Terra Energy Corp.

Terra Energy Corp.

February 26, 2010 14:57 ET

Terra Energy Announces 2009 Year-End Reserves Estimates, Valuations and Related Metrics

CALGARY, ALBERTA--(Marketwire - Feb. 26, 2010) - Terra Energy Corp. ("Terra Energy" or the "Company") (TSX:TT) is pleased to announce the results of its year end reserves evaluation, as prepared by GLJ Petroleum Consultants ("GLJ") as at December 31, 2009. This evaluation was performed in accordance with the requirements of National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). In addition, the Company would like to announce the results of its independent evaluation of undeveloped lands, as prepared by Seaton-Jordan & Associates Ltd. ("Seaton-Jordan").

"During 2009, Terra Energy continued with its track record of strong year-over-year growth in both reserves and production volumes, both on an absolute basis and on a per-share basis. This was achieved despite low natural gas prices and high levels of risk-adversity in the capital markets." said Cas H. Morel, President and CEO of Terra Energy. "Our year-end metrics continue to make Terra Energy a compelling "value" investment opportunity in the sector and our commitment to the Montney play in Northeast British Columbia positions Terra Energy for significant growth in an increasingly competitive environment."


The following are some of the highlights for 2009, comparing results as at December 31, 2009 and those as at December 31, 2008:

  • Total proved and probable reserves increased 27.5% from 18,826 mboe to 24,003 mboe
  • Net Present Value of (before tax) proved and probable reserves (NPV 10%) increased
    22.2% from $257 million to $314 million
  • Total proved reserves increased 28% from 12,469 mboe to 15,955 mboe
  • Reserve life index of 8.8 years (proved plus probable based on current production)
  • 5-year finding and development costs of $11.16/BOE (proved plus probable)
  • 2009 recycle ratio of 2.1 times
  • Undeveloped land holdings increased 151% to 495,558 net acres
  • NAV per share of Terra Energy as at December 31, 2009 is $3.79 basic, and $3.72 diluted
  • Only 1,832 boe of the 24,003 mboe of proved and probable reserves estimated as at December 31, 2009, were attributable to the Company's Montney play in Northeastern British Columbia, and were ascribed to only 2 of the Company's approximately 100 net sections of undeveloped land which is prospective for this non-conventional play.


Terra Energy increased total proved and probable reserves, net of 2009 production, by 27.5% from 18,826 mboe to 24,003 mboe at December 31, 2009, based upon forecast prices and costs. The breakdown of the Company's reserves consisted of 75.7% natural gas, 11.5% crude oil and 12.8% natural gas liquids as at December 31, 2009.

Terra Energy increased total proved and probable reserves, before 2009 production, by approximately 7,344 mboe, replacing 2008 production by 339%.

The following tables summarize certain information contained in the GLJ reserves report effective December 31, 2009. Detailed reserves information as required under NI 51-101 will be included in Terra Energy's Annual Information Form which will be filed on SEDAR prior to March 31, 2010. Oil equivalent amounts have been calculated using a conversion rate of 6,000 cubic feet of natural gas to one barrel of oil. 

Summary of Reserves by Category 
 Forecast Prices           %
 and costs December 31, 2008    December 31, 2009   Change
    Oil Gas  Liquids Total Total
 Reserves Category Total (mboe) (mbbl) (mmcf)  (mbbls) (mboe) (mboe)
 Proved Producing 8,617 1,587 51,535 1,614 11,790 37%
 Proved Non-            
 Producing 3,852 525 18,789 509 4,165 8%
 Total Proved 12,469 2,112 70,324 2,123 15,955 28%
 Total Probable 6,357 649 38,652 957 8,048 27%
 Total Proved +            
 Probable 18,826 2,762 108,975 3,079 24,003 27.5%

The estimated future net revenues are presented before deducting future estimated site restoration costs and are reduced for future abandonment costs and estimated future capital for future development associated with non-producing, undeveloped and probable additional reserves.

