Forest Gate Issues Reserve Report on two High Island 98-L Wells; Announces Financing Terms



    
    Shares outstanding:  142 Million
    Symbol & exchange:   FGT-V
    

    MONTREAL, May 25 /CNW Telbec/ - Forest Gate Resources Inc. ("Forest
Gate") reports that it has received an independent reserve report prepared in
accordance with NI51-101 on two of five potential producing wells at the High
Island 98-L ("HI-98L") offshore project located in Gulf of Mexico off the
coast of Texas.
    As previously announced in a news release dated May 12, 2009, Forest Gate
has entered into an agreement on April 28, 2008 to acquire, subject to certain
conditions, 90% of all of the issued and outstanding shares of Atlantis
Deepwater Production, Inc. and 90% of all of the issued and outstanding
securities of Impact Exploration & Production, LLC, both privately held
Houston, Texas-based oil and gas ventures (the "Transaction").
    In consideration for the securities of Atlantis and Impact, Forest Gate
would issue 142,322,333 common shares from its share capital, at a deemed
issue price of $0.02 per share for a total consideration of $2,846,446
(representing 14,232,233 common shares at a deemed issue price of $0.20 on a
post-consolidation basis of 10 for 1) , so that the sellers, as a whole, would
own 50% of Forest Gate's outstanding common shares upon completion of the
Transaction but before taking into account the concurrent financing which
terms are described below.

    Reserve Report

    Atlantis has signed an agreement with a third party, enabling it to
acquire interests ranging from 57.3% to 100% in HI-98L.
    The report, effective as at March 31, 2009 and prepared by AJM Petroleum
Consultants ("AJM"), analysed two of the five existing well bores of HI-98L.
AJM's analysis was confined to estimating currently accessible production
values in one reservoir.
    AJM reported the HI-98L wells 1 & 10 to contain a total proved reserve of
113.7 Mboe with probable additional of 636 Mboe producing a combined proved
plus probable reserve of 749.6 Mboe pre- royalties.
    Sidetracks are planned for both HI-98L 1 and HI-98L 10 which AJM reported
having net after royalty probable reserves of 88.3 Mstb oil and 1,374 MMcf gas
sales with current proved pre-royalty remaining of 34.7 Mstb of oil and 474
MMcf of gas. AJM further reported that HI-98L 1 will be reactivated at a daily
rate of 270 BOE per day and that HI-98L 10 would produce 200 bbls of oil per
day plus 300 thousand feet of gas per day.
    Forest Gate plans to increase HI-98L 10 production to 600 bbls per day of
oil once upgrading of topside facilities is completed.
    AJM estimated annual operating costs to peak at $1.3 million for the
proved reserves and $2.5 million in the proved plus probable case. The capital
investment required to reactivate the proved case is $457,000.
    "We believe reserves at HI-98L will be substantially expanded with our
work," said Michael Judson, President and Chief Executive Officer of Forest
Gate. "We have plans for upgrading facilities and for the side-tracking of
existing well-bores."

    
    Effective March 31, 2009
    -------------------------------------------------------------------------
                             Proved                                   Proved
                  Proved  Developed    Proved            Probable       Plus
               Developed       Non-       Un-               Addi-   Probable
               Producing  Producing developed    Proved    tional Additional
    -------------------------------------------------------------------------
    Light      Mstb
     and
     Medium
     Oil
    -------
    Ultimate
     Remaining       0.0       34.4       0.0      34.4     190.8      225.2
    WI Before
     Royalty         0.0       19.7       0.0      19.7     110.4      130.1
    WI After
     Royalty         0.0       15.8       0.0      15.8      88.3      104.1
    Royalty
     Interest        0.0        0.0       0.0       0.0       0.0        0.0
    Total Net        0.0       15.8       0.0      15.8      88.3      104.1

    Total Oil  Mstb
    ---------
    Ultimate
     Remaining       0.0       34.4       0.0      34.4     190.8      225.2
    WI Before
     Royalty         0.0       19.7       0.0      19.7     110.4      130.1
    WI After
     Royalty         0.0       15.8       0.0      15.8      88.3      104.1
    Royalty
     Interest        0.0        0.0       0.0       0.0       0.0        0.0
    Total Net        0.0       15.8       0.0      15.8      88.3      104.1

    Sales Gas  MMcf
    ---------
    Ultimate
     Remaining       0.0      472.6       0.0     472.6    2645.7     3118.3
    WI Before
     Royalty         0.0      314.4       0.0     314.4    1716.8     2031.2
    WI After
     Royalty         0.0      251.5       0.0     251.5    1373.5     1625.0
    Royalty
     Interest        0.0        0.0       0.0       0.0       0.0        0.0
    Total Net        0.0      251.5       0.0     251.5    1373.5     1625.0

