SYMBOL & EXCHANGE: FGE-V
MONTREAL, Dec. 23 /CNW Telbec/ - Forest Gate Energy reports that it has
entered an agreement to purchase oil and gas assets from a
privately-held, Calgary company.
Upon closing of the transaction, Forest Gate will own a non-operated 20
percent interest in oil and gas licenses encompassing 19,848 acres in
south western Saskatchewan. The remaining 80 percent interest is owned
and operated by Trafina Energy Ltd., a publicly-traded oil and gas
company based in Calgary.
As part of the transaction, Forest Gate is acquiring approximately 18
barrels per day of existing oil production and the equivalent of ten
barrels of oil per day in gas production. The hydrocarbon production is
from 12 wells in the south western areas of Saskatchewan known as
Rangeview and Divide. Forest Gate is also acquiring contiguous acreage
in an area known as Katherine, which has known hydrocarbon reserves.
Production from the existing wells is from the Upper Shaunavon (18
degree API), and Madison formations (10 degree API). Currently the
parties to the parties are completing a horizontal well in the Upper
Shaunavon formation at Divide, Saskatchewan. Analogous horizontal wells
drilled in the area have enabled production of between 75 and 125
barrels of oil per day.
According to the reserve audit filed by Trafina Energy on December 31,
2009, Divide and Rangeview, Saskatchewan, are estimated to have total
proved plus probable reserves of 705,000 barrels of oil equivalent. The
before-tax present value at a 5% discount is $13,931,000. Both the
reserve estimate and the present value calculation are increased by 20%
when Spade's interest is considered.
The total consideration for the acquisition is approximately $1.5
million. Forest Gate will issue the vendor 7.98 million shares, assume
its bank line of credit in the amount of $350,000 and assume various
liabilities of the vendor with its joint venture partner in the amount
of $277,000. Forest Gate will also make an additional cash payment to
the vendor of approximately $75,000 by March 31, 2011, subject to
normal industry adjustments.
"We are adding significantly to our daily oil production with this
transaction," said Michael Judson, Forest Gate's President. "With the
current production from Divide and Rangeview alone, we almost double
"This does not include the expected oil production from the horizontal
being completed in the Upper Shaunavon formation at Divide,
Saskatchewan. Our engineers are telling us that there is the potential
to drill six more horizontal wells into the Upper Shaunavon formation
and four horizontal wells into the Madison formation," said Mr. Judson.
The purchase is subject to various conditions and approvals including
satisfactory due diligence review, the receipt of independent reserve
audit, bank approval on the transfer of debt and TSX Venture Exchange
and board approvals.
About Forest Gate
Forest Gate Energy Inc. is a publicly listed oil and gas exploration and
production, and non-energy resource company trading on the TSX Venture
Exchange under the symbol FGE. The Company is seeking to increase
shareholder value through participation and development of energy and
other resources in Canada and internationally.
BOEs may be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. In addition, the
estimated values disclosed in this release do not represent fair market
Certain statements regarding Forest Gate, including management's
assessments of future plans and operations and Forest Gate's
anticipated financial performance, may constitute forward-looking
statements under applicable securities laws and necessarily involve
known and unknown risks and uncertainties, most of which are beyond
Forest Gate's control. These risks may cause actual financial and
operating results, performance, levels of activity and achievements to
differ materially from those expressed in, or implied by, such
Such factors include, but are not limited to: the impact of general
economic conditions in Canada and the United States; industry
conditions including changes in laws and regulations including adoption
of new environmental laws and regulations, and changes in how they are
interpreted and enforced; competition; the lack of availability of
qualified personnel; fluctuations in commodity prices; the results of
exploration and development drilling and related activities;
imprecision in reserve estimates; the production and growth potential
of Forest Gate's various assets; fluctuations in foreign exchange or
interest rates; the ability to access sufficient capital from internal
and external sources; and obtaining required approvals of regulatory
Neither TSX Venture Exchange nor its Regulation Service Provider (as
that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or the accuracy of this
SOURCE Forest Gate Energy Inc.
For further information: For further information:
ROBERT KRAMBERGER, V-P, INVESTOR RELATIONS