GALE FORCE PETROLEUM ANNOUNCES FINAL TERMS OF TRANSACTIONS, PUBLISHES FILING STATEMENT
Wednesday, May 5th, 2010
Montreal, May 5, 2010 – Gale Force Petroleum Inc. (TSX Venture: GFP, the “Corporation”) today announced the final terms of transactions to conclude the restructuring of its debts, re-finance the Corporation and acquire significant new assets (the “Transactions”).
Full details of the Transactions are described in a detailed disclosure document, published yesterday on SEDAR (the “Filing Statement”). The Transactions will be completed after the Corporation receives the final TSX Venture Exchange bulletin announcing the acceptance of the Transactions.
TRANSACTIONS SUMMARY
The Transactions are summarized as follows:
• The acquisition of the Buccaneer Assets, the Wells Ranch working interest and the Pine Mills working interests, which are oil and gas properties and assets located in Texas, Oklahoma and Tennessee (greater details of these asset purchases are provided below).
• A private placement financing, with gross proceeds of CA$1,741,500 through the issuance of 6,966,000 Units at $0.25 per Unit. Each Unit is comprised of one common share and one half of a Warrant with an exercise price of $0.375 expiring on April 29, 2011. In connection with the private placement, the Corporation issued 114,500 Units and paid $112,500 in finder’s fees to finders who are at arm’s-length to the Corporation.
• A Debt Forgiveness and Conversion transaction with respect to the Corporation’s CA$1,830,281 secured loan t forgive CA$980,281 of the loan, convert CA$400,000 into 1,600,000 common shares of the Corporation at a price of twenty-five cents (CA$0.25) per share; and convert the balance of CA$450,000 into 1,800,000 Series I Preferred Shares, convertible into up to 1,800,000 common shares of the Corporation;
ASSET PURCHASE DETAILS
Certain details concerning the terms of the oil and gas property and asset purchases have been modified since they were previously disclosed.
Please note that the definitions of “proved reserves”, “proved developed reserves”, “proved developed non-producing reserves”, “proved undeveloped”, “probable reserves” and “possible reserves” used herein are consistent with the Canadian Oil and Gas Evaluator’s Handbook in compliance with Canadian National Instrument 51-101. Please also 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 three property asset acquisitions the Corporation would purchase are as follows:
(1) Wells Ranch. GFP would take ownership of a 100% working interest with an 80% net revenue interest in the Wells Ranch Property, an oil property located in East Texas with 6 non-producing wells on 1,200 gross acres (1,200 net acres).
In a report entitled “Evaluation of Reserves Attributable to Gale Force Petroleum in J.C. Wells Field, Wood County, Texas” prepared as at December 1, 2009, the reserves of the Wells Ranch Property were estimated by an independent qualified reserves evaluator, Waterson Calhoun(3), P. Eng., of Crest Engineering Services, as set forth in the following table:
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(1) The reserves were estimated using NYMEX (WTI) prices of US$76.72 for 2009, US$81.08 for 2010 and US$85.71 for 2011, held constant thereafter, with a price differential of -US$15.00 per barrel for Sub Clarksville production and -US$3.50 for Paluxy production, such differentials being held constant for the life of the reserves.
(2) All reserves quantities are undiscounted estimates; only the net present values of future net revenues in the last column of the table are discounted estimates.
(3) Waterson Calhoun, P.Eng, is a consultant to GFP who works regularly with GFP to evaluate reserves and operations on its properties.
The purchase price for the Wells Ranch Property is US$100,000 in cash and CA$100,000 to be paid through the issuance of 400,000 Common Shares at a price of CA$0.25 per share.
GFP shall also assume abandonment and retirement obligations on the property, estimated to have a present value of US$97,531 (CA$102,664), which is the estimated future cost of abandonment and rehabilitation costs on the property assuming annual cost inflation of 3%, and using a discount rate of 10% per annum to discount back to present value.
The vendor of the Wells Ranch Property working interests acts at arm’s-length to GFP.
(2) Pine Mills Assets. GFP would take ownership of a 75.5% working interest with a 60.40% net revenue interest in the Pine Mills Property, an oil property in East Texas with 27 non-producing well bores on 900 gross acres (680 net acres would be attributable to GFP). Up to 25.5% of the 75.5% working interest may be re-purchased by the prior owner (as described below).
