Terra Energy Corp.

Terra Energy Corp.

February 01, 2010 11:28 ET

Terra Energy Announces Strategic Expansion in the BC Montney Fairway

CALGARY, ALBERTA--(Marketwire - Feb. 1, 2010) - Terra Energy Corp. (TSX:TT) ("Terra Energy" or the "Company") is pleased to announce that it has signed a commitment letter (the "Commitment Letter") outlining an arrangement with a large producer (the "Arrangement"), whereby Terra Energy will, upon closing, significantly expand the Company's presence within the Montney "Fairway" in British Columbia. In accordance with the terms of the Commitment Letter, Terra Energy will acquire approximately 91 gross (66 net) sections of land. In addition to the Montney Fairway, Terra Energy will acquire certain additional lands in Northeastern British Columbia having identified potential for multi-frac horizontal development. 

"The highly competitive environment in North America's natural gas industry requires that Terra Energy embraces science and technology in order to pursue the lowest cost production and highest return on capital employed. This transaction marks a significant step in our Company's efforts to appreciably increase exposure to the Montney play and achieve better balance between conventional and non-conventional opportunities for growth" remarked Cas H. Morel, President and CEO. "The deal will add considerably to Terra Energy's growing land presence in the Montney Fairway trend in Northeastern British Columbia with material acreage additions in key areas of high activity, including Altares/Farrell Creek, Wilder and Groundbirch."

Upon completion of the Arrangement, Terra Energy will be one of the largest holders of prospective Montney rights in British Columbia, with approximately 122 gross (100 net) sections within the prospective Montney "Fairway".

Under the terms of the Arrangement, Terra Energy will acquire a 100 percent working interest in approximately 14 net sections of land located in the Altares/Farrell Creek area. Upon closing, Terra Energy anticipates licensing up to three vertical Montney tests and one recompletion in the area. Drilling and testing, including the application of micro-seismic technology, is anticipated to commence early in 2010 with a view towards assessing the potential for a multi-well horizontal development program. As of October 1, 2009, there were approximately 21 horizontal and 10 vertical Montney wells either drilled or licensed by various operators in areas adjacent to Farrell Creek, including a vertical Montney test well reported to have initial production of more than four million cubic feef (mmcf) per day.

In addition, Terra Energy will significantly increase its current interests in the Wilder area through the addition of approximately 17.5 gross (16.25 net) sections of land. Terra Energy currently owns approximately 60 gross (30 net) sections of prospective Montney in the Wilder area. Terra Energy expects to undertake four to six vertical Montney tests and one potential horizontal well in the area during 2010 in order to preserve title and test the Montney potential in the area. Terra Energy has initiated preliminary engineering for a 30 mmcf per day gas processing plant in the Monias/Wilder area to support anticipated production from a multi-well horizontal development program. 

Under the Arrangement, Terra Energy will further receive varied interests in approximately 12 gross (3.75 net) sections (together with overriding royalties) in the Groundbirch area, located proximal to a recent horizontal Montney test that achieved a reported initial production rate of nine mmcf per day following 48 hours of continuous production testing. One 'confidential' horizontal development well has recently been drilled, and two or more follow-up horizontal Montney development wells are anticipated to be drilled this year on the Groundbirch lands contemplated under the Arrangement. Terra Energy is encouraged by results to date in the Groundbirch area and, subject to closing of the Arrangement, anticipates participating in horizontal Montney development drilling in the Groundbirch area during the course of 2010. The potential of this area is high and Terra Energy plans to work with its partner in the area to determine the ultimate scope for development in Groundbirch.

Additionally, Terra Energy will be well positioned with a significant foothold in the Inga/Fireweed area of Northeastern British Columbia, following the addition of approximately 22.5 gross (8.5 net) sections of land with average working interests of between 25 and 40 percent and rights to related production and facilities in the Inga/Fireweed area. This land is on strike with the Fireweed Doig tight sand trend.

The Arrangement is scheduled to close on or before February 15, 2010, and is subject to customary approvals, conditions, adjustments and management approval by both parties. Consideration payable by Terra Energy includes the transfer and conveyance of various oil and gas mineral interests located in British Columbia, relative to which minimal production and reserves are currently attributed in the Company's books. 

Contemporaneously with the Commitment Letter and the closing of the above mentioned Arrangement, Terra Energy has entered into an option to purchase (the "Option"), pursuant to which Terra Energy will have the option to acquire various interests in both unitized and non-unitized oil and gas properties located within the Company's existing core operating areas. The Option involves approximately 2,000 boe per day of liquids rich production for total cash consideration of approximately $115 million. The Option is subject to customary title and environmental due diligence, various representations, warranties, conditions, approvals and closing adjustments. Unless extended by the parties, the Option will expire March 31, 2010.

Terra Energy's latest presentation can be viewed at the Company's corporate website at www.terraenergy.ca., including a map of Terra Energy's landholdings in the Montney Fairway in British Columbia. Also included in the presentation is a snapshot of the Company's capitalization metrics (approx. 88 MM shares outstanding and approx. $59 MM of total net debt) and operating metrics (producing more than 7,000 boed).

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'.


All amounts in Canadian dollars unless otherwise specified

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.

This media release contains certain statements which constitute forward-looking statements or information ("forward-looking statements"), including the statements that the competitive environment in North America's natural gas industry requires that Terra Energy embraces science and technology in order to pursue the lowest cost production and highest return on capital employed, licensing of up to three vertical Montney tests and one recompletion in Altares/Farrell Creek, the commencement of a multi-well horizontal development program, the undertaking of four to six vertical Montney tests and one potential horizontal well in the Wilder area, the participation in one or more horizontal Montney wells in the Groundbirch area, and the potential of such area, the scheduled closing of the Arrangement and the exercise of the Option. Results of proximal wells are not meant to forecast, imply or guarantee future performance of wells undertaken by Terra Energy. 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 statements. As such, readers are cautioned not to place undue reliance on the forward-looking statements, as no assurance can be provided as to future results, levels of activity or achievements. 

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. The risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in more detail 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.

Contact Information

  • Terra Energy Corp.
    Bud Love
    VP Finance & CFO
    (403) 699-7777