MONTREAL, May 25 /PRNewswire-FirstCall/ -- Forest Gate Resources Inc. ("Forest Gate") reports that it has received an independent reserve report prepared in accordance with NI51-101 on two of five potential producing wells at the High Island 98-L ("HI-98L") offshore project located in Gulf of Mexico off the coast of Texas.
As previously announced in a news release dated May 12, 2009, Forest Gate has entered into an agreement on April 28, 2008 to acquire, subject to certain conditions, 90% of all of the issued and outstanding shares of Atlantis Deepwater Production, Inc. and 90% of all of the issued and outstanding securities of Impact Exploration & Production, LLC, both privately held Houston, Texas-based oil and gas ventures (the "Transaction").
In consideration for the securities of Atlantis and Impact, Forest Gate would issue 142,322,333 common shares from its share capital, at a deemed issue price of $0.02 per share for a total consideration of $2,846,446 (representing 14,232,233 common shares at a deemed issue price of $0.20 on a post-consolidation basis of 10 for 1) , so that the sellers, as a whole, would own 50% of Forest Gate's outstanding common shares upon completion of the Transaction but before taking into account the concurrent financing which terms are described below.
Reserve Report
Atlantis has signed an agreement with a third party, enabling it to acquire interests ranging from 57.3% to 100% in HI-98L.
The report, effective as at March 31, 2009 and prepared by AJM Petroleum Consultants ("AJM"), analysed two of the five existing well bores of HI-98L. AJM's analysis was confined to estimating currently accessible production values in one reservoir.
AJM reported the HI-98L wells 1 & 10 to contain a total proved reserve of 113.7 Mboe with probable additional of 636 Mboe producing a combined proved plus probable reserve of 749.6 Mboe pre- royalties.
Sidetracks are planned for both HI-98L 1 and HI-98L 10 which AJM reported having net after royalty probable reserves of 88.3 Mstb oil and 1,374 MMcf gas sales with current proved pre-royalty remaining of 34.7 Mstb of oil and 474 MMcf of gas. AJM further reported that HI-98L 1 will be reactivated at a daily rate of 270 BOE per day and that HI-98L 10 would produce 200 bbls of oil per day plus 300 thousand feet of gas per day.
Forest Gate plans to increase HI-98L 10 production to 600 bbls per day of oil once upgrading of topside facilities is completed.
AJM estimated annual operating costs to peak at $1.3 million for the proved reserves and $2.5 million in the proved plus probable case. The capital investment required to reactivate the proved case is $457,000.
"We believe reserves at HI-98L will be substantially expanded with our work," said Michael Judson, President and Chief Executive Officer of Forest Gate. "We have plans for upgrading facilities and for the side-tracking of existing well-bores."
Effective March 31, 2009 ------------------------------------------------------------------------- Proved Proved Proved Developed Proved Probable Plus Developed Non- Un- Addi- Probable Producing Producing developed Proved tional Additional ------------------------------------------------------------------------- Light Mstb and Medium Oil ------- Ultimate Remaining 0.0 34.4 0.0 34.4 190.8 225.2 WI Before Royalty 0.0 19.7 0.0 19.7 110.4 130.1 WI After Royalty 0.0 15.8 0.0 15.8 88.3 104.1 Royalty Interest 0.0 0.0 0.0 0.0 0.0 0.0 Total Net 0.0 15.8 0.0 15.8 88.3 104.1 Total Oil Mstb --------- Ultimate Remaining 0.0 34.4 0.0 34.4 190.8 225.2 WI Before Royalty 0.0 19.7 0.0 19.7 110.4 130.1 WI After Royalty 0.0 15.8 0.0 15.8 88.3 104.1 Royalty Interest 0.0 0.0 0.0 0.0 0.0 0.0 Total Net 0.0 15.8 0.0 15.8 88.3 104.1 Sales Gas MMcf --------- Ultimate Remaining 0.0 472.6 0.0 472.6 2645.7 3118.3 WI Before Royalty 0.0 314.4 0.0 314.4 1716.8 2031.2 WI After Royalty 0.0 251.5 0.0 251.5 1373.5 1625.0 Royalty Interest 0.0 0.0 0.0 0.0 0.0 0.0 Total Net 0.0 251.5 0.0 251.5 1373.5 1625.0 Mboe Mboe ---- Ultimate Remaining 0.0 113.2 0.0 113.2 631.8 744.9 WI Before Royalty 0.0 72.1 0.0 72.1 396.5 468.6 WI After Royalty 0.0 57.7 0.0 57.7 317.2 374.9 Royalty Interest 0.0 0.0 0.0 0.0 0.0 0.0 Total Net 0.0 57.7 0.0 57.7 317.2 374.9
Forest Gate has filed its statement of reserves data and other oil and gas information pursuant to National Instrument 51-101, which statement is available for public viewing on SEDAR at http://www.sedar.com/.
Financing Terms
Concurrently with the completion of the Transaction, Forest Gate expects to close a non-brokered private placement financing whereby it intends to raise between $500,000 and $2.5 million in units (the "Units"). Each Unit will consist of one common share and one common share purchase warrant. The subscription price for each Forest Gate common share will be equal to the average closing price of Forest Gate's shares on the TSX Venture Exchange ("TSXV") for the trading days (i) starting on the date trading resumes on Forest Gate's common shares and (ii) ending on May 29, 2009; minus the maximum discount permitted by the TSXV. Each warrant will be exercisable into one common share for a period of 2 years from closing at an exercise price of $0.20 per share.
The Units will be issued pursuant to applicable prospectus and registration exemptions and will be subject to a four-month hold period (the "Hold Period"). Forest Gate may also pay commissions and finder's fees in connection with this private placement, in accordance with the rules and regulations of the TSXV. It is anticipated that the financing will be completed concurrently with the completion of the Transaction which Forest Gate expects both to close on or prior to June 5, 2009 as the Transaction does not require shareholder approval. After the expiration of the Hold Period, and in the event that, for a period of 20 consecutive trading days, the common shares of Forest Gate close at or above an average closing price of $0.40, Forest Gate will then have the option to force the exercise of the warrants by giving 20 days' notice to holders of the warrants.
Forest Gate intends to utilize the proceeds from the private placement to increase working capital and finance its operations in Texas related to the Transaction. This financing is subject to the usual regulatory approvals.
About Forest Gate Resources
Forest Gate Resources Inc. is an international oil & gas exploration and production company. The Company is seeking to increase shareholder value through participation and development of oil & gas exploration and production projects in Canada and internationally.
FORWARD-LOOKING STATEMENTS
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 forward-looking statements.
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 authorities.
Among other things, the economic viability of these properties has not been established and there is no guarantee that it will be. Accordingly, Forest Gate gives no assurance nor makes any representations or warranty that the expectations conveyed by the forward-looking statements will prove to be correct and actual results may differ materially from those anticipated in the forward looking statements. Actual results may differ materially from results contemplated by the forward-looking statements. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and should not place undue reliance on such forward-looking statements. Forest Gate does not undertake to publicly update or revise any forward-looking statements.
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.
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 release. This transaction is subject to TSX Venture Exchange Approval.
Forest Gate Resources Inc.
CONTACT: Robert Kramberger, V-P, Investor Relations, 1-866-666-3040,
rkramberger@forestgate.ca, http://www.forestgate.ca/
