Fairmount announces filing of second quarter financial statements and fifth consecutive quarter of production growth.

1 January 1970

Fairmount Energy Inc. ("Fairmount" or the "Company") (TSX-V - FMT) is pleased to present a summary of its operating and financial results for the three and six months ended September 30, 2006. For a complete copy of Fairmount's second quarter financial statements and management's discussion and analysis ("MD & A"), please visit www.sedar.com. Certain information contained in this press release, including development plans, drilling locations, and capital expenditures, constitute forward looking statements which are subject to risks and uncertainties. See "Forward-Looking Statements".

All amounts are in Canadian dollars unless otherwise noted.

Highlights

We are pleased to report our fifth consecutive quarter of production growth. Average production for the second quarter increased 37% over the first quarter to 250 boe/day in the second quarter as compared to 182 boe/day during the first quarter. While we are beginning to grow production, our efforts to bring on new wells in a timely fashion have been frustrated on a number of fronts. Logistical issues are finally being resolved to bring on production from our Crossfield and Gilby wells. Our Gold Creek discovery well has only been produced intermittently and production will be limited until such time as the solution gas can be tied into our planned gathering system. An unplanned plant closure at Harmattan also tempered production for the quarter.

Cash flow from operations, while modest, continues to be positive and should increase as we continue to add production, especially if we continue to see the recovery in natural gas prices which has started recently. Daily natural gas prices in Alberta set a new 22 month low during September and North American natural gas storage continues to be at record levels. Given the current storage situation, the direction of future pricing, at least for the near term, will ultimately be determined by the weather in the upcoming heating season.

Fairmount was the operator for most of the activities undertaken this quarter. We drilled 5 wells (0.8 net) during the quarter with a success rate of 100%.

Our drilling success for the quarter was tempered by our Warner property where 3 oil wells which were drilled in the first quarter turned out to be uneconomic after completion and production testing.

Our fall and winter capital program includes plans for 8 wells (4.8 net) for the remainder of this fiscal year. A 4 well (1.4 net) drilling program to follow up on our Gold Creek discovery started in late October. We anticipate the program will be completed before year end.

The Company renewed and increased its bank line from $2 million to $7.25 million. This increase reflects the progress the Company has made in increasing reserves and production levels. Additionally, the Company was able to secure a $2 million acquisition and development line to enable us to fund development activities and/or acquisitions. During November, the bank completed its normal scheduled interim review of the loan facilities and has continued them until our annual review scheduled for April, 2007.

Subsequent to quarter end, Fairmount issued 2,555,000 common shares on a flow-through basis at a price of $1.95 per flow-through common share for aggregate gross proceeds of $4,982,250. This increase in equity, along with our increased bank lines provides Fairmount with the financial resources necessary for continued execution of our capital program.

Financial Results and selected financial information prepared in

accordance with Canadian generally accepted accounting principles

("GAAP").

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Three Months Ended

$ except September June March December

number 30, 30, 31, 31,

of shares 2006 2006 2006 2005

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Natural gas sales 451,908 308,034 334,794 595,204

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Crude oil and natural

gas liquids sales 447,225 347,115 345,055 336,150

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Interest income 1,212 33,036 42,076 25,749

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Royalties (153,217) (160,254) (189,450) (225,954)

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Revenue 752,819 539,712 545,758 736,150

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Production expenses 168,924 119,307 75,234 91,796

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General and

administrative

expenses 231,169 159,191 245,451 196,313

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Depletion, depreciation

& accretion 536,860 343,194 274,213 291,857

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Interest expense 28,786 6,980 16,547 14,837

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Net income (loss)

before income taxes (284,342) (130,143) (140,498) 92,855

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Recovery of future

income taxes - - (1,316,700) -

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Net income (loss) (284,342) (130,143) 1,176,202 92,855

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Net income (loss)

per share

- basic $(0.03) $(0.01) $0.10 $0.01

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- diluted $(0.03) $(0.01) $0.10 $0.01

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Weighted average common

shares outstanding:

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- Basic 11,116,889 11,116,889 11,088,236 9,957,585

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- Diluted 11,116,889 11,116,889 11,433,660 10,386,819

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Three Months Ended

$ except September June March December

number 30, 30, 31, 31,

of shares 2005 2005 2005 2004

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Natural gas sales 377,424 195,345 191,076 14,990

