To summarize the announcement:
- The Company has grown its reserves base and now has numerous infill, low-risk, high-return drilling and development opportunities. It has also invested heavily in infrastructure, setting the stage for continued growth in operations at key properties. It continues to increase production, and is generating enough cash from operations to maintain and increase production.
- The Texas Reef property has been the major focus for investment by the Company over the prior eight month. Results from a recompletion operation and new drilling confirm the economic viability of the project. The land acquisition program has provided the Company with over 4,300 gross acres (3,700 net acres), providing several proved undeveloped drilling locations.
- The Company has decided to sell non-core properties, and plans to use any capital it raises from the sale of these properties to help fund development operations.
Reserves & Production Growth
Over the prior eight months the Company has invested heavily in expanding its reserves base, growing its production, and generating additional opportunities for low-risk development. The following two charts show the Company's reserves and production growth:
If you cannot view the charts, please click here: http://galeforcepetroleum.com/gale-force-announces-operations-strategy-update/. Please note that these charts do not include any reserves or production from the Company's Marcellus properties in West Virginia.
Whereas reserves growth to date has exceeded the Company's guidance, anticipated production increases have been delayed. However, the Company's has invested significantly in infrastructure to facilitate future production growth, and it expects production increases to resume their upward trend next quarter, as wells that have already been recompleted are tied in and brought on production (including Texas Reef wells described below).
Texas Reef Properties Update
The Texas Reef properties have been the primary investment focus of the Company since it purchased the properties in April, 2012. Facing a highly competitive leasing situation, the Company aggressively pursued additional acreage in the fairway of the play, increasing its leasehold to 4,300 gross acres.
In September, 2012, the Company concluded a re-completion operation on one of three existing wells on the Texas Reef Properties. The re-completion included a hydraulic fracture stimulation (a "frack") of two Rodessa zones in the well. Since this time, the Company has been pumping off the frack fluid, which is now expected to be pumped off before the end of this year, at which time the well will go on production. Test oil and gas production from one of the two zones, tested in isolation, shows the well to be commercial. Furthermore, once the frack fluid is removed from the second zone, the Company expects to see additional production, as production from two zones will be comingled.
On October 5, 2012, the Company announced that it had commenced drilling of a fourth well on the Texas Reef Properties. Drilling was successfully completed in November, the primary target zone in the Rodessa was perforated, with initial tests in one of two potential zones showing excellent reservoir pressure and encouraging quantities of oil. The Company is now swab testing the perforated zone, and pending test results, expects to put the well on production in the first quarter of 2013.
Overall results and data obtained from drilling and completion operations on the Texas Reef projects have provided the Company with additional geological knowledge and confirmation of the economic viability of the project. With the additional acreage leased by the Company, the Company has numerous low-risk drilling and development opportunities that provide the Company an excellent avenue for continued growth.
Sale of Non-Core Properties
The Company announced today that it will raise capital by selling some of its non-core properties, and plans to reinvest the capital in low-risk, high-return development opportunities on its other properties.
The Company has begun actively marketing its properties for sale in Gregg & Rusk counties in East Texas, as well as its properties in Oklahoma and Tennessee. These properties have valuable established production, but are viewed by the Company as having relatively fewer opportunities for development than its other properties.
The Company expects that by investing the proceeds of the sale of these non-core properties on low-risk drilling and development opportunities, its overall production and average oil netbacks will increase within a six month horizon, significantly increasing profitability.
ABOUT GALE FORCE PETROLEUM INC. − www.GaleForcePetroleum.com
Gale Force Petroleum is a public corporation focused on acquiring and exploiting underdeveloped and 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, Tennessee and West Virginia.
Cautionary statement concerning use of BOEs:
Please note that the Company has used the term "BOE" herein, which 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.
"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, Co-Chairman & CEO, +1.514.221.2030