Gallic Energy Ltd.
TSX VENTURE : GLC

Gallic Energy Ltd.

October 14, 2009 12:00 ET

Gallic Energy Ltd. Announces Acquisition of Oklahoma Oil Properties and Up to $2 Million Private Placement

CALGARY, ALBERTA--(Marketwire - Oct. 14, 2009) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. 

Gallic Energy Ltd. ("Gallic") (TSX VENTURE:GLC) is pleased to announce it has entered into an arm's length letter of intent agreement with Energy Invest Group Ltd. ("EIG"), a private company based in the United Kingdom, to acquire a 75% working interest in the East Cushing and Cottonwood oilfields in Creek County near Tulsa, Oklahoma, currently producing approximately 30 barrels of oil per day. The current production consists of 13 wells producing from the Red Fork sand. Gallic plans to conduct redevelopment work in both fields. The letter of intent agreement also includes: (i) an option for Gallic to purchase from EIG, within 12 months, an additional 5 fields at a price of U.S. $3.00 per barrel of oil based on an independent reserves report to be completed; and (ii) a right of first refusal for Gallic to purchase from EIG over 12 additional oil and gas fields of various sizes in Oklahoma, Texas and other states.

The consideration for this acquisition is the issuance by Gallic to EIG of 11,000,000 class A common shares of Gallic (the "Gallic Share Consideration"). The securities issued pursuant to the acquisition will be subject to a four-month hold period. The securities will not be registered with the U.S. Securities and Exchange Commission and may not be offered or sold within the United States without registration or an applicable exemption from the registration requirements of the United States Securities Act of 1933 and any applicable state securities laws.

The acquisition is subject to the completion of due diligence and a formal agreement, and standard closing conditions, including a Cdn $1 minimum working capital condition. Closing of the acquisition is also subject to necessary regulatory and TSX Venture Exchange approval, as well as applicable Gallic disinterested shareholder approval in accordance with TSX Venture Exchange requirements. The acquisition is expected to close on or before December 18, 2009, with expected effective dates of September 7, 2009 for the East Cushing Field and October 21, 2009 for the Cottonwood Field.

In connection with this acquisition and to fund further development of these properties and provide general working capital, Gallic is also pleased to announce a non-brokered private placement of up to 13,333,333 class A common shares at a price of $0.15 per share for gross proceeds of up to Cdn $2 million. Gallic intends to pay a finders' fee to registered dealers in connection with this private placement, to be paid in: (a) that number of warrants equal to 6% of the shares subscribed for by investors identified by the finder, with each warrant having a term of 24 months and being exercisable into one (1) Gallic share at $0.15 per share; and (b) either: (i) that number of Gallic shares equal to 6% of the shares subscribed for by investors identified by the finder; or (ii) 6% of the subscription proceeds from investors identified by the finder.

The proceeds from the private placement will fund the acquisition closing condition for Gallic to have Cdn $1 million working capital and will be used for general working capital requirements. Closing of the private placement is expected to occur by November 27, 2009, subject to the satisfaction of standard conditions, including the receipt of all necessary regulatory and TSX Venture Exchange approvals. The securities issued pursuant to this private placement will be subject to a four-month hold period. The securities will not be registered with the U.S. Securities and Exchange Commission and may not be offered or sold within the United States without registration or an applicable exemption from the registration requirements of the United States Securities Act of 1933 and any applicable state securities laws.

The East Cushing and Cottonwood oilfields are comprised of 2119 acres with 108 wells, of which 13 wells are operating and producing approximately 30 barrels of oil per day. Pursuant to the acquisition, Gallic will acquire a 75% working interest. The remaining 25% working interest includes a capital carry on the initial recompletion of wells in both fields to independent third party companies. In 2006 an independent engineering reserves report indicated approximately 1.5 million barrels of oil still to be recovered with recovery to date of approximately 20.5%. As this report is not NI 51-101 compliant, Gallic will engage an independent reserves evaluator to prepare an NI 51-101 compliant reserves assessment. Current production mainly comes from the Red Fork sand. Both fields are currently under an inefficient waterflood. Additional bypassed zones in the Cleveland, Oswego Lime, Big Lime, Skinner have been identified and mainly untested.

