Gale Force Petroleum announces final terms of transactions, publishes filing
statement

MONTREAL, May 6 /CNW Telbec/ - Gale Force Petroleum Inc. (TSX Venture: GFP, the "Corporation") today announced the final terms of transactions to conclude the restructuring of its debts, re-finance the Corporation and acquire significant new assets (the "Transactions").

Full details of the Transactions are described in a detailed disclosure document, published yesterday on SEDAR (the "Filing Statement"). The Transactions will be completed after the Corporation receives the final TSX Venture Exchange bulletin announcing the acceptance of the Transactions.

TRANSACTIONS SUMMARY

The Transactions are summarized as follows:

    
    - The acquisition of the Buccaneer Assets, the Wells Ranch working
      interest and the Pine Mills working interests, which are oil and gas
      properties and assets located in Texas, Oklahoma and Tennessee (greater
      details of these asset purchases are provided below).

    - A private placement financing, with gross proceeds of CA$1,741,500
      through the issuance of 6,966,000 Units at $0.25 per Unit. Each Unit is
      comprised of one common share and one half of a Warrant with an
      exercise price of $0.375 expiring on April 29, 2011. In connection with
      the private placement, the Corporation issued 114,500 Units and paid
      $112,500 in finder's fees to finders who are at arm's-length to the
      Corporation.

    - A Debt Forgiveness and Conversion transaction with respect to the
      Corporation's CA$1,830,281 secured loan t forgive CA$980,281 of the
      loan, convert CA$400,000 into 1,600,000 common shares of the
      Corporation at a price of twenty-five cents (CA$0.25) per share; and
      convert the balance of CA$450,000 into 1,800,000 Series I Preferred
      Shares, convertible into up to 1,800,000 common shares of the
      Corporation;
    

ASSET PURCHASE DETAILS

Certain details concerning the terms of the oil and gas property and asset purchases have been modified since they were previously disclosed.

Please note that the definitions of "proved reserves", "proved developed reserves", "proved developed non-producing reserves", "proved undeveloped", "probable reserves" and "possible reserves" used herein are consistent with the Canadian Oil and Gas Evaluator's Handbook in compliance with Canadian National Instrument 51-101. Please also 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 three property asset acquisitions the Corporation would purchase are as follows:

    
    (1) Wells Ranch. GFP would take ownership of a 100% working interest with
        an 80% net revenue interest in the Wells Ranch Property, an oil
        property located in East Texas with 6 non-producing wells on 1,200
        gross acres (1,200 net acres).

        In a report entitled "Evaluation of Reserves Attributable to Gale
        Force Petroleum in J.C. Wells Field, Wood County, Texas" prepared as
        at December 1, 2009, the reserves of the Wells Ranch Property were
        estimated by an independent qualified reserves evaluator, Waterson
        Calhoun(3), P. Eng., of Crest Engineering Services, as set forth in
        the following table:

    -------------------------------------------------------------------------
                  Oil Reserves for the Wells Ranch Property
    -------------------------------------------------------------------------
                      Light & Medium Oil     Heavy Oil         Net Present
                     -------------------------------------   Value of Future
    Reserve                                                   Net Revenues
    Category(1)                                               Before Income
                         Gross      Net     Gross       Net     Taxes (10%
                         (bbls)   (bbls)    (bbls)    (bbls)  Discount Rate)
                                                                   (2)
    -------------------------------------------------------------------------
    Undeveloped         68,900   51,700         0         0     US$2,491,000
    -------------------------------------------------------------------------
    Total Proved        68,900   51,700         0         0     US$2,491,000
    -------------------------------------------------------------------------
    Probable            20,900   15,700     5,800     4,400       US$330,000
    -------------------------------------------------------------------------
    Total Proved
     Plus Probable      89,800   67,400     5,800     4,400     US$2,821,000
    -------------------------------------------------------------------------
    Possible            23,000   17,300     6,700     5,000       US$375,000
    -------------------------------------------------------------------------
    Total Proved Plus
     Probable Plus
     Possible          112,800   84,700    12,500     9,400     US$3,196,000
    -------------------------------------------------------------------------
    -----------------------------------
    (1) The reserves were estimated using NYMEX (WTI) prices of US$76.72 for
        2009, US$81.08 for 2010 and US$85.71 for 2011, held constant
        thereafter, with a price differential of -US$15.00 per barrel for Sub
        Clarksville production and -US$3.50 for Paluxy production, such
        differentials being held constant for the life of the reserves.
    (2) All reserves quantities are undiscounted estimates; only the net
        present values of future net revenues in the last column of the table
        are discounted estimates.
    (3) Waterson Calhoun, P.Eng, is a consultant to GFP who works regularly
        with GFP to evaluate reserves and operations on its properties.