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Crude oil and natural

gas liquids sales 201,417 110,600 85,986 13,195

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Interest income 20,622 31,281 26,465 6,913

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Royalties (124,831) (74,771) (57,228) (7,328)

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Revenue 479,046 262,455 246,299 27,770

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Production expenses 86,885 65,472 32,803 2,595

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General and

administrative

expenses 213,499 228,475 180,674 33,131

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Depletion, depreciation

& accretion 196,568 133,542 136,491 19,534

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Interest expense 25,174 34,135 27,028 -

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Net income (loss)

before income taxes (121,050) (270,876) (259,644) (186,391)

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Recovery of future

income taxes - - (1,615,200) -

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Net income (loss) (121,050) (270,876) 1,355,556 (186,391)

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Net income (loss)

per share

- basic $(0.01) $(0.03) $0.17 $(0.04)

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- diluted $(0.01) $(0.03) $0.17 $(0.04)

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Weighted average common

shares outstanding:

- Basic 8,847,585 8,815,717 7,756,855 4,344,904

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- Diluted 8,847,585 8,815,717 8,006,460 4,344,904

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Cash Flow From Operations

The term "cash flow" or "cash flow from operations" as used below does not have any standardized meaning prescribed by GAAP and should not be considered an alternative to, or more meaningful than, cash flow from operating activities or net income (loss) as determined in accordance with GAAP as an indicator of the Company's performance. In addition, the Company's determination of cash flow from operations may not be comparable to that reported by other companies. The reconciliation between net income (loss) and cash flow from operations is set out below. Fairmount believes this measure is meaningful because it is an indicator of funding sources for on-going efforts to replace production volumes and increase reserve volumes. The Company also presents cash flow from operations per share which is calculated using the same methodology as earnings per share; however this measurement also does not correspond to GAAP.

Reconciliation of cash flow from operations to net income (loss):

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Three Months Ended

$ except September June March December

per share 30, 30, 31, 31,

amounts 2006 2006 2006 2005

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Net Income (loss) (284,342) (130,143) 1,176,202 92,855

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Depletion, depreciation

and accretion 536,860 343,194 274,213 291,857

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Stock-based compensation 71,422 41,183 74,811 48,492

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Future income taxes

(recovery) - - (1,316,700) -

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Cash flow from

operations 323,940 254,234 208,526 433,204

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Cash flow per

common share:

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- Basic $0.03 $0.02 $0.02 $0.04

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- Diluted $0.03 $0.02 $0.02 $0.04

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Three Months Ended

$ except September June March December

per share 30, 30, 31, 31,

amounts 2005 2005 2005 2004

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Net Income (loss) (121,050) (270,876) 1,355,556 (186,391)

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Loss on sale of

investment in

YM Biosciences Inc. - - 1,564

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Depletion, depreciation

and accretion 196,568 133,542 136,491 19,534

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Stock-based compensation 77,970 71,707 128,947 36,129

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Future income taxes

(recovery) - - (1,615,200) -

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Cash flow from

operations 153,488 (65,627) 5,794 (129,164)

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Cash flow per

common share:

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- Basic $0.02 $(0.01) $0.00 $(0.03)

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- Diluted $0.02 $(0.01) $0.00 $(0.03)

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Operations

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Three Months Ended

September June March December

30, 30, 31, 31,

2006 2006 2006 2005

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Wells drilled - gross 5 13 4 7

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Wells drilled - net 0.8 5.8 1.2 1.2

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Natural gas production

- mcf/day 857 574 490 569

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Oil production bbl/day 23 19 13 24

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NGL production bbl/day 84 67 73 44

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Average daily production

- boe 250 182 167 163

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Average selling price

- natural gas $/mcf $5.73 $5.90 $7.43 $11.38

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Average selling price

- oil $/bbl $78.64 $80.73 $68.71 $69.33

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Average selling price

- NGL's $/boe $36.46 $33.96 $39.01 $44.97

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Three Months Ended

September June March December

30, 30, 31, 31,

2005 2005 2005 2004

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Wells drilled - gross 8 4 3 5

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Wells drilled - net 0.8 0.3 0.3 0.5

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Natural gas production

- mcf/day 434 326 340 42

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Oil production bbl/day 13 13 8 2

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NGL production bbl/day 29 9 13 1

