Fortress Energy announces third quarter 2009 financial and operating results

Monday, Nov 16, 2009

Fortress Energy Inc. announced it's financial and operating results for the third quarter ended September 30, 2009.

The Company's the financial statements, management's discussion and analysis and notes to the financial statements for the third quarter of 2009 are available on the Company's website or SEDAR.

Highlights

During the quarter Fortress has:

- Entered into a letter of intent to acquire its partners 50% working interest in its Square Creek property. The acquisition closed on October 23, 2009 subsequent to the end of the third quarter.

- Closed a public offering of 21,779,000 units ("Units") and 6,594,000 flow-through common shares (total common shares issued of 28,373,000) for gross proceeds of $11,385,185 ($10,287,000 net of issuance costs). Each Unit consists of one common share of the Company and one common share purchase warrant. The warrants are exercisable on or before September 30, 2011. Each warrant entitles the holder thereof to purchase one common share at an exercise price of $0.55.

- AECO natural gas prices averaged $3.00 per mcf, and Fortress was able to enjoy the benefits of its forward sale to receive an average price of $6.65 per mcf during the quarter.

- Continued to restrict production at Square Creek to net 2.6 mmcf/d until commodity prices improve.

- Used the period of low gas prices to perform maintenance at Buick Creek and re-route gas production at Velma resulting in production of approximately 1.2 mmcf/d being shut-in during the period.

- The Company has taken several key steps to materially reduce operating costs including the purchase of a rented compressor, camp, rig mats and other rented equipment at Square Creek. In addition, the Company replaced the field operations contractor at Square Creek, effective August 1st, and replaced the field operations contractor at the third party facility at Clear Prairie that processes the Company's Square Creek production effective November 1st.

- The Company has given formal notice to the contract operator of its Ladyfern and Mearon properties that it will be terminating its agreement with it and consequently taking back all field operations of these properties effective December 1, 2009 thereby improving well operation reliability and further reducing operating costs.

- Fortress will begin to increase its natural gas production in the fourth quarter as gas prices improve. Current production is approximately 10 mmcf per day.

Board Appointment

The Company is pleased to announce the appointment of Mr. Ronald McIntosh to the Board of Directors, effective November 10, 2009. Mr. McIntosh has extensive oil and gas and board experience. His work experience has included leadership roles in Canada and the United States as well as internationally. He was President and CEO of Navigo Energy from 2002 until 2004 and oversaw its conversion into NAV Energy Trust and C1 Energy. Prior to that he held leadership roles including Senior Vice President and COO of Gulf Canada Resources, Vice President, Exploration and International of Petro Canada, Executive Vice President and COO of Amerada Hess Canada, and Senior Vice President of AEC Oil and Gas. He is currently board Chairman of North American Energy Partners inc. and a director of Advantage Oil and Gas Inc. He has been a director of Search Energy, Crispin Energy, NAV Energy Trust, Advantage Energy Income Trust, Tasman Exploration and Roccor.

Mr. Bailey said "We are very pleased to have Mr. McIntosh join the board, his experience and knowledge of the Canadian industry will be a significant asset to the Company."

Outlook for Natural Gas Prices

Fortress continues to remain optimistic about the outlook for North American natural gas prices despite the large inventories that have accumulated during the injection season. The low drilling activity in Canada in beginning to have a significant impact on Canadian production currently at approximately 13 bcf per day down from a peak of approximately 17 bcf per day reached in April 2006. This has diminished the ability of Canadian natural gas to make up a portion of the supply necessary to meet strong gas demand in the United States. The focus on shale gas development has prolonged the timeline when we expected to greater evidence of natural declines however, Fortress believes that there are not enough natural gas wells being drilled in North America to replace natural gas production declines.

BOE Presentation

Natural gas reserves and volumes recorded in thousand cubic feet are converted to barrels of oil equivalent ("boe") on the basis of six thousand cubic feet ("mcf") of gas to one barrel ("bbl") of oil. The term "barrels of oil equivalent" may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf to 1 bbl is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalent at the wellhead.

Source: Marketwire