MONTREAL, Feb. 3 /CNW Telbec/ - The Board of Directors of Gale Force
Petroleum Inc. (TSX Venture: GFP, the "Corporation") today announced that it
has performed an in-depth review of the Corporation's business activities. The
Board of Directors has concluded that in order to continue as a going concern,
a restructuring of the Corporation's debts and concurrent refinancing is now
necessary. Therefore, as a first step, the Corporation will file a Proposal to
Creditors under the Bankruptcy and Insolvency Act (Canada) (the "Proposal"),
effective on today's date.
Michael McLellan, President and CEO, described the situation as follows:
"When your board of directors initially adopted the restructuring plan in
September 2007, there was a belief that management could obtain sufficient new
funding and create enough value to overcome an unhealthy balance sheet,
ultimately growing to create value for shareholders.
We began the restructuring plan with liabilities that exceeded $6
million, assets worth less than $1 million and minimal revenues. We needed to
raise sufficient equity to build new assets while simultaneously paying down
or reducing our debts. We have faithfully executed this strategy, raising
equity financing totalling $4.9 million, reducing the total debts of the
Corporation to $3.7 million and investing shareholder's money in new
higher-quality natural gas properties in Alberta and Kentucky.
In the last several months, oil and natural gas prices have diminished,
credit has become unavailable and general economic conditions have
deteriorated such that the Corporation can no longer rely on raising financing
in equity markets that would be needed to complete the restructuring.
It is apparent that unless there is a major reduction and restructuring
of the Corporation's debts, the Corporation will not be able to meet its
short-term obligations, nor will it be possible for the Corporation to
continue as a going concern.
The Corporation is convinced that it possesses valuable assets. Notably,
it believes that its Kentucky Shale Gas Property has the potential to provide
extended growth in both revenues and net asset value, if financing could be
made available to continue the development of the property and if natural gas
The Corporation's recent workover and completion program proved that
there is consistent gas potential across the Kentucky Property and confirmed
that there is low-risk, low-cost drilling for the Devonian Shale target, with
the potential for excellent economic returns to investment. The recent Farmout
Agreement concluded by the Corporation on January 13, 2009, will ensure the
continued development of the Kentucky Property in the near term.
However, in the event of a bankruptcy today, even if there is an orderly
sale of the Corporation's assets, in current market conditions there would be
no value remaining for the Corporation's shareholders or for its unsecured
As a result, the Corporation has determined that the best option to
realize a possible future for the Corporation, its shareholders and its
creditors, is to file a Proposal to Creditors under the Bankruptcy and
insolvency Act (Canada)."
The Proposal will address all classes of creditors and observe standard
practice, regulatory and financial requirements.
For the Proposal to be "Approved", it must receive approval in each class
of creditor by at least 66.67% in dollars and 50.00% plus one in the number of
eligible creditors who vote. It also must be accepted by the Court.
The Proposal offers payment of all debts owing to the Corporation's
unsecured creditors and potential claimants totalling approximately $2.5
million by the issuance of common shares of the Corporation. Category I
unsecured creditors will be offered full payment of their claims at $0.05 per
share, or, twenty (20) common shares of the Corporation per each dollar of
debt. Category II unsecured creditors will be offered full payment of their
claims at $0.067 per share, or, fifteen (15) common shares of the Corporation
per each dollar of debt. If the Proposal is Approved, the Corporation will
issue approximately 47,000,000 common shares to settle all claims. There are
currently 19,468,284 common shares of the Corporation issued and outstanding.
The Corporation has also reached an agreement with its lender and sole
secured creditor, Primatlantis Capital, which is subject to the Approval of
the Proposal. According to the terms of this agreement, $133,000 in interest
and fees owing to Primatlantis will be paid as a Category I unsecured creditor
under the Proposal. Additionally, there will be several amendments to the loan
agreement, including: the Maturity Date will be extended until December 31,
2010; the loan will not earn any interest nor will there be any fees owing on
the loan until after December 31, 2009; after December 31, 2009 the loan will
earn interest at 12% per annum; after December 31, 2009, the loan will be
convertible in full or in part into securities of the Corporation, at the
election of the lender, upon terms and conditions similar to those offered to
purchasers of securities of the Corporation participating in any private
placement of the Corporation following the Proposal, and; the loan is
repayable in full or in part at the election of the Corporation at any time
without penalty. Because there will be no scheduled interest payments or
capital repayments on the loan until after December 31, 2009, the lender will
not put the Corporation into default until at least after December 31, 2009,
which will provide the Corporation with time to attempt to obtain funding to
reimburse the loan and/or pursue other growth strategies.
The Proposal to Creditors was designed by the Corporation to be fair and
equitable to all creditors and stakeholders, with the goal of providing the
best chance at realizing value for the creditors, claimants and shareholders
under the circumstances. For the filing of the Proposal, the Corporation has
contracted Raymond Chabot Inc. to act as Trustee.
The shares issued as payment of debts under the Proposal as well as the
amended convertible loan agreement are subject to prior applicable regulatory
The Board of Directors of the Corporation is composed of five members,
being Jocelyn Boucher (Chairman), Ron Bourgeois, Mazen Haddad, Antoinette
Lizzi and Michael McLellan. As part of the restructuring, the directors had
decided against drawing any salary or board fees since July 1, 2008, and will
not draw any fees until at least after the restructuring of the Corporation is
complete and new financing is obtained. Also, all current directors and
officers of the Corporation have forfeited their options to purchase shares of
If the Proposal is Approved, the Corporation will require a minimum
amount of equity financing for the restructuring to be successful and for the
Corporation to continue as a going concern. The Corporation is therefore
examining financing opportunities. Further details will be announced when
ABOUT GALE FORCE PETROLEUM INC.(TM) - www.GaleForcePetroleum.com
Gale Force Petroleum is a public corporation focused on acquiring and
exploiting unconventional and conventional gas resources in mature basins,
building shareholder value through growth. It owns producing natural gas
properties in Alberta, Canada and in Kentucky, USA.
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 annual
exercise ended June 30, 2008 available on SEDAR. 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.
"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: Michael McLellan, President and CEO, (514)