In a report entitled “Evaluation of Reserves Attributable to Gale Force Petroleum in Pine Mills Field, Wood County, Texas” prepared as at December 1, 2009, the reserves of the Pine Mills Property were estimated by an independent qualified reserves evaluator, Waterson Calhoun, P.Eng., of Crest Engineering Services, as set forth in the following table:
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(1) The reserves were estimated using a discount rate of 10%, using NYMEX prices of US$76,72 for 2009, US$81,08 for 2010 and US$85,71 for 2011, held constant thereafter, with a price differential of -$18.39 per barrel, such differentials being held constant for the life of the reserves.
(2) All reserves quantities are undiscounted estimates; only the net present values of future net revenues in the last column of the table are discounted estimates.
The purchase price to be paid for the Pine Mills Property is the assumption of up to an estimated US$531,959.01 in short-term trade payables, of which US$331,959.01 are secured trade payables and the balance are unsecured trade payables.
GFP would also assume abandonment and retirement obligations on the property, estimated to have a present value of US$108,609 (CA$114,323), which is the estimated future cost of abandonment and rehabilitation costs on the property assuming annual cost inflation of 3%, and using a discount rate of 10% to discount back to present value.
GFP would take possession of the 75.5% working interest that was acquired by Buccaneer from Hammerhead Investment Partners (“Hammerhead”) pursuant to a joint venture and assignment agreement signed between Hammerhead and Buccaneer with the consent of GFP as of November 5, 2009. As per this agreement Buccaneer acquired a 75.5% working interest in the Pine Mills Property, of which Hammerhead had the option to re-purchase from Buccaneer up to 25.5% of the working interest by paying certain cash and other consideration to Buccaneer by January 15, 2010.
Hammerhead has attempted to exercise its option to re-purchase a working interest of the Pine Mills; however, Buccaneer and GFP have taken the position that it failed to provide adequate consideration to re-purchase a 25.5% working interest. As of the date hereof, the matter remains unresolved, and Buccaneer and GFP believe that there is a significant likelihood that the dispute will result in the matter being referred to arbitration by a single arbiter in the State of Texas, which was the agreed upon method for resolving disputes under the November 5, 2009 agreement.
The vendor of the Pine Mills Property working interests, Hammerhead, acts at arm’s-length to GFP.
(3) Buccaneer Assets. GFP would take ownership of the “Buccaneer Assets”, comprised most significantly of a 95.0% Net Profit Interest in certain Central Oklahoma Properties which include 4 producing wells and 13 on-producing wells, and a 20% working interest in a non-operated property in Tennessee, which includes 4 producing wells, for a total purchase of the benefits to the oil and natural gas minerals rights from 5,970 gross acres (2,620 net acres), on which there are 8 producing wells and 13 non-producing wells.
The Buccaneer Assets also include operating equipment, including one workover rig, current assets of US$190,242 (CA$200,255) as at December 31, 2009, and a Buccaneer Operating, LLC, a wholly-owned subsidiary of Buccaneer, which holds no assets but is the registered entity that operates Buccaneer’s properties in Texas.
An evaluation of the Buccaneer Asset properties by an independent qualified reserves evaluator, Michele K. Mudrone, P.Eng, of MKM Engineering, in a report entitled “Appraisal of Certain Oil and Gas Properties Owned by Buccaneer Energy Corporation Located in Oklahoma, Tennessee, and Texas” prepared as at October 1, 2009, using a discount rate of 10%, and using NYMEX prices until 2019, with prices held constant thereafter, found that Buccaneer’s properties have proved reserves of US$8,901,210.
A summary of the Buccaneer Assets reserves are set forth in the following table:
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(1) The reserves were estimated using NYMEX (WTI) prices of US$70. 27 for 2009, US$70.94 for 2010 and US$75.76 for 2011, etc., to 2019, with a price adjustment to the NYMEX prices that is indexed to the monthly average of the daily closing prices received on the properties at the Cushing, Oklahoma delivery point.
(2) All reserves quantities are undiscounted estimates; only the net present values of future net revenues in the last column are discounted estimates.
Although GFP would hold a 95% Net Profit Interest in the Central Oklahoma Properties upon closing of the Transactions, GFP shall be responsible for 100% of capital expenses on the Central Oklahoma Properties, and shall have the sole and exclusive right to approve capital expenditures, including any completion, drilling deepening, recompletion, rework or sidetracking on the properties. GFP shall also have the right to approve any sub-contractors or suppliers used in the operating of the properties.
