CALGARY, ALBERTA--(Marketwire - April 6, 2010) - Fairborne Energy Ltd. (TSX:FEL) ("Fairborne" or the "Company") is pleased to provide the following operational update.
Since drilling its first horizontal well in early 2008, Fairborne has employed a focused strategy of identifying and capturing opportunities where reserves and economics can be significantly improved through the utilization of horizontal drilling and multi-stage completions. During the first quarter of 2010 Fairborne drilled and completed its 45th horizontal well in this ongoing strategy and currently is focused on horizontal oil drilling in Sinclair, Manitoba and horizontal gas development primarily at Marlboro and Westerose.
The Company's Marlboro property is an example of the successful execution of this strategy. Fairborne drilled and completed the first Wilrich horizontal well in the Deep Basin in 2009. Based on the information gained from the first successful well the Company has increased its land position from nine to 43 net sections and has successfully drilled and completed five horizontal wells to date, with the sixth horizontal well successfully drilled and awaiting completion. The Company plans to drill up to nine additional Wilrich horizontal wells in the second half of 2010. Successful execution of this strategy is measured in production growth. With the two most recent Wilrich horizontal wells on production, Marlboro sales gas volumes have doubled from 15 MMcf per day (9 MMcf per day net) to 30 MMcf per day (20 MMcf per day net) since the implementation of horizontal drilling in April 2009. Fairborne's Wilrich drilling inventory currently exceeds 120 gross locations.
Consistent with the strategy of developing new opportunities to exploit horizontal drilling technology, the Company successfully drilled and completed its first wells into two new opportunities during the first quarter of 2010. The first is on the prolific Hoadley Glauconite gas trend at Westerose and the second is in the Brazeau Belly River Oil Unit.
First Quarter Drilling Summary
Fairborne has successfully completed the majority of its winter drilling program, with only one well at Marlboro still awaiting completion. Fairborne drilled three (2.5 net) vertical wells at Harlech, three (2.6 net) horizontal wells at Marlboro, four (3.5 net) horizontal wells at Sinclair, Manitoba, one (0.9 net) horizontal well at Brazeau and two (2.0 net) wells at Westerose on the Hoadley Glauconite trend, for a total of 10 (9.0 net) horizontal wells and three (2.5 net) vertical wells with a 100 percent success rate.
Production
First quarter production is expected to average between 13,500 and 14,000 BOE per day. With the majority of production additions from the first quarter drilling program commencing during the month of March, first quarter 2010 exit production was approximately 15,500 BOE per day with approximately 1,000 BOE per day behind pipe awaiting a facility expansion which is currently underway. Current production is approximately 72 percent natural gas with the balance being light oil and natural gas liquids. Including behind pipe volumes, this represents a 27 percent increase in production from 2009 exit volumes of approximately 13,000 BOE per day and exceeds previous guidance which forecast production of 15,000 BOE per day during April, 2010.
Capital expenditures to date in 2010 are estimated to be $72 million, of which $48 million was spent on drilling and completions with the remainder allocated to land, seismic and facilities. Total production additions for the quarter were approximately 4,000 BOE per day resulting in capital efficiencies of approximately $18,000 per BOE per day on total capital and $12,000 per BOE per day on drilling and completion expenditures.
Sinclair - Torquay/Bakken
In addition to the foregoing, Fairborne's Sinclair light oil property continues to deliver exceptional economics resulting from low operating costs ($6.00 per bbl), high quality light oil and royalty free production on Crown lands.
The first quarter program included the drilling of four (3.5 net) horizontal wells, which are now all on production at an average rate of 65 bbls per day per well. Fairborne's current inventory of horizontal drilling opportunities at Sinclair includes 142 locations, of which 10 were booked as undeveloped locations in the 2009 year end reserve report. During the fourth quarter of 2009, Fairborne received approval from the Manitoba regulatory authority for a two section waterflood pilot at Sinclair. Water injection commenced in mid-December and production response in the offset producer occurred in early March and to date has resulted in a 100 percent increase in the oil production rate from that well.
Risk Management
Fairborne currently has 24 MMcf per day hedged for the remainder of 2010 at an average price of $6.63 per Mcf.
Fairborne is a crude oil and natural gas exploration, development and production company headquartered in Calgary, Alberta, Canada. Fairborne's shares trade on the Toronto Stock Exchange under the symbol "FEL".