Fairmount announces 114% increase in production and filing of first quarter report for the three months ended June 30, 2007



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

    CALGARY, Aug. 9 /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, 2007. For a complete
copy of Fairmount's first quarter report including financial statements and
management's discussion and analysis ("MD & A") please visit www.sedar.com.
Certain information contained in this press release, including development
plans, drilling locations, and capital expenditures, constitute forward
looking statements which are subject to risks and uncertainties. See
"Forward-Looking Statements".

    
    Highlights:

    -   Production has increased 114% as compared to the first quarter of
        last year from an average of 182 boe/day in the first quarter of last
        year to 390 boe/day in the first quarter of this year, based on a
        conversion rate of six thousand cubic feet of natural gas to one
        barrel of oil.

    -   Eight consecutive quarters of production growth.

    -   Current production is estimated at 425 boe/day with another
        300 boe/day estimated behind pipe awaiting tie-in this fall.

    -   Bank lines increased from $9.25 million to $14.0 million during the
        quarter.

    -   5 well drilling program to commence mid September


    Operations
    -------------------------------------------------------------------------
                                              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            30          15          25          23
    -------------------------------------------------------------------------
    NGL production bbl/day           127         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                    $70.68      $66.68      $67.06      $78.64
    -------------------------------------------------------------------------
    Average selling price -
     NGL's $/bbl                  $38.95      $37.93      $32.86      $36.46
    -------------------------------------------------------------------------
    Average selling price -
     $/boe                        $43.41      $42.89      $40.09      $39.13
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                              Three Months Ended

                                   June       March     December   September
                                    30,         31,        31,         30,
                                   2006        2006       2005        2005
    -------------------------------------------------------------------------
    Wells drilled - gross             13           4           7           8
    -------------------------------------------------------------------------
    Wells drilled - net              5.6         1.2         1.2         0.8
    -------------------------------------------------------------------------
    Natural gas production -
     mcf/day                         574         490         569         434
    -------------------------------------------------------------------------
    Oil production bbl/day            19          13          24          13
    -------------------------------------------------------------------------
    NGL production bbl/day            67          73          44          29
    -------------------------------------------------------------------------
    Average daily production -
     boe/day                         182         167         163         115
    -------------------------------------------------------------------------
    Average selling price -
     natural gas $/mcf             $5.90       $7.43      $11.38       $9.46
    -------------------------------------------------------------------------
    Average selling price -
     oil $/bbl                    $80.73      $68.71      $69.33      $78.63
    -------------------------------------------------------------------------
    Average selling price -
     NGL's $/bbl                  $33.96      $39.01      $44.97      $38.91
    -------------------------------------------------------------------------
    Average selling price -
     $/boe                        $39.58      $44.09      $62.08      $54.71
    -------------------------------------------------------------------------
    

    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 28% to 66% in 17 contiguous sections of land in the Gold Creek area.
Fairmount is the operator of all of its Gold Creek wells.
    In October 2006 Fairmount commenced a program to drill 4 (1.36 net) wells
in succession on its Gold Creek property as a follow up to its previously
announced (August 2006) Gold Creek discovery well. Three of the four wells
were successful resulting in 3 cased petroleum and / or natural gas wells
(1.08 net) and 1 dry and abandoned well (0.28 net).
    The Company is very pleased with the success of this exploration drilling
program and has the following production and test results to report:
    The first well (0.28 net) was drilled completed in the fall of 2006. This
well, along with our previously announced (August 2006) discovery well has
been tied in and both wells started gas production in March, 2007. Currently,
these wells are producing at a combined gross rate of 1,500 mcf/day plus
approximately 110 bbls/day of natural gas liquids and 10 bbls/day of crude
oil. Current production from these two wells is limited by the amount of
compression capacity available on the existing gathering system. See
additional details regarding the expansion of capacity below.
    The second well (0.30 net) has been completed and tested in two
prospective zones. Based on preliminary testing results, the first zone flowed
at a final gas rate of 3.5 mmcf/day and 155 bbls/day condensate for a total of
738 boe/day (gross) after a 3 day period. The second zone flowed at a final
gas rate of 3.0 mmcf/day and 180 bbls/day condensate for a total of
680 boe/day after a 4 day period. The combined total flow rates during the
respective test periods was 6.5 mmcf/day of natural gas and 335 bbls/day of
condensate for a total of approximately 1,400 boe/day (gross). Fairmount is
currently awaiting the expansion of compression facilities to transport and
process the production from this well. Fairmount, along with partners, has
entered into an agreement with the current operator of the gathering and
compression facilities to acquire a working interest in the compression
facilities by paying to increase the compression and throughput capability of
the facilities. Fairmount anticipates the additional compression and
associated capacity to bring this well on production will be in place this
fall.
    The third well (0.50 net) was cased and completed in January, 2007 as an
oil well. From January to June the well was restricted or shut in due to
trucking restrictions on area roads caused by spring break up and rain
conditions. Subsequent to quarter end, the well has been placed on continuous
production at a rate of approximately 20 boe/day net to Fairmount.
    Gold creek contributed 107 boe/day of production for the quarter ended
June 30, 2007.
    Based on the results of the five wells drilled to date on this property,
geologic mapping, and/or 3D seismic Fairmount has identified an additional
8 drilling locations on existing Company lands.