Additionally, upon closing of the Transactions GFP would also be granted the option by Buccaneer to purchase the 100% working interest in the Central Oklahoma Properties for US$100.00, for a period of ten years.
Summary of Historical Financial Statements of Buccaneer
The following table sets forth summary historical financial information regarding Buccaneer:
________________________________________
(1) These liabilities are composed of an US$180,000 (CA$189,474) account payable and US$200,618 (CA$211,176) in related party advances to Buccaneer from Joseph F. Langston Jr. These liabilities shall be repaid at closing through the issuance of 757,895 Common Shares to discharge US$180,000 (CA$189,474) of liabilities and 844,706 Preferred Shares convertible into up to 844,706 Common Shares to discharge US$200,618 (CA$211,176) in liabilities.
(2) Of these related party advances, which are advances without interest or term to repayment, it is intended that US$78,926 shall be repaid in cash shortly after closing.
(3) The impairment charges for both period presented in the table were recognized to adjust the value of Buccaneer’s Assets to equal the purchase price for the Acquisition of the Buccaneer Assets as described herein.
Acquisition Price & Assumed Liabilities
The total Purchase Price for the Buccaneer Assets is CA$2,891,173, to be paid by GFP as follows:
a) Up to 5,465,136 Common Shares shall be issued to Buccaneer at a price of CA$0.25 per share for a total issuance value of CA$1,366,281, of which a balance of sale of 1,200,000 Common Shares with a value of CA$300,000 shall not be issued until certain conditions are met post-closing; and
b) GFP shall assume CA$1,524,889 (US$1,448,645) in Assumed Liabilities of Buccaneer, of which CA$400,651 (US$380,618) shall be paid down through the issuance of GFP securities at the closing, as described below under “Debt Reduction”.
Debt Reduction
In addition to the securities issued in payment of the Purchase Price, simultaneously with the closing, GFP shall issue CA$400,651 of its securities to liability-holders of Buccaneer to pay down CA$400,651 (US$380,618) of liabilities as follows:
(a) 757,895 Common Shares at a price of CA$0.25 for a total issuance value of CA$189,474, to pay down a US$180,000 account payable of Buccaneer;
(b) 844,706 Series I Preferred Shares for a total issuance value of CA$211,177, such Series I Preferred Shares being convertible into up to 844,706 Common Shares, to pay down US$200,6118 in shareholder advances of Buccaneer; and
(c) 422,353 Warrants, with no value assigned, as they are being issued along with the other securities.
This debt reimbursement will reduce the total debt levels of GFP assumed from Buccaneer at the closing to approximately US$1,068,027 (CA$1,124,239), which is calculated as US$1,448,645 (CA$1,524,889) total liabilities of Buccaneer as at December 31, 2009, less the US$380,618 (CA$400,651) that shall be repaid and discharged by the issuance of Common Shares, Series I Preferred Shares and Warrants at closing.
STOCK OPTION PLAN
The Corporation shall amend its stock option plan and issue stock options under the new plan. The amended stock option plan would permit the Corporation to issue up to 1,500,000 options (post-share-consolidation), which would be less than 10% of shares of the Corporation issued and outstanding following the closing of the Transactions. The Corporation would issue options to purchase an aggregate 1,376,000 shares of the Corporation at a price of $0.33, which expire on or about at latest on May 12, 2015. The Amended Stock Option Plan and the issuance of options including the exercise price are subject to the approval or revision of the TSX Venture Exchange.
TRANSACTIONS SUMMARY
The table below sets forth the capital structure of the Corporation following closing of the Transactions:
Once the Transactions have been completed, management of the Corporation would consider the restructuring of the Corporation completed. The restructuring would result in the elimination of the Corporation’s secured loan, a substantial increase in the size and potential of the Corporation’s oil and gas reserves, and sufficient working capital and cash flow from operations to continue as a going concern.
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 "Business Risks" in the Corporation's periodic filings on SEDAR, for example, in its Management Discussion and Analysis for the annual exercise ended June 30, 2009. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Corporation does not assume the obligation to update any forward-looking statements.
“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.”
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Full details of the Transactions are described in a detailed disclosure document, published yesterday on SEDAR (the “Filing Statement”). The Transactions will be completed after the Corporation receives the final TSX Venture Exchange bulletin announcing the acceptance of the Transactions.
