CALGARY, ALBERTA, Dec. 2, 2009 (Marketwire) -- FairWest Energy Corporation (TSX:FEC) ("FairWest" or the "Company") announces that it intends to offer up to $4,000,000 of Series 2, 14% Secured Subordinated Redeemable Convertible Debentures (the "Series 2 Debentures") maturing on October 31, 2011. The Series 2 Debentures have a 14% annualized yield payable monthly. The Series 2 Debentures are redeemable and convertible into Common Shares of the Company at $0.15 per share any time before the maturity date.
The Company also advises that debentureholders holding $1,750,000 of the Company's Series 1, 14% Secured Subordinated Redeemable Convertible Debentures (the "Series 1 Debentures") have agreed to extend the maturity date of the debentures from October 31, 2009 to October 31, 2011. These debentureholders have also agreed to reduce the conversion rate from $0.45 per share to $0.15 per share. One debentureholder holding $250,000 of the Series 1 Debentures has not agreed to an extension beyond the maturity date.
The Series 1 Debentures and the Series 2 Debentures are redeemable and rank pari passu with each other. The proposed conversion rate of $0.15 per share is subject to regulatory and exchange approval.
As previously announced, the Company has been operating under a forbearance agreement with its principal lender. The forbearance agreement required the Company to reduce its credit facility with the lender from $12.5 million at December 31, 2008 to $6.9 million by October 31, 2009. As previously reported, the Company has successfully reduced the facility to $7.4 million and plans to further reduce the facility to $6.9 million on or before December 15, 2009. As a result of the necessity to meet the sharp reduction in lending value, the Company has been required to cut capital costs and dispose of producing properties. The Company has now divested properties with approximately 110 boepd of associated production and has plans to sell several non-core properties before year end.
As a result of the sale of producing properties and limited access to capital, the Company's production averaged 475 boepd for the month of October. In mid-November, 2009 the Company commenced an optimization program by performing workovers and recompletions, which increased production by approximately 125 boepd to the current level of approximately 600 boepd. The Company will continue its optimization program, subject to the availability of capital and anticipates the addition of up to 150 boepd of production by the end of January, 2010.
In addition, the Company completed the drilling of an 1,100 meter multi zone liquid rich gas test on its lands at Kirkpatrick Lake. The well, which qualifies for the Alberta Royalty Drilling Tax Credit, is scheduled for completion by mid December. The Company paid 45% of D&A costs to earn an 80% working interest in production from the well.
About FairWest Energy
FairWest (TSX:FEC) is a Calgary, Alberta based junior oil and gas company engaged in the acquisition, exploration, development and production of crude oil and natural gas in the provinces of Alberta and Saskatchewan.
This news release may contain certain forward-looking statements, including management's assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that the Company will derive there from. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
The terms bbls, bbls/d, boe, boes or boes/d may be misleading, particularly if used in isolation. A boe (barrel of oil equivalent) conversion ratio of 6 mcf per one (1) boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
129,839,879 Common Shares Issued