    Harmattan

    Fairmount's Harmattan property is located approximately 105 kilometers
north west of Calgary. Fairmount has an interest in approximately 20 sections
of land at Harmattan, with an average working interest of approximately 8%.
Most wells at Harmattan are oil wells with associated gas and natural gas
liquids production. Fairmount owns 10% of the gathering and field compression
facilities at Harmattan. These gathering and field facilities are currently
operating at or near capacity.
    The Harmattan property has exceeded initial expectations with economic
hydrocarbons being found in multiple formations over our lands. The initial
target was the Lower Cardium formation, however, 20 wells have been
successfully completed and are producing from the Upper Cardium. Fifteen of
these wells are dual producers from both of these zones.
    In total Fairmount has drilled 44 wells (3.8 net) at Harmattan as at
June 30, 2007 with the Company estimating 8 to 10 additional locations remain
for future development drilling. In the quarter ended June 30, 2007, Fairmount
participated in the drilling of 1 well (0.1 net) at Harmattan. Current
production at Harmattan is estimated to be approximately 200 boe/day and the
Company expects to maintain production at about this level for the next two to
three years as additional wells and re-completions are performed to keep the
existing infrastructure at or near capacity.

    Crossfield

    Fairmount has a land position of approximately 6.0 sections with an
average working interest of approximately 50% in the Crossfield area, north
west of Calgary. Fairmount is the operator of the Crossfield property with
2 wells (0.78 net) on production for the quarter ended June 30, 2007. Current
production from these two wells is approximately 40 boe/day.

    Gilby

    Fairmount has approximately 3.75 sections of land in the Gilby area, west
of Red Deer, Alberta with an operated average working interest of 50% and 2
wells (1.0 net) on production during the quarter.

    Warner

    Our shallow gas property at Warner is located approximately 32 kilometres
south east of Lethbridge in southern Alberta. Fairmount has an interest in
approximately 17 contiguous sections of land at Warner, with an average
working interest of approximately 50%. Fairmount also owns 50% of the
gathering and field compression facilities which deliver gas into the ATCO
South transmission system.
    Gas production at Warner comes from the Medicine Hat and Barons
formations. Effective April 1, 2007, Fairmount became the operator of the
Warner property and facilities.

    
    Financial Results and selected financial information

    -------------------------------------------------------------------------
                                              Three Months Ended

                                   June       March     December   September
                                    30,         31,        31,         30,
    $ except number of shares      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
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                              Three Months Ended

                                   June       March     December   September
                                    30,         31,        31,         30,
    $ except number of shares      2006        2006       2005        2005
    -------------------------------------------------------------------------
    Natural gas sales            308,034     334,794     595,204     377,424
    -------------------------------------------------------------------------
    Crude oil and natural gas
     liquids sales               347,115     345,055     336,150     201,417
    -------------------------------------------------------------------------
    Interest income               33,036      42,076      25,749      20,622
    -------------------------------------------------------------------------
    Royalties                   (160,254)   (189,450)   (225,954)   (124,831)
    -------------------------------------------------------------------------
    Revenue                      539,712     545,758     736,150     479,046
    -------------------------------------------------------------------------
    Production expenses          119,307      75,234      91,796      86,885
    -------------------------------------------------------------------------
    General and administrative
     expenses                    159,191     245,451     196,313     213,499
    -------------------------------------------------------------------------
    Depletion, depreciation &
     accretion                   343,194     274,213     291,857     196,568
    -------------------------------------------------------------------------
    Interest expense               6,980      16,547      14,837      25,174
    -------------------------------------------------------------------------
    Net income (loss) before
     income taxes               (130,143)   (140,498)     92,855    (121,050)
    -------------------------------------------------------------------------
    Recovery of future income
     taxes                             -   1,316,700           -           -
    -------------------------------------------------------------------------
    Net income (loss)           (130,143)  1,176,202      92,855    (121,050)
    -------------------------------------------------------------------------
    Net income (loss)
     per share         - basic    $(0.01)      $0.10       $0.01      $(0.01)
    -------------------------------------------------------------------------
                       - diluted  $(0.01)      $0.10       $0.01      $(0.01)
    -------------------------------------------------------------------------
    Weighted average common
     shares outstanding:
    -------------------------------------------------------------------------
    - Basic                   11,116,889  11,088,236   9,957,585   8,847,585
    -------------------------------------------------------------------------
    - Diluted                 11,116,889  11,433,660  10,386,819   8,847,585
    -------------------------------------------------------------------------
    

    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
                                    30,         31,        31,         30,
    $ except per share amounts     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
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                              Three Months Ended

                                   June       March     December   September
                                    30,         31,        31,         30,
    $ except per share amounts     2006        2006       2005        2005
    -------------------------------------------------------------------------
    Net Income (loss)           (130,143)  1,176,202      92,855    (121,050)
    -------------------------------------------------------------------------
    Depletion, depreciation
     and accretion               343,194     274,213     291,857     196,568
    -------------------------------------------------------------------------
    Stock-based compensation      41,183      74,811      48,492      77,970
    -------------------------------------------------------------------------
    Future income taxes
     (recovery)                        -  (1,316,700)          -           -
    -------------------------------------------------------------------------
    Cash flow from operations    254,234     208,526     433,204     153,488
    -------------------------------------------------------------------------
    Cash flow per common share:
    -------------------------------------------------------------------------
      - Basic                      $0.02       $0.02       $0.04       $0.02
    -------------------------------------------------------------------------
      - Diluted                    $0.02       $0.02       $0.04       $0.02
    -------------------------------------------------------------------------
    

    Forward-Looking Statements

    This press release contains forward-looking statements, including but not
limited to future exploration and development plans and anticipated production
levels. These statements relate to future events or the Company's future
performance. All statements other than statements of historical fact are
forward-looking statements. In some cases, forward-looking statements 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. 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 statements will not occur. Forward-looking statements are
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; 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 statements 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 statements. 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. Subject to the
company's obligations under applicable securities laws, the Company is not
under any duty to update any of the forward-looking statements after the date
of this press 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
equivalent (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.

    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; 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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