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Average daily production

- boe 115 77 78 10

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Average selling price

- natural gas $/mcf $9.46 $6.57 $6.03 $5.67

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Average selling price

- oil $/bbl $78.63 $68.84 $51.45 $53.52

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Average selling price

- NGL's $/boe $38.91 $32.61 $42.42 $40.64

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Gold Creek

The Gold Creek area is located on the southern flank of the Peace River Arch, near Grande Prairie, Alberta. Fairmount, along with a partner, entered into an agreement to farm-in on land held by a senior exploration and development company with a commitment to drill 1 well (0.34 net). Drilling of this well was completed and the well was cased in the spring of this year. This well earned Fairmount operated working interests of between 28% and 40% in 4 sections of land with an option on one additional section. Drilling targeted the Triassic Halfway formation which is supported with three dimensional seismic coverage. While we have been able to produce this Gold Creek light oil discovery well intermittently, production has been and will be limited until such time as the solution gas can be tied into our planned gathering system.

The Company currently has 14.25 sections (5 net) at Gold Creek. Subsequent to quarter end, Fairmount commenced operations to drill 4 (1.4 net) wells at Gold Creek by December 31, 2006 with the first well spudded on October 12, 2006.

Harmattan

Fairmount's Harmattan property is located in Southern Alberta, approximately 100 kilometres north west of Calgary. Fairmount has an interest in approximately 20 sections of land at Harmattan, with an average working interest of approximately 8%. Most wells at Harmattan are oil wells with associated gas and natural gas liquids production.

Fairmount drilled 4 wells (0.3 net) at Harmattan during the quarter. Fairmount also acquired an additional working interest in 4 wells (0.1 net) through participation for our proportionate share of a producing property acquisition during the quarter. In total there were 41 wells (3.7 net) at Harmattan at September 30, 2006 with the Company estimating 6 to 12 additional locations remain for future development drilling.

Net average production for the quarter from Harmattan was 203 boe/d consisting of 665 mcf/d of natural gas and 92 boe/d of oil, condensate and natural gas liquids. Production during September was shut in for 8 days as a result of unplanned maintenance and plant turn around activities at the third party processing plant through which our field system flows. Fairmount owns 10% of the gathering and field compression facilities at Harmattan which are currently running at or near capacity. At quarter end, 4 wells are awaiting completion and / or tie in and we expect to be able to maintain production at or near plant capacity for the rest of this fiscal year.

Warner

Our shallow gas property at Warner is located approximately 32 kilometres south east of Lethbridge in Southern Alberta. Fairmount has an interest in approximately 17 sections of land at Warner, with an average working interest of approximately 50%. Fairmount also owns 50% of the gathering and field compression facilities which deliver gas into the ATCO South transmission system.

Gas production at Warner comes from the Medicine Hat and Barons formations. The Company's working interest share of production for the quarter averaged 21 mcf/d (4 boe/d) with the field shut-in during September. The operator of this property has recently changed and Fairmount is optimistic about working with the new operator to bring on more gas production and reduce per unit operating costs. Fairmount had 2 (1.0 net) Medicine Hat wells standing awaiting tie-in during the quarter. Pending a recovery in the outlook for natural gas prices and a reduction in the cost of services, these wells will be brought onto production and will be used to evaluate the viability of a program to down space to 4 wells per section and potentially drill up to 8 additional Medicine Hat wells. Subsequent to quarter end, Fairmount was able to secure a drilling rig at acceptable cost and has commenced drilling operations for 2 (1.0 net) infill Barons wells.

Last year, the Company completed a three dimensional seismic program over some of our Warner lands to assess Mannville oil potential. Based on the results of this program, 3 initial drilling locations were identified. These locations were drilled during the first quarter. All 3 (2.9 net) wells were cased with one well completed during the first quarter and two of the wells completed during the second quarter. While these wells looked promising on logs, production testing resulted in uneconomic water cuts and, as such, these wells will need to be abandoned.

Crossfield

Fairmount has a land position of approximately 6.25 sections with an average working interest of approximately 50% in the Crossfield area, north west of Calgary. Fairmount is operator with 1 well (0.28 net) on production for the quarter and 1 well (0.50 net) completed as a natural gas well. This well is scheduled for tie-in during the fourth quarter with expected production of approximately 25 boe/day net to Fairmount.

Gilby

Fairmount has approximately 3.75 sections of land in the Gilby area, west of Red Deer, Alberta with an operated average working interest of 50%.