 Summary of Net Present Values of Future Net Revenue ($000's) Discounted Before Income Taxes  
 Forecast Prices 31-Dec-08   31-Dec-09   % Change  
 Reserves Category   0 %   10 % 0 % 10 % 0 % 10 %
 Proved Producing $ 228,825   $ 144,132   287,404   179,688   25.5   24.7  
 Proved Non-Producing $ 80,580   $ 46,336   92,466   58,545   14.7   26.3  
 Total Proved $ 309,405   $ 190,468   379,871   238,233   22.8   25.0  
 Total Probable $ 173,303   $ 66,320   205,423   75,551   18.5   13.9  
 Total Proved + Probable $ 482,708   $ 256,788   585,294   313,784   21.2   22.1  

The forecast prices used in the GLJ reserves report were GLJ's forecast prices as at January 1, 2010 as presented below. The January 1, 2010 forecast prices for natural gas reflect a substantial (approx. 20%) reduction from the January 1, 2009 forecast pricing.

AECO (CDN$ / GJ)    
Year    Dec 31, 2008 Evaluation    Dec 31, 2009 Evaluation    % Difference Year over Year
1 $7.58 5.96 -21.4%
2 $7.94 6.79 -14.5%
3 $8.34 6.89 -17.4%
WTI (US$/BBL)    
Year    Dec 31, 2008 Evaluation    Dec 31, 2009 Evaluation    % Difference Year over Year
1 $57.50 $80.00 39.1%
2 $68.00 $83.00 22.1%
3 $74.00 $86.00 16.2%


Terra Energy added 5,178 mboe of proved plus probable reserves in 2009 (adjusted for production). As Terra Energy is a full cycle E&P company, F&D costs are best examined over a multi-year period. Based on net future required capital of $42.634 million (as per GLJ's estimate), Terra Energy's five year F&D costs per BOE on a proved plus probable basis is $11.22.

Proved Reserves 2004 - 2009
Net Reserve Adds (BOE)   16,405,669
Net Capital Spent $ 207,141,601
Change in Future Capital Required $ 13,878,200
  $ 221,019,801
F&D Costs / BOE (1) $ 13.47
Proved Plus Probable Reserves   2004 – 2009
Net Reserve Adds (BOE)   22,385,518
Net Capital Spent $ 207,141,601
Change in Future Capital Required $ 42,634,300
  $ 249,775,901
F&D Costs / BOE (1) $ 11.16
(1)  Includes Future Capital/Abandonment Costs    

Terra Energy's 2009 field netback was $22.93/BOE resulting in a recycle ratio of 2.1 times.

Terra Energy's gross undeveloped land holdings increased from 228,741 gross acres

(197,075 net) as at December 31, 2008 to 622,902 gross acres (495,558 net) as at December 31, 2009. This represents an increase of 172% (151% net). Below is a summary of the Company's undeveloped land holdings, broken down by province:

  December 31, 2009 December 31, 2008
  Gross Net Gross Net
 Area Acreage Acreage Acreage Acreage
 Alberta 289,838 260,681 67,536 54,341
 British Columbia 331,151 233,127 158,645 140,337
 Saskatchewan 1,913 1,750 2,560 2,397
 Totals 622,902 495,558 228,741 197,075
  Undeveloped Land Values % Change  
 Area 2009 2008    
 Alberta $ 10,777,393 $ 3,771,324 186 %
 British Columbia $ 60,727,102 $ 23,985,631 153 %
 Saskatchewan $ 633,789 $ 1,584,714 -150 %
 Totals $ 72,138,284 $ 29,341,669 146 %

The undeveloped land holdings of the Company were evaluated as at December 31, 2009 by Seaton-Jordan. The value of Terra Energy's net undeveloped land holdings is estimated to be approximately $72,138,284 as at December 31, 2009. This valuation represents an increase of 146% over last year's valuation of undeveloped land as prepared by Seaton-Jordan.


