Forest Gate 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.
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."
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