MONTREAL, June 13 /CNW Telbec/ - Gale Force Petroleum Inc. (TSX-V: GFP,
the "Corporation") has announced the terms by which it will acquire a 50%
ownership in the Kentucky Shale Gas Property, inclusive of 22,000 acres of oil
and gas leases, 9 gas wells and 5 miles gathering lines, including
compressors, all located in Eastern Kentucky, from NAFG, LLC, a private U.S.
company. The purchase price will be $2.5 million of which Gale Force Petroleum
will pay $1.25 million. Gale Force Petroleum's two joint venture partners,
Wind Hydrogen Limited (ASX: WHN, "WHL") and Derby Resources LLC ("Derby") will
share the remaining 50% ownership.
The Corporation has now completed its operational, geological and
technical due diligence of the Kentucky Shale Gas Property on behalf of the
joint venture and is satisfied with its findings. Legal due diligence on the
Kentucky Shale Gas Property is ongoing, and is expected to culminate prior to
closing the acquisition before the end of June 2008.
Gale Force Petroleum will be the "Operator" of the Kentucky Shale Gas
Property, and is assembling a team of industry experts in unconventional gas
exploration and development, with specialized knowledge of Devonian shale gas
recovery as well as experience in Eastern Kentucky. The operating team will be
provided with performance incentives.
The Kentucky Shale Gas Property is located in Eastern Kentucky in the
Appalachian Basin, and there is analogous commercial production within a
20 mile radius of the Property. The primary target of development is the
Devonian shale gas, however, there is potential oil and gas production from
other zones that are productive in the area, which will be evaluated during
the Phase 1 Program. The Devonian shale gas formation is located at
approximately 1000 feet deep, and is consistently 250 feet in thickness across
the Property. Due to the shallow depth of the formation and low services costs
in the area, a typical well drilled, stimulated and completed is approximately
According to petroleum engineer David Kahn PhD, P.Eng. who is working
with the Corporation, there is a Discovered Resource between 1.0 trillion
cubic feet (TCF) and 1.9 TCF of original gas in place (GIP) in the Devonian
shale gas formation on the 22,000 acre Property. "Discovered Resources" are
those quantities of oil and gas estimated on a given date to be remaining in,
plus those quantities already produced from, known accumulations. Discovered
resources are divided into economic and uneconomic categories, with the
estimated future recoverable portion classified as reserves and contingent
According to Mr. Kahn, based on the analysis of typical analogous wells
and assuming 20-acre spacing, recovery rates may vary between 20% and 33% of
GIP, yielding a Contingent Resource of 200bcf and 380bcf. "Contingent
Resources" are those quantities of oil and gas estimated on a given date to be
potentially recoverable from known accumulations but are not currently
economic. This Contingent Resource estimate is contingent on gas prices
remaining above $5 per mcf and on the ability of the Operator to effectively
access and stimulate the formation, creating sufficient permeability to
extract the resource from the unconventional shale formation. Horizontal
drilling and newer stimulation techniques may be used by the Corporation to
achieve economic production, improve flow rates and accelerate recovery. The
Contingent Resource estimate is also confirmed by data on average wells in
Eastern Kentucky, which according to the Kentucky Geological Survey average
cumulative production of 0.3 bcf per well over 20 years on 22 acre spacing.
The Phase 1 Program for development of the Kentucky Shale Gas Property is
expected to require a capital investment of approximately $1.5 million and
will focus on two main objectives: commencing production from the nine wells
in place, and drilling, coring and putting in production additional wells so
as to obtain greater cash-flows and improved geological knowledge of the
Property. The Phase 1 Program will commence immediately upon closing the
acquisition of the Property and is scheduled to finish before the end of 2008.
To fund its 50% share of the purchase of the Kentucky Shale Gas Property
and for the Phase 1 development of the Property, the Corporation will require
approximately $2.5 million. As previously announced, the Corporation has
retained Becher McMahon to help raise gross proceeds of up to $5 million
though the issuance of Units to help pay for the Kentucky Shale Gas Property.
The remaining net proceeds raised will be used for the further exploration and
development of properties in Canada and to reimburse the Corporation's debt.
In the aforementioned financing, each Unit will be issued at a price of
$0.50 and will consist of one common share of the Corporation and one
half-warrant. Each warrant will entitle its holder to purchase one common
share of the corporation for $0.70 for a period of two years following the
closing of the financing. The common shares and warrants will be subject to a
four-month hold period. The financing is subject to TSX Venture Exchange and
other customary regulatory approvals.
In separate news, the Corporation announced that to avoid litigation it
has settled under favourable terms a lawsuit brought against it by Martial
Rolland. The settlement includes a mutual release and disbursements of $35,000
by the Corporation to Mr. Rolland to settle a claim of $315,000.
ABOUT GALE FORCE PETROLEUM INC. - www.GaleForcePetroleum.com
Gale Force Petroleum is a public oil and gas corporation focused on
acquiring and developing oil and gas properties in North America, building
shareholder value through growth.
ABOUT BECHER MCMAHON CAPITAL MARKETS INC. - www.BMCapitalMarkets.com
Becher McMahon Capital Markets is an independent Limited Market Dealer
(LMD), with a wealth of experience in corporate finance, mergers and
acquisitions, deal generation, asset management and corporate management.
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 - especially but not limited to any geological or
reservoir information not supported by a NI 51-101 report - are based on
assumptions and estimates that are subject to various risks and uncertainties
including but not limited to geological risk, engineering risks, market risk
and the risks disclosed under the heading "Business Risks" in the
Corporation's periodic filings with Canadian securities regulators, including
most recently in its Management Discussion and Analysis for the exercise ended
June 30, 2007 available on SEDAR. 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
"The TSX Venture Exchange has not reviewed this release and therefore
does not accept responsibility for its adequacy or accuracy."
For further information:
For further information: Gale Force Petroleum Inc.: Michael McLellan,
(514) 333-9292; Becher McMahon Capital Markets Inc.: Campbell Becher, (647)