    The purchase price for the Wells Ranch Property is US$100,000 in cash and
    CA$100,000 to be paid through the issuance of 400,000 Common Shares at a
    price of CA$0.25 per share.
    GFP shall also assume abandonment and retirement obligations on the
    property, estimated to have a present value of US$97,531 (CA$102,664),
    which is the estimated future cost of abandonment and rehabilitation
    costs on the property assuming annual cost inflation of 3%, and using a
    discount rate of 10% per annum to discount back to present value.
    The vendor of the Wells Ranch Property working interests acts at arm's-
    length to GFP.

    (2) Pine Mills Assets. GFP would take ownership of a 75.5% working
        interest with a 60.40% net revenue interest in the Pine Mills
        Property, an oil property in East Texas with 27 non-producing well
        bores on 900 gross acres (680 net acres would be attributable to
        GFP). Up to 25.5% of the 75.5% working interest may be re-purchased
        by the prior owner (as described below).

    In a report entitled "Evaluation of Reserves Attributable to Gale Force
    Petroleum in Pine Mills Field, Wood County, Texas" prepared as at
    December 1, 2009, the reserves of the Pine Mills Property were estimated
    by an independent qualified reserves evaluator, Waterson Calhoun, P.Eng.,
    of Crest Engineering Services, as set forth in the following table:

    -------------------------------------------------------------------------
                   Oil Reserves for the Pine Mills Property
    -------------------------------------------------------------------------
                                   Heavy Oil            Net Present Value of
                        ----------------------------     Future Net Revenues
    Reserve Category(1)    Gross           Net           Before Income Taxes
                           (bbls)        (bbls)        (10% Discount Rate)(2)
    -------------------------------------------------------------------------
    Developed Non-
     Producing            26,400        16,700                    US$379,000
    -------------------------------------------------------------------------
    Total Proved          26,400        16,700                   US $379,000
    -------------------------------------------------------------------------
    Probable              57,100        35,800                   US $688,000
    -------------------------------------------------------------------------
    Total Proved
     Plus Probable        83,500        52,500                 US $1,067,000
    -------------------------------------------------------------------------
    Possible             440,700       275,300                 US $5,044,000
    -------------------------------------------------------------------------
    Total Proved
     Plus Probable
     Plus Possible       524,200       327,800                 US $6,111,000
    -------------------------------------------------------------------------
    -------------------------------------------
    (1) The reserves were estimated using a discount rate of 10%, using NYMEX
        prices of US$76,72 for 2009, US$81,08 for 2010 and US$85,71 for 2011,
        held constant thereafter, with a price differential of -$18.39 per
        barrel, such differentials being held constant for the life of the
        reserves.
    (2) All reserves quantities are undiscounted estimates; only the net
        present values of future net revenues in the last column of the table
        are discounted estimates.

    The purchase price to be paid for the Pine Mills Property is the
    assumption of up to an estimated US$531,959.01 in short-term trade
    payables, of which US$331,959.01 are secured trade payables and the
    balance are unsecured trade payables.

    GFP would also assume abandonment and retirement obligations on the
    property, estimated to have a present value of US$108,609 (CA$114,323),
    which is the estimated future cost of abandonment and rehabilitation
    costs on the property assuming annual cost inflation of 3%, and using a
    discount rate of 10% to discount back to present value.
    GFP would take possession of the 75.5% working interest that was acquired
    by Buccaneer from Hammerhead Investment Partners ("Hammerhead") pursuant
    to a joint venture and assignment agreement signed between Hammerhead and
    Buccaneer with the consent of GFP as of November 5, 2009. As per this
    agreement Buccaneer acquired a 75.5% working interest in the Pine Mills
    Property, of which Hammerhead had the option to re-purchase from
    Buccaneer up to 25.5% of the working interest by paying certain cash and
    other consideration to Buccaneer by January 15, 2010.
    Hammerhead has attempted to exercise its option to re-purchase a working
    interest of the Pine Mills; however, Buccaneer and GFP have taken the
    position that it failed to provide adequate consideration to re-purchase
    a 25.5% working interest. As of the date hereof, the matter remains
    unresolved, and Buccaneer and GFP believe that there is a significant
    likelihood that the dispute will result in the matter being referred to
    arbitration by a single arbiter in the State of Texas, which was the
    agreed upon method for resolving disputes under the November 5, 2009
    agreement.
    The vendor of the Pine Mills Property working interests, Hammerhead, acts
    at arm's-length to GFP.