Mr. Mark Woods, Gallic's President and COO, commented "Gallic is pleased to enter into this agreement with EIG as a major shareholder with the acquisition of these properties through shares. This indicates EIG's belief that these fields and a strategy of consolidating proven producing properties with the appropriate application of technology will result in company and shareholder growth". Woods continued, "Gallic will see immediate growth in production and reserves as a result of this acquisition and will continue to add to its consolidation strategy in the U.S., while continuing to advance its longer term exploration prospects internationally".

EIG is a technology-led developer of energy and environmental projects. EIG's mission is to promote energy efficiency, develop new energy sources and remediate industrial pollution through profitable industrial projects. The first wells on the East Cushing and Cottonwood fields are being re-logged and re-worked using EIG's stimulation technology called Ionizer, which is of specific interest to Gallic. This application combines ionized water with proprietary surfactants to remove skin damage and swollen clays from the well bore in order to boost production. (See www.ion-treater.com) The technology enhances oil water separation, reduces water injection pressures and improves waterflood performance. As part of the acquisition, Gallic has agreed with EIG to continue selectively testing with these technical applications at cost on any of the fields within this agreement. (See www.energyinvestgroup.com)

Gallic's strategy is to acquire and consolidate oil and gas properties within North America brining immediate production, cashflow and reserves to the company while it continues to explore for oil and gas internationally.

Gallic Energy Ltd. has 19,716,154 class A shares outstanding, and trades on the TSX Venture Exchange under the symbol GLC.

Forward-looking Statements

This press release contains forward-looking statements. Any statements that are contained in this press release that are not statements of historical fact may be considered forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expects" and similar expressions. Forward-looking statements in this press release include, but are not limited to, statements with respect to the closing or completion of the acquisition, statements concerning the anticipated private placement and the anticipated use of the net proceeds therefrom, and management's assessment of future plans and operations, expectations of future production, cash flow and earnings.

Although Gallic believes that the expectations reflected in these forward-looking statements are reasonable, undue reliance should not be placed on them because Gallic can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. These forward-looking statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses and health, safety and environmental risks), acquisitions, commodity price and exchange rate fluctuation and uncertainties resulting from competition from other producers and ability to access sufficient capital from internal and external sources. There is also risk that the closing of the acquisition and/or the private placement could be delayed if Gallic is not able to obtain the necessary regulatory, stock exchange and applicable shareholder approvals on the timelines it has planned. The acquisition and/or the private placement will not be completed at all if these approvals are not obtained or any other conditions to the closings are not satisfied. The intended use of the net proceeds of the offering by Gallic might change if the board of directors of Gallic, determines that it would be in the best interests of Gallic to deploy the proceeds for some other purpose. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Gallic's operations and/or financial results are included in Gallic's reports on file with Canadian securities regulatory authorities.

Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

The forward-looking statements contained in this press release are made as of the date hereof and Gallic undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

THIS PRESS RELEASE, REQUIRED BY APPLICABLE CANADIAN LAWS, IS NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES DESCRIBED HEREIN IN THE UNITED STATES. THESE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS REGISTERED OR EXEMPT THEREFROM.

Note: Boe means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Boepd means barrel of oil per day.

In this press release: (i) mmboe means million boe; (ii) boe/d or boepd means boe per day; (iii) bbls/d means barrels per day; (iv) mcf means thousand cubic fee; (v) mmcf means million cubic feet; (vi) mcf/d or mcfd means thousand cubic feet per day; and (vii) mmdf/d or mmcfd means million cubic feet per day.

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.

Contact Information

  • Gallic Energy Ltd.
    Mr. Mark Woods
    President and Chief Operating Officer
    (403) 263-1105
    (403) 265-4514 (FAX)
    markwoods@gallicenergy.com