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Gale
Force Petroleum Inc. (TSX Venture: GFP - News; "Gale Force"
or the "Company") today announced that it has concluded the
purchase of producing oil properties in East Texas (the "Colgate
Properties").
The
Colgate Properties are located within 5 miles of the Company's existing
properties in East Texas and consist of mainly of 100% working interests in
oil and gas properties that are currently producing, in the aggregate,
approximately 100 barrels per day.
"This
is the sixth acquisition completed by Gale Force in 8 months, more than
doubling the size of the Company's producing operations," said Michael McLellan, Chairman and CEO of Gale Force Petroleum Inc.
"Due to its proximity to our existing properties and its size, the
Colgate properties add scale to our existing operations in East Texas and
will reduce our lifting costs and overhead per barrel. And we continue to
evaluate similar accretive acquisition opportunities to increase our oil
reserves and production. "
In
a report entitled "Evaluation of Reserves attributable to Gale Force
Petroleum in the acquisition of the Colgate Properties" prepared as at
December 1, 2010, the reserves of the Colgate Property were estimated by an
independent qualified reserves evaluator, Waterson
Calhoun, P.E., at Crest Engineering Services, using an average forecast oil
price of US$88.69, as follows: <<
______________________________________________________________________________
|
Oil Reserves for the Colgate Properties
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|______________________________________________________________________________|
|
| Light
& Medium Oil|Net Present Value of |
|
|_______________________|Future Net Revenues Before|
|
Reserve Category
|Gross (bbls)|Net (bbls)|Income
Taxes (10% Discount|
|
|
|
|Rate)(x)
|
|
|
|
|
|
|
|
|
|
|
|__________________________|____________|__________|__________________________|
|Proved Developed Producing| 263,300| 199,820|
US$4,759,000|
|__________________________|____________|__________|__________________________|
|Probable
|
298,600|
221,230|
US$4,604,000|
|__________________________|____________|__________|__________________________|
|Total Proved Plus Probable| 561,900| 421,050|
US$9,363,000|
|__________________________|____________|__________|__________________________|
|Possible
|
377,400|
284,960|
US$4,877,000|
|__________________________|____________|__________|__________________________|
|Total Proved Plus Probable| 939,300| 706,010|
US$14,240,000|
|Plus Possible
|
|
|
|
|__________________________|____________|__________|__________________________|
>>
------------------------------------------------------------ (x)The
reserves were estimated using NYMEX (WTI) prices as at December 1, 2010 of
$89.31 for 2010 and 2011, $89.23 for 2012, $88.48 for 2013, $88.28 for 2014
and $88.53 thereafter.
Please note that the
estimates of reserves and future net revenue for
individual properties may not reflect the same confidence level as estimates
of reserves and future net revenue for all properties, due to the effects of
aggregation and the estimated values disclosed herein do not represent fair
market value.
The purchase price for the
Colgate Properties was CA$3.805 million,
comprised of US$2.805 million in cash (converted into Canadian dollars using
an exchange rate of 1.00), 2,075,000 common share units (the "Common
Share
Units") with an issuance value of CA$622,500, 591,668 preferred share
units
(the "Preferred Share Units") with an issuance value of CA$177,500,
and a
CA$200,000 balance of sale payable through the issuance of 666,666 Preferred
Share Units on April 1, 2011.
Each Common Share Unit is
issued at a price of CA$0.30 per unit, and is
comprised of one common share of the Company and one warrant (the
"Warrants")
with an exercise price of $0.50 expiring July 31, 2012. Each Preferred Share
Unit is issued at a price of CA$0.30 per unit, and is comprised of one Series
I preferred share of the Company and one Warrant. The Series I preferred
shares are convertible into common shares of the Company at any time, subject
to a conversion limit whereby the Sellers of the Colgate properties (the
"Sellers") are restricted to owning no more than 10% of the common
shares of
the Company issued and outstanding.
The Warrants issued are also subject to a
conversion limit whereby the Sellers are restricted to owning no more than
10%
of the common shares of the Company issued and outstanding, whereby the
Warrants are exercisable into Series I preferred shares instead of common
shares of the Company if the 10% conversion limit would be exceeded.
In addition to the
purchase price paid, the Company also estimated that
it assumed abandonment retirement obligations on the Colgate Properties with
a
present value of US$892,271, which is the estimated future cost of
abandonment
and rehabilitation costs on the properties assuming annual cost inflation of
3% and using a discount rate of 10% per annum to discount back to present
value.
To help finance the
US$2.825 million cash component of the purchase
price, the Company withdrew US$2 million from its secured US$15 million bank
facility (the "Bank Loan"), the borrowing base of which was raised
to US$4.5
million in conjunction with the acquisition. The Bank Loan has a maturity
date of May 1, 2012 and bears interest of 5% per annum. The remaining
US$825,000 cash component of the purchase price was taken from the proceeds
of
the equity private placement announced by the Company on February 1, 2011.
The Sellers of the Colgate
Properties are at arm's length from the
Company. All of the securities
issued by the Company in connection with this
acquisition are subject to resale restrictions which expire on June 1, 2011.
There are now a total of 21,055,737 common shares of the Company issued and
outstanding.
ABOUT GALE FORCE PETROLEUM
INC. www.GaleForcePetroleum.com Gale Force
Petroleum is a public corporation focused on acquiring and exploiting
undervalued oil and gas reserves in mature basins, bringing operational
expertise and capital to lower-risk, development-type projects. The Company
currently owns producing oil and gas properties in Texas, Oklahoma and
Tennessee.
Forward looking statements:
Statements included herein, including those
that express management's expectations or estimates of our future performance,
constitute "forward-looking statements" within the meaning of
applicable
securities laws. Forward-looking
statements are based on
assumptions and
estimates that are subject to various risks and uncertainties, including the
risks disclosed under the heading "Risks and Uncertainties" in the
Company's
periodic filings on SEDAR, for example, in its Management Discussion and
Analysis for the year ended June 30, 2010. Such information contained herein
represents management's best judgment as of the date hereof based on
information currently available. The Company does not assume the obligation
to
update any forward-looking statements, except as required under applicable
law.
"Neither TSX Venture
Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release."
To view this news release in HTML formatting, please use the following URL:
http://www.cnw.ca/en/releases/archive/February2011/02/c7262.html
For
further information
Michael
McLellan, CFA, Chairman & CEO, +1.514.221.2030
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