    (3) Buccaneer Assets. GFP would take ownership of the "Buccaneer Assets",
        comprised most significantly of a 95.0% Net Profit Interest in
        certain Central Oklahoma Properties which include 4 producing wells
        and 13 on-producing wells, and a 20% working interest in a non-
        operated property in Tennessee, which includes 4 producing wells, for
        a total purchase of the benefits to the oil and natural gas minerals
        rights from 5,970 gross acres (2,620 net acres), on which there are 8
        producing wells and 13 non-producing wells.

    The Buccaneer Assets also include operating equipment, including one
    workover rig, current assets of US$190,242 (CA$200,255) as at December
    31, 2009, and a Buccaneer Operating, LLC, a wholly-owned subsidiary of
    Buccaneer, which holds no assets but is the registered entity that
    operates Buccaneer's properties in Texas.
    An evaluation of the Buccaneer Asset properties by an independent
    qualified reserves evaluator, Michele K. Mudrone, P.Eng, of MKM
    Engineering, in a report entitled "Appraisal of Certain Oil and Gas
    Properties Owned by Buccaneer Energy Corporation Located in Oklahoma,
    Tennessee, and Texas" prepared as at October 1, 2009, using a discount
    rate of 10%, and using NYMEX prices until 2019, with prices held constant
    thereafter, found that Buccaneer's properties have proved reserves of US
    $8,901,210.

    A summary of the Buccaneer Assets reserves are set forth in the following
    table:

    -------------------------------------------------------------------------
                      Oil and Gas Reserves of Buccaneer
    -------------------------------------------------------------------------
                     Light & Medium Oil    Natural Gas          Net Present
                 ----------------------------------------     Value of Future
                                                                Net Revenues
    Reserve              Gross      Net     Gross      Net     Before Income
    Category(1)          (bbls)   (bbls)     (Mcf)    (Mcf)      Taxes (10%
                                                            Discount Rate)(2)
    -------------------------------------------------------------------------
    Developed
     Producing          44,000   34,000   287,000  225,000          1,682,000
    -------------------------------------------------------------------------
    Developed
     Non-producing     138,000  107,000   586,000  457,000          5,108,000
    -------------------------------------------------------------------------
    Undeveloped         70,000   55,000   396,000  311,000          2,110,000
    -------------------------------------------------------------------------
    Total Proved       252,000  196,000 1,269,000  993,000          8,900,000
    -------------------------------------------------------------------------
    ---------------------------------
    (1) The reserves were estimated using NYMEX (WTI) prices of US$70.27 for
        2009, US$70.94 for 2010 and US$75.76 for 2011, etc., to 2019, with a
        price adjustment to the NYMEX prices that is indexed to the monthly
        average of the daily closing prices received on the properties at the
        Cushing, Oklahoma delivery point.
    (2) All reserves quantities are undiscounted estimates; only the net
        present values of future net revenues in the last column are
        discounted estimates.

    Although GFP would hold a 95% Net Profit Interest in the Central Oklahoma
    Properties upon closing of the Transactions, GFP shall be responsible for
    100% of capital expenses on the Central Oklahoma Properties, and shall
    have the sole and exclusive right to approve capital expenditures,
    including any completion, drilling deepening, recompletion, rework or
    sidetracking on the properties. GFP shall also have the right to approve
    any sub-contractors or suppliers used in the operating of the properties.

    Additionally, upon closing of the Transactions GFP would also be granted
    the option by Buccaneer to purchase the 100% working interest in the
    Central Oklahoma Properties for US$100.00, for a period of ten years.