TRANSACTIONS SUMMARY
The Transactions are summarized as follows:
• The acquisition of the Buccaneer Assets, the Wells Ranch working interest and the Pine Mills working interests, which are oil and gas properties and assets located in Texas, Oklahoma and Tennessee (greater details of these asset purchases are provided below).
• A private placement financing, with gross proceeds of CA$1,741,500 through the issuance of 6,966,000 Units at $0.25 per Unit. Each Unit is comprised of one common share and one half of a Warrant with an exercise price of $0.375 expiring on April 29, 2011. In connection with the private placement, the Corporation issued 114,500 Units and paid $112,500 in finder’s fees to finders who are at arm’s-length to the Corporation.
• A Debt Forgiveness and Conversion transaction with respect to the Corporation’s CA$1,830,281 secured loan t forgive CA$980,281 of the loan, convert CA$400,000 into 1,600,000 common shares of the Corporation at a price of twenty-five cents (CA$0.25) per share; and convert the balance of CA$450,000 into 1,800,000 Series I Preferred Shares, convertible into up to 1,800,000 common shares of the Corporation;
ASSET PURCHASE DETAILS
Certain details concerning the terms of the oil and gas property and asset purchases have been modified since they were previously disclosed.
Please note that the definitions of “proved reserves”, “proved developed reserves”, “proved developed non-producing reserves”, “proved undeveloped”, “probable reserves” and “possible reserves” used herein are consistent with the Canadian Oil and Gas Evaluator’s Handbook in compliance with Canadian National Instrument 51-101. Please also 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 three property asset acquisitions the Corporation would purchase are as follows:
(1) Wells Ranch. GFP would take ownership of a 100% working interest with an 80% net revenue interest in the Wells Ranch Property, an oil property located in East Texas with 6 non-producing wells on 1,200 gross acres (1,200 net acres).
In a report entitled “Evaluation of Reserves Attributable to Gale Force Petroleum in J.C. Wells Field, Wood County, Texas” prepared as at December 1, 2009, the reserves of the Wells Ranch Property were estimated by an independent qualified reserves evaluator, Waterson Calhoun(3), P. Eng., of Crest Engineering Services, as set forth in the following table:
| Oil Reserves for the Wells Ranch Property | |||||
| Reserve Category(1) | Light & Medium Oil | Heavy Oil | Net Present Value of Future Net Revenues Before Income Taxes (10% Discount Rate) (2) | ||
| Gross (bbls) | Net (bbls) | Gross (bbls) | Net (bbls) | ||
| Undeveloped | 68,900 | 51,700 | 0 | 0 | US$2,491,000 |
| Total Proved | 68,900 | 51,700 | 0 | 0 | US$2,491,000 |
| Probable | 20,900 | 15,700 | 5,800 | 4,400 | US$330,000 |
| Total Proved Plus Probable | 89,800 | 67,400 | 5,800 | 4,400 | US$2,821,000 |
| Possible | 23,000 | 17,300 | 6,700 | 5,000 | US$375,000 |
| Total Proved Plus Probable Plus Possible | 112,800 | 84,700 | 12,500 | 9,400 | US$3,196,000 |
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(1) The reserves were estimated using NYMEX (WTI) prices of US$76.72 for 2009, US$81.08 for 2010 and US$85.71 for 2011, held constant thereafter, with a price differential of -US$15.00 per barrel for Sub Clarksville production and -US$3.50 for Paluxy production, such differentials being held constant for the life of the reserves.
(2) All reserves quantities are undiscounted estimates; only the net present values of future net revenues in the last column of the table are discounted estimates.
(3) Waterson Calhoun, P.Eng, is a consultant to GFP who works regularly with GFP to evaluate reserves and operations on its properties.
The purchase price for the Wells Ranch Property is US$100,000 in cash and CA$100,000 to be paid through the issuance of 400,000 Common Shares at a price of CA$0.25 per share.
GFP shall also assume abandonment and retirement obligations on the property, estimated to have a present value of US$97,531 (CA$102,664), which is the estimated future cost of abandonment and rehabilitation costs on the property assuming annual cost inflation of 3%, and using a discount rate of 10% per annum to discount back to present value.
The vendor of the Wells Ranch Property working interests acts at arm’s-length to GFP.