Terra Energy's NAV per share as at December 31, 2009 is calculated as follows:

Net Asset Value December 31, 2009 2009  
    ($000 )
Total Proved plus Probable reserves (NPV 10)   313,784  
Undeveloped Land (456,950 net acres) (1)   72,138  
Book Value of Seismic   5,200  
Total Net Debt (2)   (57,065 )
Net Asset Value   334,057  
Shares Outstanding December 31   87,989  
Basic NAV per share $ 3.79  
In the money options (2,890,000 shares) $ 3,845  
Diluted Shares Outstanding December 31, 2009   90,879  
Diluted NAV per share $ 3.72  
(1) Based on December 31, 2009 Seaton-Jordan report      
(2)  Information based on unaudited financial results      


To view the Comparative Growth charts, please click the following link: http://media3.marketwire.com/docs/226tt_cg.pdf


Unaudited Financial Information
Certain financial and operating information included in this media release for the year ended December 31, 2009, such as finding and development costs, production information and net asset value, are based on estimated unaudited financial results for the year then ended, and are subject to the same limitations as discussed under Forward-Looking Statements set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2009 and changes could be material.

Information Regarding Disclosure in Oil and Gas Reserves and Operational Information
A BOE conversion ratio of six thousand cubic feet per barrel (6mcf/bbl) of natural gas to barrels of oil equivalence is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency for the individual products at the wellhead. Such disclosure of BOE's may be misleading, particularly if used in isolation.

In accordance with Canadian practice, production volumes are reported on a company gross basis, before deduction of Crown and other royalties, unless otherwise stated. Unless otherwise specified, all reserve volumes in this media release and all information derived there from are based on "company interest reserves" using forecast prices and costs. "Company interest reserves" consist of "company gross reserves" (as defined in National Instrument 51-101 adopted by the Canadian Securities Regulators ("NI 51-101") plus Terra Energy's royalty interests in reserves. "Company interest reserves" are not a measure defined in NI 51-01 and does not have a standardized meaning under NI 51-101. Accordingly our Company interest reserves may not be comparable to reserves presented or disclosed by other issuers. Our oil and gas reserves statement for the year ended December 31, 2009, which will include complete disclosure of our oil and gas reserves and other oil and gas information in accordance with NI 51-101, will be contained within our Annual Information Form which will be available on our SEDAR profile at www.sedar.com. In relation to the disclosure of estimates in the operations update discussion, such estimates for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.

In relation to the disclosure of net asset value ("NAV"), the NAV table shows what is normally referred to as a "produce-out" NAV calculation under which the current value of the Company's reserves would be produced at forecast future prices and costs and do not necessarily represent a "going concern" value of the Company. The value is a snapshot in time and is based on various assumptions including commodity prices and foreign exchange rates that vary over time. The future net revenues estimated by GLJ do not represent the fair market value of the reserves, nor should it be assumed that Terra Energy's internally estimated value of its undeveloped land holdings represent the fair market value of the lands.

The reader is also cautioned that this media release contains the term "Reserve Life Index", which is not a recognized measure under Canadian Generally Accepted Accounting Principles ("GAAP"). Management believes that this measure is a useful supplemental measure of the length of time reserves would be produced at the rate used in the calculation. Readers are cautioned, however, that this measure should not be construed as an alternative to other terms such as net income determined in accordance with GAAP as a measure of performance. Terra Energy's method of calculating this measure may differ from other companies, and accordingly, they may not be comparable to measures used by other companies.

Forward-Looking Statements
The media release may contain forward-looking statements including expectations of future production, cash flow, earnings and the positioning of the Corporation for significant growth. These statements are based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (eg., 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), commodity price, price and exchange rate fluctuation and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional information on these and other factors that could affect Terra Energy's operations or financial results are included in Terra Energy's reports on file with Canadian securities regulatory authorities. Although Terra Energy believes that the expectations reflected in our forward-looking statements are reasonable, our forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward looking information. As such, readers are cautioned not to place undue reliance on the forward looking information, as no assurance can be provided as to future results, levels of activity or achievements. The risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in our Annual Information Form and other documents available at www.sedar.com. Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, Terra Energy does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

The reader is further cautioned that estimating reserves requires judgments and decisions based upon available geological, geophysical, engineering and economic data. These estimates may change, having either a positive or negative effect on the net earnings of the Company as further information becomes available and as the economic environment changes.

Terra Energy is a junior oil and gas company engaged in the exploration for, and development and production of, natural gas and oil in Western Canada. Terra Energy's common shares trade on the Toronto Stock Exchange under the symbol 'TT'.

Contact Information

  • Terra Energy Corp.
    Mr. Bud Love
    Vice President of Finance and Chief Financial Officer
    (403) 699-7777