FairWest’s operating and financial strategy involves being the operator of its core properties and holding up to a 50% working interest position in these properties.  Being the operator allows FairWest to manage its production base on a timely basis and hence effectively manage the operational and financial risks associated with acquisitions and drilling.  Property acquisitions and capital projects may be funded by third party syndicates who participate in projects managed by FairWest.

In order to pursue either an acquisition or a drilling project, FairWest must find a third party or parties who do not wish to be the operator and who are prepared to assume the risks associated with a 50% working interest position.  Accordingly, an essential part of FairWest’s business strategy is to create related private companies and limited partnerships that are prepared to acquire oil and gas properties from FairWest and jointly participate with FairWest in exploitation, drilling operations and acquisitions. In the case of the private companies, FairWest holds a 25% equity interest in the private company. In the case of the limited partnerships, FairWest does not hold any interest in the general partner of the limited partnership.  FairWest provides management services to the related companies and partnerships and allocates a portion of its corporate overhead expenses to these parties.  After two years from formation of the company or partnership, FairWest has a right to make an offer to acquire its interest at fair market value.

The benefits of this joint venture strategy to FairWest are:

• Accelerated expansion of operated core properties.
• Joint participation in acquisitions, exploration, development and exploitation with the syndicate.
• Access to syndicate’s undeveloped acreage in FairWest core areas, minimizing exposure to competitive land sales.
• FairWest continues to build a source of future production acquisitions which can be acquired based on fair market value.
• FairWest receives a contribution to its overhead expenses from the managed syndicate.