Peace River Arch

The Peace River Arch has been an integral part of Fairborne's portfolio. During the Third Quarter, Fairborne's average daily production was 914 Boe/d including 5,020 Mcf/d natural gas and 77 Bbls/d oil and associated liquids. The PRA comprises six different producing properties with Valhalla/Rycroft being the single largest producing property with
production averaging 618 Boe/d (3,413 Mcf/d sweet gas and 49 Bbls/d associated liquids) during the Third Quarter.

Fairborne plans to drill between five to seven wells and complete or re-complete an additional six to seven wells during 2008. In addition to these projects Fairborne plans to re-complete one existing well to a water disposal well that management believes will help in reducing operating costs as well as general third party disposal fees in an area that is in short supply of disposal capacity.

In early 2007 Fairborne entered into a farmout agreement with a third party to expedite the development of lands in the Gordondale area of the PRA. The agreement was comprised of both a drilling and an optimization commitment and, to date, the third party has drilled seven wells with a 100% success rate and recompleted or tied in an additional five wells.
It is currently anticipated that the third party will have substantially completed its earning portion of the agreement by year end 2007 at which time earning will entitle them to drill additional wells in which Fairborne will participate, on previously earned lands. Management anticipates that the agreement will continue into 2008 and that the third party will propose additional wells on the earned lands.

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