(2) Pine Mills Assets. GFP would take ownership of a 75.5% working interest with a 60.40% net revenue interest in the Pine Mills Property, an oil property in East Texas with 27 non-producing well bores on 900 gross acres (680 net acres would be attributable to GFP). Up to 25.5% of the 75.5% working interest may be re-purchased by the prior owner (as described below).
In a report entitled “Evaluation of Reserves Attributable to Gale Force Petroleum in Pine Mills Field, Wood County, Texas” prepared as at December 1, 2009, the reserves of the Pine Mills Property were estimated by an independent qualified reserves evaluator, Waterson Calhoun, P.Eng., of Crest Engineering Services, as set forth in the following table:
| Oil Reserves for the Pine Mills Property | |||
| Reserve Category(1) | Heavy Oil | Net Present Value of Future Net Revenues Before Income Taxes (10% Discount Rate) (2) | |
| Gross (bbls) | Net (bbls) | ||
| Developed Non-Producing | 26,400 | 16,700 | US$379,000 |
| Total Proved | 26,400 | 16,700 | US $379,000 |
| Probable | 57,100 | 35,800 | US $688,000 |
| Total Proved Plus Probable | 83,500 | 52,500 | US $1,067,000 |
| Possible | 440,700 | 275,300 | US $5,044,000 |
| Total Proved Plus Probable Plus Possible | 524,200 | 327,800 | US $6,111,000 |
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(1) The reserves were estimated using a discount rate of 10%, using NYMEX prices of US$76,72 for 2009, US$81,08 for 2010 and US$85,71 for 2011, held constant thereafter, with a price differential of -$18.39 per barrel, such differentials being held constant for the life of the reserves.
(2) All reserves quantities are undiscounted estimates; only the net present values of future net revenues in the last column of the table are discounted estimates.
The purchase price to be paid for the Pine Mills Property is the assumption of up to an estimated US$531,959.01 in short-term trade payables, of which US$331,959.01 are secured trade payables and the balance are unsecured trade payables.
GFP would also assume abandonment and retirement obligations on the property, estimated to have a present value of US$108,609 (CA$114,323), which is the estimated future cost of abandonment and rehabilitation costs on the property assuming annual cost inflation of 3%, and using a discount rate of 10% to discount back to present value.
GFP would take possession of the 75.5% working interest that was acquired by Buccaneer from Hammerhead Investment Partners (“Hammerhead”) pursuant to a joint venture and assignment agreement signed between Hammerhead and Buccaneer with the consent of GFP as of November 5, 2009. As per this agreement Buccaneer acquired a 75.5% working interest in the Pine Mills Property, of which Hammerhead had the option to re-purchase from Buccaneer up to 25.5% of the working interest by paying certain cash and other consideration to Buccaneer by January 15, 2010.
Hammerhead has attempted to exercise its option to re-purchase a working interest of the Pine Mills; however, Buccaneer and GFP have taken the position that it failed to provide adequate consideration to re-purchase a 25.5% working interest. As of the date hereof, the matter remains unresolved, and Buccaneer and GFP believe that there is a significant likelihood that the dispute will result in the matter being referred to arbitration by a single arbiter in the State of Texas, which was the agreed upon method for resolving disputes under the November 5, 2009 agreement.
The vendor of the Pine Mills Property working interests, Hammerhead, acts at arm’s-length to GFP.
(3) Buccaneer Assets. GFP would take ownership of the “Buccaneer Assets”, comprised most significantly of a 95.0% Net Profit Interest in certain Central Oklahoma Properties which include 4 producing wells and 13 on-producing wells, and a 20% working interest in a non-operated property in Tennessee, which includes 4 producing wells, for a total purchase of the benefits to the oil and natural gas minerals rights from 5,970 gross acres (2,620 net acres), on which there are 8 producing wells and 13 non-producing wells.
The Buccaneer Assets also include operating equipment, including one workover rig, current assets of US$190,242 (CA$200,255) as at December 31, 2009, and a Buccaneer Operating, LLC, a wholly-owned subsidiary of Buccaneer, which holds no assets but is the registered entity that operates Buccaneer’s properties in Texas.
