Forest Gate Snaps Up 2 Texas-Based Oil and Gas Ventures

Forest Gate Resources has entered into an agreement 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.

In consideration for the securities of Atlantis and Impact, Forest Gate would issue a certain number of common shares from its share capital 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. Concurrently with the completion of this transaction, Forest Gate expects to close a non-brokered private placement financing whereby it intends to raise between $500,000 and $2.5 million under existing market terms and conditions and consolidate its common shares on a 10 for 1 basis.

One of the seller, Angus Energy LLP, is a privately-held Edinburgh, Scotland-based exploration and production company co-owned and run by Jonathan Tidswell. Mr. Tidswell was formerly a consultant to Forest Gate on international exploration and production. In addition to being President of Angus Energy LLP, Jonathan Tidswell is currently President of Wellmack Ltd., an oil services company based in Aberdeen, Scotland. Tidswell started his career with Halliburton Energy Services working as a logging engineer and in production enhancement and well intervention. He also worked with Wintershall Libya as drilling engineer, drilling supervisor and petroleum engineer.

Atlantis and Impact were established by Mr. Tidswell utilizing the expertise of industry specialists, Richard Sharp and Matthew Fabre, to take advantage of onshore and offshore opportunities in oil and gas exploration and production in Texas and Louisiana. Messrs. Sharp and Fabre have extensive experience in the area.

Forest Gate has not verified the technical information as the following information was provided by Atlantis and Impact's management and trading will remain halted until the filing of an acceptable 51-101 report.

The Offshore Opportunity

Atlantis has signed an agreement on February 26, 2009 with a third party, enabling it to acquire interests ranging from 57.3% to 100% in the High Island 98-L (HI-98L) project located in Gulf of Mexico off the coast of Texas. According to Atlantis, HI-98L produced 600 barrels of oil per day before being shut-in in September 2008.

HI-98L currently consists of five well bores and a single processing platform with multiple primary separation and measurement components, secondary processing facilities, and sales measurement readings. All hydrocarbons are transported by a single 8" multiphase pipeline and routed 6 miles to the terminal facility for separation, treatment and sales.

Five wells have been drilled and completed with two wells capable of immediate production. According to Atlantis, production could re-commence at HI-98L as early as August with optimization and acceleration possible. The HI-98L field is located in 40 feet of water and encompasses multiple state leases on High Island 98L and a federal lease on the opposite side of the 3 league line in the same block.

In the coming months, Atlantis will acquire HI-98L for US$500,000 plus the assumption of the third party's share of the plug and abandonment liability.

The siph davisi "C" and "A" sands are the primary producers in the immediate area, having produced over 50 BCF from 2 traps.

The "C" sand is locally prevalent and has accounted for 33 BCF. Quality of the thinner "A" sand varies significantly, providing a stratigraphic element to its production. The A sand has accounted for production of 17 BCF. There are no apparent wet wells in the A sand. Minor production has been made from thin discorbis b sands above the siph davisi section, and the normal-pressured amph b above that.

In the NE/4 of HI_98L, United Meridian Corporation (UMC) drilled its successful #1 well in 1996. That well has produced from siph davisi "A" and "C" sands, plus a thick "B" sand channel, which is the target of one of the prospects discussed below. The UMC well has produced 10.9 BCF. Target depths are approximately 9000'. Drill site water depths range from 35-40'.

A 3D seismic survey was performed by Eastern Geophysical in the early 90's. At least three processed versions have been generated. The original interpretation was made on the Kelman 2003 pre-stack time migration. In 2006-07, GeoCenter produced an updated PSTM, on which the current interpretation was made.

In addition, Atlantis is presently negotiating with another third party to enter into an agreement with such third party, which would enable Atlantis to acquire the gathering system and terminal facility to compliment the HI-98L acquisition. The terminal facility includes gas and oil separation, dehydration and oil storage facilities.

The acquisition of the gathering system assets, while not a necessity, will offer significant advantages to Atlantis. It is through this facility that the HI-98L production will be transported and sold. Thus, Atlantis will be able to own and control where it stores, gathers and transmits its oil and gas. In addition to the P&A liability, the gathering system assets require minimum upgrades totalling US$300,000 in order to effect upgrades to the facility.

According to Atlantis, the terminal facility consists of a high pressure separator, low pressure separator, skimmer/treater, gas dehydration, glycol reclamation, flare stack and scrubber, 35,000 barrel storage tank, interconnecting pipe, barge/tanker/truck loading station, related real estate and downstream sales pipeline. Photos and video of the HI-98L platform are available on Forest Gate's website at www.forestgate.ca.

The Onshore Opportunity

Impact is currently finalizing lease agreements for onshore assets with current production and hydrocarbon exploration potential with current production being at 48 barrels of oil per day. These assets have an aggregate lease hold of 7,100 net mineral acres in southeast and south Texas.

Impact interprets the potential existence of significant pay zones in deeper structures based on geological and geophysical work.

The New Company

Upon the completion of this transaction, Forest Gate will change its name to Forest Gate Energy. The new company will maintain its primary operations office in Houston, Texas with its corporate office to be maintained in Canada.

The new management team will consist of existing Forest Gate management, Atlantis management and Angus management. Atlantis has several petroleum engineers on contingency immediately available to begin and oversee production and start up. These engineers have worked for Petrobras, Texaco and Shell in their deepwater production division and have over 40 years combined experience in petroleum engineering offshore and onshore in Texas, Louisiana and Gulf of Mexico.

The assets described in this press release are currently the only assets owned by Atlantis and Impact.

"We are very pleased to be teaming up with Forest Gate," said Jonathan Tidswell, President of Angus Energy, LLP. "I think we have formed a very skilful, resourceful and entrepreneurial oil company."

"We are acquiring superb assets and a very experienced and talented technical team," said Michael Judson, Chief Executive Officer of Forest Gate.

The completion of the transaction will be subject to customary conditions and Forest Gate shareholders passing a resolution approving the transaction.


 

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