 of ratio 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. Present values of future
net revenue do not represent fair market value of Fairmount's reserves.

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





For further information:

For further information: Joseph S. Durante, President and CEO,
JDurante@Fairmountenergy.com or Ryan A. Michaluk, VP Finance and CFO,
RMichaluk@Fairmountenergy.com, Fairmount Energy Inc., 2200, 520-5th Avenue SW,
Calgary, Alberta, T2P 3R7, Phone: (403) 355-0440, Fax: (403) 355-0465, Visit
us at our website www.fairmountenergy.com

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FAIRMOUNT ENERGY INC.

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