An evaluation of the Buccaneer Asset properties by an independent qualified reserves evaluator, Michele K. Mudrone, P.Eng, of MKM Engineering, in a report entitled “Appraisal of Certain Oil and Gas Properties Owned by Buccaneer Energy Corporation Located in Oklahoma, Tennessee, and Texas” prepared as at October 1, 2009, using a discount rate of 10%, and using NYMEX prices until 2019, with prices held constant thereafter, found that Buccaneer’s properties have proved reserves of US$8,901,210.
A summary of the Buccaneer Assets reserves are set forth in the following table:
| Oil and Gas Reserves of Buccaneer | |||||
| Reserve Category(1) | Light & Medium Oil | Natural Gas | Net Present Value of Future Net Revenues Before Income Taxes (10% Discount Rate)(2) | ||
| Gross (bbls) | Net (bbls) | Gross (Mcf) | Net (Mcf) | ||
| Developed Producing | 44,000 | 34,000 | 287,000 | 225,000 | 1,682,000 |
| Developed Non-producing | 138,000 | 107,000 | 586,000 | 457,000 | 5,108,000 |
| Undeveloped | 70,000 | 55,000 | 396,000 | 311,000 | 2,110,000 |
| Total Proved | 252,000 | 196,000 | 1,269,000 | 993,000 | 8,900,000 |
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(1) The reserves were estimated using NYMEX (WTI) prices of US$70. 27 for 2009, US$70.94 for 2010 and US$75.76 for 2011, etc., to 2019, with a price adjustment to the NYMEX prices that is indexed to the monthly average of the daily closing prices received on the properties at the Cushing, Oklahoma delivery point.
(2) All reserves quantities are undiscounted estimates; only the net present values of future net revenues in the last column are discounted estimates.
Although GFP would hold a 95% Net Profit Interest in the Central Oklahoma Properties upon closing of the Transactions, GFP shall be responsible for 100% of capital expenses on the Central Oklahoma Properties, and shall have the sole and exclusive right to approve capital expenditures, including any completion, drilling deepening, recompletion, rework or sidetracking on the properties. GFP shall also have the right to approve any sub-contractors or suppliers used in the operating of the properties.
Additionally, upon closing of the Transactions GFP would also be granted the option by Buccaneer to purchase the 100% working interest in the Central Oklahoma Properties for US$100.00, for a period of ten years.
Summary of Historical Financial Statements of Buccaneer
The following table sets forth summary historical financial information regarding Buccaneer:
| Balance Sheets (US$) | As at June 30, 2009 (audited) | As at December 31, 2009 (unaudited) |
| Current Assets | 338,038 | 190,242 |
| Property and Equipment | 2,393,678 | 2,556,372 |
| TOTAL Assets | 2,731,716 | 2,746,614 |
| Trade Payables and Accruals | 106,923 | 159,517 |
| Liabilities to be Paid in Securities of GFP at closing(1) | 380,618 | 380,618 |
| Related-party Advances(2) | 81,583 | 78,926 |
| Bank Note at 6% (variable interest) | 752,000 | 783,796 |
| Asset Retirement Obligations | 44,308 | 45,788 |
| TOTAL Liabilities | 1,365,432 | 1,448,645 |
| TOTAL Shareholder’s Equity | 1,366,284 | 1,297,969 |
| Income Statements (US$) | For the Year Ended June 30, 2009 (audited) | For the Three Months Ended December 31, 2009 (unaudited) |
| Oil and Gas Revenues | 587,591 | 78,307 |
| Other Revenues | 4,755 | 19,465 |
| TOTAL Revenues | 592,346 | 97,772 |
| Severance Taxes | 44,950 | 4,606 |
| Lease Operating Expenses | 445,225 | 7,820 |
| General & Administrative | 129,548 | 45,147 |
| Depreciation, Depletion and Amortization | 217,674 | 35,247 |
| Other expenses | 107,572 | - |
| Impairment of long-lived assets(3) | 1,550,793 | 280,666 |
| Interest Expense | 60,267 | 6,542 |
| Income Tax Expense (Benefit) | (228,443) | - |
| NET Income (loss) | (1,735,240) | (282,256) |
________________________________________
(1) These liabilities are composed of an US$180,000 (CA$189,474) account payable and US$200,618 (CA$211,176) in related party advances to Buccaneer from Joseph F. Langston Jr. These liabilities shall be repaid at closing through the issuance of 757,895 Common Shares to discharge US$180,000 (CA$189,474) of liabilities and 844,706 Preferred Shares convertible into up to 844,706 Common Shares to discharge US$200,618 (CA$211,176) in liabilities.
