DALLAS, TX, Jan. 31, 2012 /CNW Telbec/ - Gale Force Petroleum Inc.
(TSXV: GFP) (OTCQX: GFPMF) ("Gale Force" or the "Company") announced today that it has purchased non-operated interests in the
liquids-rich Marcellus shale gas field in Wetzel and Marshall Counties,
West Virginia (the "Marcellus Properties").
"This is a tremendous opportunity with excellent financial terms for
Gale Force to participate in one of the most successful plays in North
American oil and gas in recent times", said Michael McLellan, Chairman
and CEO. "The liquids-rich natural gas gives the property very
favourable economics at current oil and gas prices".
The Marcellus Properties consist of approximately 10,000 acres, operated
by a multi-billion dollar public oil and gas company with favourable
service contracts. The properties are in the "wet gas" window of the
Marcellus shale gas field, with prolific natural gas liquids and
condensate in addition to abundant natural gas. To date over 15 wells
have been wells have been drilled on the Marcellus Properties and
between 50 and 100 additional new wells are expected to be drilled and
completed on similar spacing to the existing 15 wells within the next 3
Of the wells already drilled on the Marcellus Properties several have
been completed, flow-testing at rates ranging from 3 to 5 million cubic
feet (MMcf) of gas per day. The wells also had an initial condensate
production rate ranging from 70 barrels to in excess of 95 barrels per
each MMcf of gas produced, and initial natural gas liquids (NGL)
volumes from the wet gas stream estimated to be over 35 barrels per
MMcf of gas produced, which should significantly enhance the economics
of the field.
The Company has purchased working interests (WIs) in various existing
wells and the rights to participate in any of the up to 100 additional
wells expected to be drilled on the Marcellus Properties. As per the
terms of the investment, the Company will earn payout of its initial
investment plus an internal rate of return (IRR) of 35%, prior to its
WIs being reduced by approximately 40%. Following this initial
purchase, the Company owns WIs including a 1.275% WI in numerous
existing drilled but not completed wells, a 0.255% WI in several
existing drilled and completed wells, and the Company has the rights to
participate in the drilling of up to 100 wells throughout the acreage
for a minimum of 1.125% WI in each well until it earns payout plus an
IRR of 25%, after which its interests in each well decreases by 50%.
The initial investment made by the Company for the interests in the
existing wells on the Marcellus Properties will be approximately
US$1,500,000 for its share of drilling, completions and tie-in costs
over the next 3 months. Additionally, the Company has the option to
fund its share of any new wells drilled over the next 2 to 3 years on
the property, expected to require between $2.5 million and $10 million,
depending on the drilling programs determined by the operator of the
project. A finder's fee of US$90,000 is payable to IROMAD, a
specialized oil and gas consultancy, for its role in sourcing and
performing due diligence on the acquisition.
To finance the purchase of the Marcellus Properties the Company borrowed
CA$500,000 (the "Short-term Loan") from Palos Merchant Bank L.P. and
will conclude a CA$500,000 equity private placement (the "Private
Placement") with a strategic US oil and gas investor, Young Capital
Partners, for a total CA$1,000,000 in new capital raised.
"Even though Gale Force is generating significant cash from operations
and has approximately $600,000 currently available on its line of
credit, these small financings not only provide liquidity to close the
Marcellus Properties...", said Mr. McLellan, "These financings also
assure that the Company continues the development of its existing
properties, where it is expected that daily production will grow to
between 350 and 400 BOE per day by June, 2012, not including the new
production from this acquisition".
The $500,000 Short-term Loan from Palos Merchant Bank L.P. shall earn
interest of 1.25% per month and has a term of between 2 and 6 months.
The Short-term Loan is secured by a first-rank security interest on the
50% of the Company's Thunder Property and the Company's interests in
the Marcellus Properties.
The $500,000 Private Placement with Young Capital Partners (see below
for a description of Young Capital Partners) is in exchange of
2,500,000 units (the "Units"). Each Unit shall be issued at a price of
$0.20 per Unit, and will be comprised of one common share Company and
one warrant with a term of 2 years with an exercise price of $0.20. The
common shares and warrants are subject to resale restrictions that will
expire on April 2, 2012.
The Company also signed a shares-for-debt agreement to settle fees owing
to IROMAD to settle accrued consulting fees of $15,000, through the
issuance of 75,000 Units. These shares and warrants shall be issued
today, along with 585,000 shares and 500,000 warrants issued under
previously signed shares-for debt agreements, as previously announced
on January 10, 2012.
The issuance of the common shares and the warrants are subject to TSX
Venture Exchange approval.
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.
ABOUT YOUNG CAPITALPARTNERS, LP - www.YoungCM.com
Young Capital Partners, LP is a limited partnership advised by Young
Capital Management, LLC, a Registered Investment Advisor with the state
of California that is based in Los Angeles. Joshua Young is the
managing member of Young Capital Partners. He was previously an analyst
at Karlin Asset Management, a multi-billion dollar single family office
based in Los Angeles. He was recently featured in Oil & Gas Investor
Magazine and in The Energy Report.
ABOUT PALOS MERCHANT BANK L.P. - www.PalosManagement.com/Palos-Merchant-Bank.php
Palos Merchant Bank L.P. ("Palos") engages in merchant banking activities and provides a variety of
corporate finance services including: capital-raising, credit
syndication, buyout financing, advice on mergers and acquisitions,
restructuring and due diligence. There are two major differences
between Palos and traditional investment banks: (1) Palos invests its
own own money alongside other investors, typically as the lead
investor, and (2) Palos does not engage in underwriting. Palos
Merchant Bank also becomes involved in the governance of the companies
in which it invests, usually by taking an active role at the Board of
Directors level. The managers of the Palos have extensive experience in
corporate finance, private equity, venture capital and seed financing.
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