DALLAS, TX, Feb. 2 /CNW Telbec/ - Gale Force Petroleum Inc. (TSX Venture: GFP) ("Gale Force" or the "Company") today announced that it has concluded the purchase of producing oil properties in East Texas (the "Colgate Properties").  

The Colgate Properties are located within 5 miles of the Company's existing properties in East Texas and consist of mainly of 100% working interests in oil and gas properties that are currently producing, in the aggregate, approximately 100 barrels per day.

"This is the sixth acquisition completed by Gale Force in 8 months, more than doubling the size of the Company's producing operations," said Michael McLellan, Chairman and CEO of Gale Force Petroleum Inc.  "Due to its proximity to our existing properties and its size, the Colgate properties add scale to our existing operations in East Texas and will reduce our lifting costs and overhead per barrel. And we continue to evaluate similar accretive acquisition opportunities to increase our oil reserves and production. "

In a report entitled "Evaluation of Reserves attributable to Gale Force Petroleum in the acquisition of the Colgate Properties" prepared as at December 1, 2010, the reserves of the Colgate Property were estimated by an independent qualified reserves evaluator, Waterson Calhoun, P.E., at Crest Engineering Services, using an average forecast oil price of US$88.69, as follows:

Oil Reserves for the Colgate Properties
Reserve Category Light & Medium Oil Net Present Value of
Future Net Revenues
Before Income Taxes
(10% Discount Rate)*
Proved Developed Producing 263,300 199,820 US$4,759,000
Probable 298,600 221,230 US$4,604,000
Total Proved Plus Probable 561,900 421,050 US$9,363,000
Possible 377,400 284,960 US$4,877,000
Total Proved Plus Probable Plus
939,300 706,010 US$14,240,000

*The reserves were estimated using NYMEX (WTI) prices as at December 1, 2010 of
$89.31 for 2010 and 2011, $89.23 for 2012, $88.48 for 2013, $88.28 for 2014 and
$88.53 thereafter.

Please 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 purchase price for the Colgate Properties was CA$3.805 million, comprised of US$2.805 million in cash (converted into Canadian dollars using an exchange rate of 1.00), 2,075,000 common share units (the "Common Share Units") with an issuance value of CA$622,500, 591,668 preferred share units (the "Preferred Share Units") with an issuance value of CA$177,500, and a CA$200,000 balance of sale payable through the issuance of 666,666 Preferred Share Units on April 1, 2011.

Each Common Share Unit is issued at a price of CA$0.30 per unit, and is comprised of one common share of the Company and one warrant (the "Warrants") with an exercise price of $0.50 expiring July 31, 2012.  Each Preferred Share Unit is issued at a price of CA$0.30 per unit, and is comprised of one Series I preferred share of the Company and one Warrant. The Series I preferred shares are convertible into common shares of the Company at any time, subject to a conversion limit whereby the Sellers of the Colgate properties (the "Sellers") are restricted to owning no more than 10% of the common shares of the Company issued and outstanding.  The Warrants issued are also subject to a conversion limit whereby the Sellers are restricted to owning no more than 10% of the common shares of the Company issued and outstanding, whereby the Warrants are exercisable into Series I preferred shares instead of common shares of the Company if the 10% conversion limit would be exceeded.

In addition to the purchase price paid, the Company also estimated that it assumed abandonment retirement obligations on the Colgate Properties with a present value of US$892,271, which is the estimated future cost of abandonment and rehabilitation costs on the properties assuming annual cost inflation of 3% and using a discount rate of 10% per annum to discount back to present value.

To help finance the US$2.825 million cash component of the purchase price, the Company withdrew US$2 million from its secured US$15 million bank facility (the "Bank Loan"), the borrowing base of which was raised to US$4.5 million in conjunction with the acquisition.  The Bank Loan has a maturity date of May 1, 2012 and bears interest of 5% per annum.  The remaining US$825,000 cash component of the purchase price was taken from the proceeds of the equity private placement announced by the Company on February 1, 2011.

The Sellers of the Colgate Properties are at arm's length from the Company.  All of the securities issued by the Company in connection with this acquisition are subject to resale restrictions which expire on June 1, 2011.  There are now a total of 21,055,737 common shares of the Company issued and outstanding.

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.

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."


For further information:

Michael McLellan, CFA, Chairman & CEO, +1.514.221.2030

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