Fairborne Energy Makes Strategic Land and Facilities Acquisition on Growing Wilrich Gas Play

Thursday, Jul 29, 2010

Fairborne Energy Ltd. ("Fairborne" or the "Company") (TSX:FEL) is pleased to announce that it has entered into an agreement to purchase a significant land position with producing assets and facilities (the "Assets") in the Company's core Marlboro/Pine Creek area. The acquisition will have an effective date of July 1, 2010 and is expected to close on or about September 9, 2010 for a cash purchase price, at closing, of approximately $71.5 million, subject to closing adjustments. The completion of the transaction is subject to customary regulatory approvals and other conditions. The acquisition will be funded through Fairborne's existing credit facility.

Transaction Highlights:

The Assets to be acquired by Fairborne doubles the Company's position in a significant new gas play and exploration trend in the Company's core Marlboro/Pine Creek area of West Central Alberta.

The acquisition has the following assets and attributes:

--  167 gross sections (91.4 net sections) of land, which includes 71.8 net

    sections of undeveloped Wilrich rights; 

--  Significant development opportunities on the Assets with an identified

    inventory of more than 200 potential Wilrich horizontal locations on the

    acquired lands;  

--  Over 30 potential gross Notikewin/Falher horizontal locations; 

--  Significant number of vertical locations with multi zone potential; 

--  More than 100 workover locations in various reservoirs identified in

    existing well bores; 

--  Strategic infrastructure including over 150 km of operated pipelines and

    a 55.1% working interest in a 14 MMcf/d (licensed to 42 MMcf/d) gas

    plant; 

--  Reserves estimated by GLJ Petroleum Consultants Ltd., effective as of

    June 30, 2010, of 2.7 MMboe total proved and 5.1 MMboe total proved plus

    probable; and 

--  Current production of approximately 980 boe/d of mature, shallow decline

    production (83% gas).

Since drilling and completing its first Wilrich horizontal well in the Deep Basin in 2009, the Company has successfully drilled and completed a total of seven Wilrich horizontal wells (100% success rate). The average 30-day Initial Production Rate of these wells has been 4 MMcf/d of gas and average sales volumes of 50 bbls/d of Natural Gas Liquids. The addition of these horizontal wells has brought the total current Marlboro area sales gas volumes to 28.6 MMcf/d (20.1 MMcf/d net). During this same period, the Company has been able to increase its land position from seven net sections initially to over 140 net sections post-acquisition. With the majority of Cretaceous rights in the area now being held by industry and unavailable for lease, this acquisition allows the Company to double its landholdings. Recent land sale activity along this trend has averaged between $1,500 to $2,500 per hectare. Including the Assets acquired in the acquisition, the Company now has a Wilrich drilling inventory in excess of 350 gross locations.

With the continued success of the Wilrich play and the expanded horizontal drilling program targeting the Wilrich, this acquisition represents the strategic use of the Company's balance sheet contemplated in the focused strategy that has allowed Fairborne to grow production from 13,000 boe/d at the end of 2009 to the current level in excess of 15,000 boe/d.

Upon closing of the acquisition, Fairborne expects net debt to be approximately $200 million, on a current borrowing base of $285 million. The current borrowing base was determined on proved producing production and reserves as at December 31, 2009. Fairborne would expect the borrowing base to increase as result of year to date operational success and the addition of the Assets.

Source: Market Wire