Forest Gate Unwinds Vanterra Deal

SYMBOL & EXCHANGE: FGE-V

MONTREAL, Nov. 29 /CNW Telbec/ - Forest Gate Energy Inc. ("Forest Gate" or the "Corporation") reports that it has completed its previously-announced unwinding transaction with Vanterra Energy Inc. ("Vanterra") (see press release dated July 14, 2010) by transferring its 70% interest in certain Arizona and Utah oil and gas licenses vended-in to Forest Gate in the fourth quarter of 2009 and January 2010 in exchange for the surrender for cancellation by Vanterra of 3,596,053 common shares of Forest Gate, 4,343,947 subscription receipts convertible into common shares of Forest Gate, and 7,300,000 common share purchase warrants.

Effective November 26, 2010, Forest Gate cancelled all of the foregoing subscription receipts and common share purchase warrants, and remitted the 3,596,053 common shares to its transfer agent and registrar so that the shares could be returned to treasury and cancelled.

As a result of the transaction, there are 42,534,522 common shares of Forest Gate issued and outstanding.

For additional information on the transaction and its rationale, please see Forest Gate's news release dated July 14, 2010. 

Forest Gate filed an application with the TSX Venture Exchange ("Exchange") in order to obtain conditional acceptance of the proposed transaction pursuant to Policy 5.2 of the Exchange. The conditional acceptance was granted by the Exchange. 

In its submissions to the regulators, Forest Gate highlighted the following important factors:

1. the proposed transaction was unanimously approved by the Corporation's board of directors;
   
   
2. the proposed transaction is "non-arm's length" solely by virtue of the aggregation of the shareholdings of Mr. Vandergrift and Vanterra (approximately 11% of the issued and outstanding common shares of the Corporation at the time the transaction was negotiated - currently less than 10%);
   
   
3. the proposed transaction was negotiated and agreed to after Mr. Vandergrift resigned from his positions as President and Chief Operating Officer and director of the Corporation;
   
   
4. Forest Gate may benefit from a statutory exemption from the formal valuation requirement set out in Section 5.4 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") by virtue of the fact that the Corporation is not listed on a specified market (Section 5.5(b) of MI 61-101) and that the Corporation was, and continues to be, experiencing financial hardship (Section 5.5(g) of MI 61-101);
   
   
5. Forest Gate may benefit from a statutory exemption from the minority shareholder approval requirement set out in Section 5.6 of MI 61-101 by virtue of the fact that the Corporation was, and continues to be, experiencing financial hardship (Section 5.7(1)(e) of MI 61-101);
   
   
6. none of the members of management or the board of directors of Forest Gate has any economic interest in or continuing relationship with Vanterra or Mr. Vandergrift;
   
   
7. the board of directors of the Corporation has determined that since, among other things, it is no longer able to or interested in pursuing oil and gas exploration and development on the properties covered by the Arizona and Utah licenses, the proposed transaction is reasonable and in the best interests of the Corporation;
   
   
8. the closing of the proposed transaction will improve the Corporation's share capitalization and financial condition and enable the Corporation to pursue additional opportunities and secure financing in connection therewith.  In this regard, the Corporation recently reached an agreement with respect to certain gold properties situated in the Province of Québec, including the Pershing Gold Property (see press release dated September 2, 2010), and is currently looking at certain oil and gas wells in Western Canada;
   
   
9. the shareholding in the Corporation is diversified and there are no control blocks such that it would not be practicable to obtain the written consent of a majority of disinterested shareholders in a cost-effective and timely manner;
   
   
10. In addition to the $2.5 million commitment in respect of the Arizona licenses due on or before December 31, 2010, the Corporation would have needed to satisfy cash calls in respect of the Utah licenses, which represented a total potential liability in excess of $816,080 ($479,000 to Tidewater regarding the Grand County property and $337,080 to Vanterra regarding the Iron County property in Utah).  Forest Gate did not have the ability to satisfy its obligations with respect to its interests in the Arizona and Utah licenses.  Consequently, absent unwinding of the transaction, the Corporation risked forfeiting its right, title and interest in such licenses and Vanterra would have remained the holder of all of the securities of Forest Gate that were issued to Vanterra as consideration for the licenses. Therefore, with a financial milestone due on or before December 31, 2010 in respective of the Arizona licenses, the Corporation needed to close the proposed transaction as soon as possible or risk forfeiting all of the licenses; and
    
    
11. if the Corporation was unable to close the proposed transaction in a timely manner, Vanterra could simply wait until: (i) the Corporation was unable to meet its December 31, 2010 deadline in respect of the Arizona licenses, and (ii) default in respect of the short term cash call obligations on the properties subject to the Utah licenses, resulting in a situation where Vanterra would ultimately end up reclaiming all of the Arizona and Utah oil and gas licenses in addition to keeping all of the securities of the Corporation received in consideration for the initial acquisition of said licenses;
    
    
12. the market price of the Corporation's common shares did not react to the announcement of the proposed transaction with Vanterra, but the feedback received by the Corporation from shareholders since the announcement of the proposed transaction was overwhelmingly positive. The cost of a special meeting of shareholders is estimated at $40,000 and considered cost prohibitive by the Corporation;
    
    
13. the Corporation is challenged, in a financial context, as shown by the "going concern" note contained in the Corporation's financial statements. If the proposed transaction is not completed in a timely fashion, the Corporation will be seriously challenged in its operations.

About Forest Gate

Forest Gate Energy Inc. is a publicly listed oil and gas exploration and production, and non-energy resource company trading on the TSX Venture Exchange under the symbol FGE. The Company is seeking to increase shareholder value through participation and development of energy and other resources in Canada and internationally.

FORWARD-LOOKING STATEMENTS

Certain statements regarding Forest Gate, including management's assessments of future plans and operations and Forest Gate's anticipated financial performance, may constitute forward-looking statements under applicable securities laws and necessarily involve known and unknown risks and uncertainties, most of which are beyond Forest Gate's control. These risks may cause actual financial and operating results, performance, levels of activity and achievements to differ materially from those expressed in, or implied by, such forward-looking statements.

Such factors include, but are not limited to: the impact of general economic conditions in Canada and the United States; industry conditions including changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced; competition; the lack of availability of qualified personnel; fluctuations in commodity prices; the results of exploration and development drilling and related activities; imprecision in reserve estimates; the production and growth potential of Forest Gate's various assets; fluctuations in foreign exchange or interest rates; the ability to access sufficient capital from internal and external sources; and obtaining required approvals of regulatory authorities.

Neither TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or the accuracy of this release.

For further information:

Robert Kramberger, V-P, Investor Relations
1-866-666-3040
[email protected]
www.forestgate.ca