    Summary of Historical Financial Statements of Buccaneer

    The following table sets forth summary historical financial information
    regarding Buccaneer:

    -------------------------------------------------------------------------
                                                  As at              As at
                                                June 30,         December 31,
            Balance Sheets (US$)                  2009               2009
                                               (audited)         (unaudited)
    -------------------------------------------------------------------------
    Current Assets                               338,038             190,242
    -------------------------------------------------------------------------
    Property and Equipment                     2,393,678           2,556,372
    -------------------------------------------------------------------------
    TOTAL Assets                               2,731,716           2,746,614
    -------------------------------------------------------------------------
    Trade Payables and Accruals                  106,923             159,517
    -------------------------------------------------------------------------
    Liabilities to be Paid in Securities
     of GFP at closing(1)                        380,618             380,618
    -------------------------------------------------------------------------
    Related-party Advances(2)                     81,583              78,926
    -------------------------------------------------------------------------
    Bank Note at 6% (variable interest)          752,000             783,796
    -------------------------------------------------------------------------
    Asset Retirement Obligations                  44,308              45,788
    -------------------------------------------------------------------------
    TOTAL Liabilities                          1,365,432           1,448,645
    -------------------------------------------------------------------------
    TOTAL Shareholder's Equity                 1,366,284           1,297,969
    -------------------------------------------------------------------------
                                                   For              For the
                                                the Year        Three Months
            Income Statements (US$)               Ended               Ended
                                           June 30, 2009   December 31, 2009
                                                (audited)         (unaudited)
    -------------------------------------------------------------------------
    Oil and Gas Revenues                         587,591              78,307
    -------------------------------------------------------------------------
    Other Revenues                                 4,755              19,465
    -------------------------------------------------------------------------
    TOTAL Revenues                               592,346              97,772
    -------------------------------------------------------------------------
    Severance Taxes                               44,950               4,606
    -------------------------------------------------------------------------
    Lease Operating Expenses                     445,225               7,820
    -------------------------------------------------------------------------
    General & Administrative                     129,548              45,147
    -------------------------------------------------------------------------
    Depreciation, Depletion and Amortization     217,674              35,247
    -------------------------------------------------------------------------
    Other expenses                               107,572                   -
    -------------------------------------------------------------------------
    Impairment of long-lived assets(3)         1,550,793             280,666
    -------------------------------------------------------------------------
    Interest Expense                              60,267               6,542
    -------------------------------------------------------------------------
    Income Tax Expense (Benefit)                (228,443)                  -
    -------------------------------------------------------------------------
    NET Income (loss)                         (1,735,240)           (282,256)
    -------------------------------------------------------------------------

    -------------------------------
    (1) These liabilities are composed of an US$180,000 (CA$189,474) account
        payable and US$200,618 (CA$211,176) in related party advances to
        Buccaneer from Joseph F. Langston Jr. These liabilities shall be
        repaid at closing through the issuance of 757,895 Common Shares to
        discharge US$180,000 (CA$189,474) of liabilities and 844,706
        Preferred Shares convertible into up to 844,706 Common Shares to
        discharge US$200,618 (CA$211,176) in liabilities.
    (2) Of these related party advances, which are advances without interest
        or term to repayment, it is intended that US$78,926 shall be repaid
        in cash shortly after closing.
    (3) The impairment charges for both period presented in the table were
        recognized to adjust the value of Buccaneer's Assets to equal the
        purchase price for the Acquisition of the Buccaneer Assets as
        described herein.

    Acquisition Price & Assumed Liabilities

    The total Purchase Price for the Buccaneer Assets is CA$2,891,173, to be
    paid by GFP as follows:

    a) Up to 5,465,136 Common Shares shall be issued to Buccaneer at a price
       of CA$0.25 per share for a total issuance value of CA$1,366,281, of
       which a balance of sale of 1,200,000 Common Shares with a value of CA
       $300,000 shall not be issued until certain conditions are met post-
       closing; and
    b) GFP shall assume CA$1,524,889 (US$1,448,645) in Assumed Liabilities of
       Buccaneer, of which CA$400,651 (US$380,618) shall be paid down through
       the issuance of GFP securities at the closing, as described below
       under "Debt Reduction".

