Mr. Michael McLellan reports

GALE FORCE TO SELL MAJORITY STAKE IN ITS TEXAS REEF PROPERTIES, SIGNS AGREEMENT WITH NEW OPERATOR

Gale Force Petroleum Inc. has entered into an agreement to sell an 81-per-cent working interest in its properties in Henderson and Anderson counties, Texas, as well as its 90-per-cent interest in a four-mile natural-gas-gathering system on the properties, for an aggregate selling price of $5.85-million (U.S.). The transaction is expected to close on or before Aug. 22, 2014.

The company will retain an average 12-per-cent working interest plus a 3-per-cent overriding royalty interest in its existing four producing wells on the Texas Reef properties, and an average 9-per-cent working interest plus a 5-per-cent overriding royalty interest throughout its remaining 3,500 undeveloped net acres. The purchaser is an experienced, well-capitalized, private exploration and production operator with operations in several states in the Southern United States.

The purchaser recently drilled six vertical wells and two horizontal wells immediately adjacent to the company's Texas Reef properties (the company and the purchaser have overlapping and integrated land positions). Upon closing, the purchaser will become the operator of the existing and future wells throughout the Texas Reef properties. Horizontal drilling of several wells is planned.

"The company will benefit from the new operator's experience drilling and operating in the area, while participating in the upside with its retained interests," said Michael McLellan, chief executive officer. "Also, this property divestiture will allow Gale Force to make significant debt repayments and free up capital to make investments in other core properties."

With the proceeds from the sale of the properties, the company expects to make an approximate $2.5-million reduction in its senior bank facility, fully pay off any outstanding subordinate notes and have approximately $2.5-million remaining for its capital development programs.