Forest Gate Acquires Oil & Gas Production
December 23 2010 - 8:30AM
PR Newswire (Canada)
MONTREAL, Dec. 23 /CNW/ -- 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 our production." "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. 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. In addition, the estimated values
disclosed in this release do not represent fair market value.
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. 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. To view this news release in HTML
formatting, please use the following URL:
http://www.cnw.ca/en/releases/archive/December2010/23/c7477.html p
align="justify"ROBERT KRAMBERGER, V-P, INVESTOR RELATIONSbr/
1-866-666-3040br/ a
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