    Mboe  Mboe
    ----
    Ultimate
     Remaining       0.0      113.2       0.0     113.2    631.8       744.9
    WI Before
     Royalty         0.0       72.1       0.0      72.1    396.5       468.6
    WI After
     Royalty         0.0       57.7       0.0      57.7    317.2       374.9
    Royalty
     Interest        0.0        0.0       0.0       0.0      0.0         0.0
    Total Net        0.0       57.7       0.0      57.7    317.2       374.9
    

    Forest Gate has filed its statement of reserves data and other oil and
gas information pursuant to National Instrument 51-101, which statement is
available for public viewing on SEDAR at www.sedar.com.

    Financing Terms

    Concurrently with the completion of the Transaction, Forest Gate expects
to close a non-brokered private placement financing whereby it intends to
raise between $500,000 and $2.5 million in units (the "Units"). Each Unit will
consist of one common share and one common share purchase warrant. The
subscription price for each Forest Gate common share will be equal to the
average closing price of Forest Gate's shares on the TSX Venture Exchange
("TSXV") for the trading days (i) starting on the date trading resumes on
Forest Gate's common shares and (ii) ending on May 29, 2009; minus the maximum
discount permitted by the TSXV. Each warrant will be exercisable into one
common share for a period of 2 years from closing at an exercise price of
$0.20 per share.
    The Units will be issued pursuant to applicable prospectus and
registration exemptions and will be subject to a four-month hold period (the
"Hold Period"). Forest Gate may also pay commissions and finder's fees in
connection with this private placement, in accordance with the rules and
regulations of the TSXV. It is anticipated that the financing will be
completed concurrently with the completion of the Transaction which Forest
Gate expects both to close on or prior to June 5, 2009 as the Transaction does
not require shareholder approval. After the expiration of the Hold Period, and
in the event that, for a period of 20 consecutive trading days, the common
shares of Forest Gate close at or above an average closing price of $0.40, 
Forest Gate will then have the option to force the exercise of the warrants by
giving 20 days' notice to holders of the warrants.
    Forest Gate intends to utilize the proceeds from the private placement to
increase working capital and finance its operations in Texas related to the
Transaction. This financing is subject to the usual regulatory approvals.

    About Forest Gate Resources

    Forest Gate Resources Inc. is an international oil & gas exploration and
production company. The Company is seeking to increase shareholder value
through participation and development of oil & gas exploration and production
projects in Canada and internationally.

    FORWARD-LOOKING STATEMENTS

    Certain statements regarding Forest Gate, including management's
assessments of future plans and operations and Forest Gate's anticipated
financial performance, may constitute forward-looking statements under
applicable securities laws and necessarily involve known and unknown risks and
uncertainties, most of which are beyond Forest Gate's control. These risks may
cause actual financial and operating results, performance, levels of activity
and achievements to differ materially from those expressed in, or implied by,
such forward-looking statements.
    Such factors include, but are not limited to: the impact of general
economic conditions in Canada and the United States; industry conditions
including changes in laws and regulations including adoption of new
environmental laws and regulations, and changes in how they are interpreted
and enforced; competition; the lack of availability of qualified personnel;
fluctuations in commodity prices; the results of exploration and development
drilling and related activities; imprecision in reserve estimates; the
production and growth potential of Forest Gate's various assets; fluctuations
in foreign exchange or interest rates; the ability to access sufficient
capital from internal and external sources; and obtaining required approvals
of regulatory authorities.
    Among other things, the economic viability of these properties has not
been established and there is no guarantee that it will be. Accordingly,
Forest Gate gives no assurance nor makes any representations or warranty that
the expectations conveyed by the forward-looking statements will prove to be
correct and actual results may differ materially from those anticipated in the
forward looking statements. Actual results may differ materially from results
contemplated by the forward-looking statements. When relying on
forward-looking statements to make decisions, investors and others should
carefully consider the foregoing factors and other uncertainties and should
not place undue reliance on such forward-looking statements. Forest Gate does
not undertake to publicly update or revise any forward-looking statements.
    BOEs may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
    Neither TSX Venture Exchange nor its Regulation Service Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or the accuracy of this release. This
transaction is subject to TSX Venture Exchange Approval.




For further information:

For further information: Robert Kramberger, V-P, Investor Relations,
1-866-666-3040, rkramberger@forestgate.ca, www.forestgate.ca

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Forest Gate Energy Inc.

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