In the fourth quarter of fiscal 2006, a well was drilled, cased and completed for 2 gas zones within the Mannville formation. During this quarter, the well was tied-in. Production during the quarter was impaired by asphaltines in the reservoir which have restricted the flow rate of the well by reducing the effective permeability of the formation. The Company is optimistic it can address this issue through the use of chemicals. This well is currently producing approximately 10 boe/day net to Fairmount.

The Company drilled 1 well (0.50 net) targeting the Lower Mannville formation in the second quarter with the well cased and completed in the third quarter. Tie-in operations are under way with production of between 10 and 15 boe/day (net) expected to be on-stream sometime during January, 2007.

Little Bow

Fairmount has an operated 60% to 100% working interest position in 3 sections of land in the Little Bow area, approximately 100 kilometres north of Lethbridge, Alberta. Fairmount identified 2 drilling locations at Little Bow based on area geology and a three dimensional seismic program shot last year. These wells are exploration wells and the first well (1.0 net) was drilled in the first quarter and was dry and abandoned. The second exploration well is planned for the fourth quarter of fiscal 2007.

Forward - Looking Statements

Certain statements included in this press release constitute forward-looking statements under applicable securities legislation. These statements relate to future events or the Company's future performance. All statements other than statements of historical fact are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue", or the negative of these terms or other comparable terminology. Forward looking statements or information in this press release include, but are not limited to, business strategy and objectives, reserve quantities and the discounted present value of future net cash flows from such reserves, net revenue, future production levels, capital expenditures, exploration plans, development plans, acquisition and disposition plans and the timing thereof, operating and other costs, and royalty rates. These statements are only predictions. Actual events or results may differ materially. In addition, this press release may contain forward-looking statements attributed to third party industry sources. Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur.

In addition to other assumptions identified in this press release, assumptions in respect of forward-looking statements have been made regarding, among other things:

- the Company's ability to benefit from the combination of growth

opportunities and the ability to grow through the capital markets;

- the Company's acquisition strategy, the criteria to be considered

in connection therewith and the benefits to be derived therefrom;

- sustainability and growth of production and reserves through

prudent management and acquisitions;

- the emergence of accretive growth opportunities;

- the impact of Canadian governmental regulation on the Company;

- the strategy of the Company regarding commodity price risk

management;

- changes in oil and natural gas prices and the impact of such

changes on cash flow;

- the level of capital expenditures devoted to development activity

rather than exploration;

- the use of development activity and/or acquisitions to replace and

add to reserves;

- the quantity of oil and natural gas reserves and oil and natural

gas production levels; and

- currency, exchange and interest rates.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company can not guarantee future results, levels of activity, performance, or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Some of the risks and other factors, some of which are beyond the Company's control, which could cause results to differ materially from those expressed in the forward-looking statements contained in this press release include, but are not limited to:

- general economic conditions in Canada, the United States and

globally;

- industry conditions, including fluctuations in the price of crude

oil, natural gas and natural gas liquids and services used by the

Company;

- uncertainties associated with estimating reserves;

- royalties payable in respect of oil and gas production;

- governmental regulation of the oil and gas industry, including

income tax and environmental regulation;

- fluctuation in foreign exchange or interest rates;

- stock market volatility and market valuations;

- the impact of environmental events;

- the need to obtain required approvals from regulatory authorities;

- unanticipated operating events which can reduce production or

cause production to be shut-in or delayed;

- failure to obtain industry partner and other third party consents

and approvals, when required; and

- third party performance of obligations under contractual

arrangements.

Statements relating to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Subject to the Company's obligations under applicable securities laws, the Company is not under any duty to update any of the forward-looking statements after the date of this press release to conform such statements to actual results or to changes in the Company's expectations.

Per barrel of oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil equivalent (6:1). Barrel of oil equivalents ("boe") may be misleading, particularly if used in isolation. A boe conversion of ratio 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The TSX Venture Exchange does not accept responsibility for the adequacy

or accuracy of this release.

For further information: Joseph S. Durante, President and CEO, JDurante@Fairmountenergy.com; or Ryan A. Michaluk, VP Finance and CFO, RMichaluk@Fairmountenergy.com; Fairmount Energy Inc., 2200, 520- 5th Avenue SW, Calgary, Alberta, T2P 3R7, Phone: (403) 355-0440, Fax: (403) 355-0465, Visit us at our website www.fairmountenergy.com

Source: newswire

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