Forest Gate to Acquire Oil and Gas Assets

CALGARY, Alberta, December 13, 2011 /CNW Telbec/ - Forest Gate Energy Inc. (TSXV: FGE) reports that its energy group has entered into a letter of intent with Sandbox Energy Corp., a private oil and gas company based in Calgary, Alberta, to acquire most of the existing oil and gas assets of Sandbox, a prospective deal to acquire new oil production and reserves and $500,000 in cash.

The transaction is subject to several conditions being met before closing. Sandbox must arrange on behalf of Forest Gate financing for the development of Sandbox’s existing assets. Sandbox must also close on the acquisition of 90 (gross) barrels of oil equivalent per day. Ninety-three percent of the daily hydrocarbon production is oil. Finally, Sandbox must a make a payment of $500,000 in cash to Forest Gate.

Sandbox’s current assets include interests in approximately 100 sections of land in the Russelton and Shackleton areas of southwest Saskatchewan. Sandbox owns working interests in these properties ranging between 50 and 100 percent.

The Russelton property is located approximately 60 miles northwest of Swift Current, Saskatchewan in township 21. AJM Petroleum Consultants, Calgary, in December 2008 reported that the Russelton property was producing gas from 20 wells from the Milk River formation.

The Shackleton and Greater Shackleton area properties are located within several townships distance from Russelton. According to the AJM report (Dec. 2008), at Shackleton, Sandbox was producing gas from 11 wells in the Milk River Formation. The same formation in Greater Shackleton also produced gas from 14 wells. The Russelton and Shackleton assets were shut-in December 2010.

Sandbox is also presently pursuing the acquisition of a 90 percent interest in the southwest Saskatchewan properties known as Divide, Rangeview and Katherine in which Forest Gate currently holds a 10 percent working interest. The successful completion of the acquisition by Sandbox and in turn the successful completion of the transaction between Forest Gate and Sandbox, would result in Forest Gate owning a 100 percent interest in Divide, Rangeview and Katherine. These properties are currently producing on a gross basis 87 barrels of oil equivalent per day (93% oil).

Forest Gate will commission an updated NI 51-101-compliant reserve report on the Sandbox assets.

In consideration for the oil and gas assets above assets, Forest Gate will issue to Sandbox a total of 25 million common shares at a price per share of $0.20. As described above, conditions precedent to closing include: Sandbox arranging a financing to be done through Forest Gate for the development of the Russelton and Shackleton properties, the acquisition of the southwest Saskatchewan assets and the payment to Forest Gate of $500,000 in cash. The transaction is expected to close on or before February 29, 2012.

Following the closing of the transaction, Chris Tesarski, President of Sandbox, will join Forest Gate as Vice President Land and Business Development. “Chris will add a lot of value to our team,” said Michael Judson, CEO of Forest Gate. “Chris and Scott St. John, our Operations Manager, will run the energy side of our business in Calgary.”

Mr. Tesarski has 25 years of experience in the oil and gas industry. Prior to Sandbox he was CEO of Arrow Energy Ltd. from 2006 to 2008. He has also been involved in oil and gas mergers and acquisitions and has facilitated $100 million worth of M&A transactions.

The proposed transaction is subject to various conditions and approvals including a satisfactory due diligence review of Sandbox’s oil and gas assets, the entering into of a definitive agreement, and the obtaining of TSX Venture Exchange and board approvals.

The proposed transaction is an arm’s length transaction and no finder’s fee or commission will be paid in connection therewith.

In other news, Forest Gate reports that it is arranging a non-brokered private placement up to $250,000 by issuing an aggregate of up to 5 million units at a price of $0.05 per unit.

Each unit consists of one common share and one common share purchase warrant. Each warrant will entitle the holder to purchase one additional common share of Forest Gate at a price of $0.20 until 24 months from the date of issuance of the warrants.

Forest Gate will use the proceeds to purchase oil and gas equipment.

The private placement is subject to regulatory approval including that of the TSX Venture Exchange.

In other news, Robert Kramberger has resigned as Vice President, Investor Relations.

“Rob will be greatly missed as head of Investor Relations,” said Michael Judson. Rob was significantly more than his former title. He was a builder of Forest Gate.”

“I have never seen a more dedicated person,” said Judson “He worked unrelentingly to protect and further the interests of Forest Gate and its shareholders. He has decided that he wants to spend more time pursuing his work in visual art, particularly his painting of Canadian Landscapes” .

Trading in the shares of the company will remain halted pending further regulatory filings with the Exchange..

BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

About Forest Gate Energy
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 isseeking to increase shareholder value through participation and development of energy and other resources in Canada and internationally.

For more information please contact:

MICHAEL JUDSON PRESIDENT & CEO
1-866-666-3040
MJUDSON@FORESTGATE.CA
WWW.FORESTGATE.CA