Fairborne Energy Ltd. has entered into an agreement with a private oil and gas company to sell its entire working interest in the Clive D2A and D3A Units, associated non unit production, and other rights associated with the Clive CO2 development (the "Assets") for gross proceeds of $47.5 million, subject to normal course closing adjustments. Payment includes a base price of $37.5 million payable on closing and an additional payment of $10 million payable upon the satisfaction of certain conditions regarding the Clive CO2 project.

The Assets

Details of the Company's divested Assets are as follows:

■ Reserves attributed to the Assets, based on Fairborne's independent reserve evaluation prepared by GLJ Petroleum Consultants Ltd. ("GLJ") on a proved basis are 0.68 million bbls(1) and on a proved plus probable basis are 0.93 million bbls(1) ■ Current production attributed to the Assets is approximately 300 bbls/d ■ (1) As evaluated by GLJ effective December 31, 2010 and mechanically updated to December 31, 2011, deducting 2011 production and re-running the evaluation utilizing GLJ's price deck as at January 1, 2012.

Impact to Fairborne

■ Reduces estimated year end net debt by 18%; ■ Based on the January 31, 2012 closing price of $2.42: ■ 398% premium to Fairborne's current enterprise value per flowing barrel valuation based on production of 16,000 boe per day ■ 578% premium to Fairborne's current enterprise value per proved plus probable reserves (December 31, 2010 post first quarter divestiture); and ■ Divested Assets represent 2% of 2011 exit volumes and proceeds represent 19% of current market capitalization

The transaction will have an effective date of January 31, 2012, is subject to the satisfaction of various conditions to closing including a financing condition in favor of the purchaser. The transaction is scheduled to close during the second quarter of 2012.

The proceeds from the transaction will be applied to reduce indebtedness under Fairborne's outstanding credit facilities. Fairborne's banking syndicate has informed the Company that there will be no change to the Company's current credit facility of $325 million as a result of the transaction. The credit facility will be subject to its annual borrowing base review on or before May 2012.

Tags: Fairborne Energy Ltd.