DALLAS, TX, Feb. 2 /CNW Telbec/ - Gale Force Petroleum Inc. (TSX
Venture: GFP) ("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
Light & Medium Oil
Net Present Value of
Future Net Revenues
Before Income Taxes
(10% Discount Rate)*
Proved Developed Producing
Total Proved Plus Probable
Total Proved Plus Probable Plus
*The reserves were estimated using NYMEX (WTI) prices as at December 1,
$89.31 for 2010 and 2011, $89.23 for 2012, $88.48 for 2013, $88.28 for
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
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."
SOURCE GALE FORCE PETROLEUM INC.
For further information:
Michael McLellan, CFA, Chairman & CEO, +1.514.221.2030