Mr. Michael McLellan reports

GALE FORCE CLOSES TEXAS REEF INTERESTS SALE

Gale Force Petroleum Inc. has concluded the sale of an 81-per-cent working interest in its properties in Henderson and Anderson counties, Texas (the Texas Reef properties), as well as its 90-per-cent interest in a four-mile natural-gas-gathering system on the properties, for a total selling price of $5.85-million (U.S.). Per the terms of the purchase and sale agreement, $567,000 (U.S.) of the purchase price will be held in escrow for 60 days following closing, or longer, if there are any title or environmental issues to be resolved.

The company has retained an average 12-per-cent working interest and 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 and a 5-per-cent overriding royalty interest throughout another 3,500 undeveloped net acres.

The purchaser, an experienced, well-capitalized private E&P (exploration and production) operator with operations in several states in the southern United States, has taken over as operator of the Texas Reef properties.

"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, the company has made significant debt repayments and freed up capital for investment in core properties."

With the proceeds of the sale, the company has repaid $3-million (U.S.) of its senior bank facility. The borrowing base of the facility is now $1.75-million and the maturity date has been extended to Jan. 1, 2016. Also, the next date for a borrowing base redetermination will be Jan. 1, 2015, at which time it will be determined if monthly borrowing base reductions are needed. The facility is currently an interest-only facility, with an interest rate that remains unchanged at 5 per cent per year.

The company also repaid all other subordinate notes, including the seller's note issued upon the purchase of Texas Reef interests announced on Feb. 26, 2014, which had an outstanding balance of $350,000 (U.S.), the bridge loan to Primatlantis Capital, which had an outstanding balance of $255,000 (U.S.), and the note payable to Iroquois Capital Opportunity Fund, which had an outstanding balance of $33,000.

Further to the announcement made on Aug. 18, 2014, the closing of the sale of the Thunder properties has been delayed. The company expects to announce a revised closing date in the near future.