(2) Of these related party advances, which are advances without interest or term to repayment, it is intended that US$78,926 shall be repaid in cash shortly after closing.
(3) The impairment charges for both period presented in the table were recognized to adjust the value of Buccaneer’s Assets to equal the purchase price for the Acquisition of the Buccaneer Assets as described herein.
Acquisition Price & Assumed Liabilities
The total Purchase Price for the Buccaneer Assets is CA$2,891,173, to be paid by GFP as follows:
a) Up to 5,465,136 Common Shares shall be issued to Buccaneer at a price of CA$0.25 per share for a total issuance value of CA$1,366,281, of which a balance of sale of 1,200,000 Common Shares with a value of CA$300,000 shall not be issued until certain conditions are met post-closing; and
b) GFP shall assume CA$1,524,889 (US$1,448,645) in Assumed Liabilities of Buccaneer, of which CA$400,651 (US$380,618) shall be paid down through the issuance of GFP securities at the closing, as described below under “Debt Reduction”.
Debt Reduction
In addition to the securities issued in payment of the Purchase Price, simultaneously with the closing, GFP shall issue CA$400,651 of its securities to liability-holders of Buccaneer to pay down CA$400,651 (US$380,618) of liabilities as follows:
(a) 757,895 Common Shares at a price of CA$0.25 for a total issuance value of CA$189,474, to pay down a US$180,000 account payable of Buccaneer;
(b) 844,706 Series I Preferred Shares for a total issuance value of CA$211,177, such Series I Preferred Shares being convertible into up to 844,706 Common Shares, to pay down US$200,6118 in shareholder advances of Buccaneer; and
(c) 422,353 Warrants, with no value assigned, as they are being issued along with the other securities.
This debt reimbursement will reduce the total debt levels of GFP assumed from Buccaneer at the closing to approximately US$1,068,027 (CA$1,124,239), which is calculated as US$1,448,645 (CA$1,524,889) total liabilities of Buccaneer as at December 31, 2009, less the US$380,618 (CA$400,651) that shall be repaid and discharged by the issuance of Common Shares, Series I Preferred Shares and Warrants at closing.
STOCK OPTION PLAN
The Corporation shall amend its stock option plan and issue stock options under the new plan. The amended stock option plan would permit the Corporation to issue up to 1,500,000 options (post-share-consolidation), which would be less than 10% of shares of the Corporation issued and outstanding following the closing of the Transactions. The Corporation would issue options to purchase an aggregate 1,376,000 shares of the Corporation at a price of $0.33, which expire on or about at latest on May 12, 2015. The Amended Stock Option Plan and the issuance of options including the exercise price are subject to the approval or revision of the TSX Venture Exchange.
TRANSACTIONS SUMMARY
The table below sets forth the capital structure of the Corporation following closing of the Transactions:
| Shareholder Group | Securities | Quantity (Issued or Underlying) | Issue / Exercise / Conversion Price |
| Existing Shareholders | Common Shares | 1,243,187 | - |
| Secured Lender | Common Shares | 1,600,000 | $0.25 |
| Acquisitions | Common Shares | 5,423,031 | $0.25 |
| Private Placement ($1,741,500) | Common Shares | 6,966,000 | $0.25 |
| Finder’s Fees | Common Shares | 114,000 | |
| TOTAL Common Shares I&O | 15,346,218 | ||
| Balance of Sale, Acquisition | Balance of Sale | 1,200,000 | $0.25 |
| Warrants | Warrants | 3,785,639 | $0.375 |
| Employee Options | Options | 124,000 | $0.25 |
| Employee Options | Options | 1,376,000 | $0.33 |
| Series I Preferred Shares | Series I Preferred Shares | 2,644,706 | $0.25 |
| TOTAL Fully Diluted | 24,476,563 |
Once the Transactions have been completed, management of the Corporation would consider the restructuring of the Corporation completed. The restructuring would result in the elimination of the Corporation’s secured loan, a substantial increase in the size and potential of the Corporation’s oil and gas reserves, and sufficient working capital and cash flow from operations to continue as a going concern.
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 "Business Risks" in the Corporation's periodic filings on SEDAR, for example, in its Management Discussion and Analysis for the annual exercise ended June 30, 2009. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Corporation does not assume the obligation to update any forward-looking statements.
“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.”
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