    Debt Reduction

    In addition to the securities issued in payment of the Purchase Price,
    simultaneously with the closing, GFP shall issue CA$400,651 of its
    securities to liability-holders of Buccaneer to pay down CA$400,651 (US
    $380,618) of liabilities as follows:

    (a) 757,895 Common Shares at a price of CA$0.25 for a total issuance
        value of CA$189,474, to pay down a US$180,000 account payable of
        Buccaneer;
    (b) 844,706 Series I Preferred Shares for a total issuance value of
        CA$211,177, such Series I Preferred Shares being convertible into up
        to 844,706 Common Shares, to pay down US$200,6118 in shareholder
        advances of Buccaneer; and
    (c) 422,353 Warrants, with no value assigned, as they are being issued
        along with the other securities.

    This debt reimbursement will reduce the total debt levels of GFP assumed
    from Buccaneer at the closing to approximately US$1,068,027 (CA
    $1,124,239), which is calculated as US$1,448,645 (CA$1,524,889) total
    liabilities of Buccaneer as at December 31, 2009, less the US$380,618 (CA
    $400,651) that shall be repaid and discharged by the issuance of Common
    Shares, Series I Preferred Shares and Warrants at closing.
    

STOCK OPTION PLAN

The Corporation shall amend its stock option plan and issue stock options under the new plan. The amended stock option plan would permit the Corporation to issue up to 1,500,000 options (post-share-consolidation), which would be less than 10% of shares of the Corporation issued and outstanding following the closing of the Transactions. The Corporation would issue options to purchase an aggregate 1,376,000 shares of the Corporation at a price of $0.33, which expire on or about at latest on May 12, 2015. The Amended Stock Option Plan and the issuance of options including the exercise price are subject to the approval or revision of the TSX Venture Exchange.

TRANSACTIONS SUMMARY

The table below sets forth the capital structure of the Corporation following closing of the Transactions:

    
    -------------------------------------------------------------------------
                                                                     Issue /
                                                      Quantity     Exercise /
    Shareholder Group              Securities       (Issued or    Conversion
                                                     Underlying)     Price
    -------------------------------------------------------------------------
    Existing Shareholders        Common Shares        1,243,187            -
    -------------------------------------------------------------------------
    Secured Lender               Common Shares        1,600,000        $0.25
    -------------------------------------------------------------------------
    Acquisitions                 Common Shares        5,423,031        $0.25
    -------------------------------------------------------------------------
    Private Placement
     ($1,741,500)                Common Shares        6,966,000        $0.25
    -------------------------------------------------------------------------
    Finder's Fees                Common Shares          114,000
    -------------------------------------------------------------------------
    TOTAL Common Shares I&O                          15,346,218
    -------------------------------------------------------------------------
    Balance of Sale,
     Acquisition               Balance of Sale        1,200,000        $0.25
    -------------------------------------------------------------------------
    Warrants                          Warrants        3,785,639       $0.375
    -------------------------------------------------------------------------
    Employee Options                   Options          124,000        $0.25
    -------------------------------------------------------------------------
    Employee Options                   Options        1,376,000        $0.33
    -------------------------------------------------------------------------
    Series I Preferred                Series I
     Shares                   Preferred Shares        2,644,706       $0.25
    -------------------------------------------------------------------------
    TOTAL Fully Diluted                              24,476,563
    -------------------------------------------------------------------------
    

Once the Transactions have been completed, management of the Corporation would consider the restructuring of the Corporation completed. The restructuring would result in the elimination of the Corporation's secured loan, a substantial increase in the size and potential of the Corporation's oil and gas reserves, and sufficient working capital and cash flow from operations to continue as a going concern.

ABOUT GALE FORCE PETROLEUM INC. - www.GaleForcePetroleum.com

Gale Force Petroleum is a public corporation with a focus on the development and exploitation of oil and gas resources in mature basins, building shareholder value by making accretive acquisitions and developing its properties. It will own oil and natural gas properties in Texas, Oklahoma, Tennessee and Kentucky.

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 "Business Risks" in the Corporation's periodic filings on SEDAR, for example, in its Management Discussion and Analysis for the annual exercise ended June 30, 2009. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Corporation does not assume the obligation to update any forward-looking statements.

"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: For further information: Michael McLellan, Chairman and CEO, (514) 333-9292

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Gale Force Petroleum Inc.

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