Terra Energy Corp.

Terra Energy Corp.

March 03, 2010 09:00 ET

Terra Energy Capex Plan Targets Montney

CALGARY, ALBERTA--(Marketwire - March 3, 2010) - Terra Energy Corp. ("Terra Energy" or the "Company") (TSX:TT) is pleased to announce its Capital Expenditure Plan and Budget for 2010 ("2010 Capex Plan"). The 2010 Capex Plan contemplates a minimum of $65 Million of capital expenditures targeting:

1. A strategic push into the Montney Fairway in Northeast British Columbia,
by advancing the level of geotechnical/engineering science, on a
"field-by-field" basis, in respect of each block or field of prospective
undeveloped Montney land, to the "decision-point" stage for major
commercial development and proving-up significant reserves in the
process; and

2. Drilling projects designed to at minimum maintain production or increase
it beyond the current base level of 7,100 boed.

"The 2010 Capex Plan has been designed to give us the biggest bang for the buck, using our existing sources of capital, and relying heavily on science and technology as the key strategy for ensuring success." said Cas H. Morel, President and CEO of Terra Energy. "Success in our industry will belong to low-cost producers and we intend to be among them. Terra Energy plans to unlock the potential of our Montney play and to advance other non-conventional plays and prospects on our lands. The Company currently has over one-half million net acres of undeveloped lands."

Montney Plans

A significant portion of the 2010 Capex Plan will be committed to the Montney play. The Company has over 100 net sections of prospective undeveloped land within the Montney Fairway in Northeast British Columbia. This land position is comprised of several blocks or fields, including Groundbirch, Farrell Creek/Altares and Greater Wilder.

At Groundbirch, the Montney play is already at the stage of active development. The Company generally owns a 25% working interest in this block. The Groundbirch block is in close proximity to the Monterey 4 - 30 - 80 - 20W6M Hz well, which was reported by the operator to flow raw gas at a rate of "approximately 9.0 million cubic feet per day with a flowing wellhead pressure of 7,000 kilopascals after 48 hours of continuous production testing". One horizontal well was drilled on the Groundbirch block prior to the recent acquisition by Terra Energy and is currently awaiting completion, in which the Company will have an overriding royalty interest. Currently, two additional follow-up wells are being drilled. The Company is anticipating a minimum of six wells to be drilled and completed during calendar 2010. The operator has received approval to commence construction of an associated gas processing plant and related facilities, with the development anticipated to be on stream prior to year end. The Groundbirch block represents a small piece of Terra Energy's overall position in the Montney play, but will help accelerate the Company's understanding of the play.

In the highly prospective Farrell Creek/Altares area (where Terra Energy owns 17 net sections of land), the Company is targeting not only the Montney formation, but also the Doig formation. The Company's lands are adjacent, or in close proximity, to lands which are the subject of two separate recent applications (covering over 40 sections) by Talisman Energy Inc. for Good Engineering Practice, one in respect of the Montney formation and one in respect of the Doig formation. Terra Energy will be drilling 2 or 3 vertical Montney/Doig wells during 2010. In addition, the Company will be recompleting one standing well for Doig, Upper Montney and Middle Montney potential. The Company's lands at Farrell Creek/Altares are in close proximity to several high rate Montney horizontal tests. With success, Terra Energy will immediately follow up with a horizontal well in this area. It is hoped that the foregoing will position Terra Energy with the ability to advance this field to the commercial development stage. The Company is now conducting preliminary engineering work to construct a 30 MMcf/day (5,000 boed) gas processing plant in the Farrell Creek/Altares area, which would be tied into the Spectra Fort Nelson mainline for sales gas.

In the Greater Wilder area, Terra Energy plans on drilling a program of 5 to 7 vertical Montney wells (approximately 6 net wells) during the second half of 2010 in order to obtain key reservoir parameters. Any one or more of these wells may be converted into a horizontal well during the course of drilling. In addition to title preservation, this well program will include two of the commitment wells involved in a recently announced farm-in by the Company, and will provide the Company with essential fundamental data in order to advance field development. Upon success, these wells are intended to be followed up with a program of horizontal wells. The Company is now conducting preliminary engineering work to construct a 30 MMcf/day (5,000 boed) gas processing plant in the Wilder area, which could be tied into both of the Spectra Fort St. John (Sumas) mainline and the Spectra Alberta 26" (Gordondale) mainline, by converting one of the Company's existing 6" gathering lines into a sales line.

Capital Plans for Other Areas

The remaining projects being planned by Terra Energy for 2010 will advance the following priorities:

1. Advancing work on other non-conventional plays on the Company's existing
land base, including plays targeting "oily" reservoirs;

2. Shifting the balance in the commodity mix of the Company's conventional
operations closer towards 50 : 50 (oil : gas) over time;

3. Maximizing the use of Alberta Drilling Incentive Credits;

4. Benefiting from the British Columbia Temporary Two Percent Gas Royalty
Program; and

5. Drilling projects designed to at minimum maintain production or increase
it beyond the current base level of 7,100 boed.

In the Sunrise/Eight Mile area of British Columbia, the Company will drill 2 to 4 high rate infill Doig gas wells, which will help offset declines and take advantage of the British Columbia Temporary Two Percent Gas Royalty Program. These wells can immediately be tied-in to the Company's 100% WI Tower production facility.

In relation to the Red Creek area of British Columbia, Terra Energy has engaged a third party reservoir engineering consulting firm to study the feasibility of a water flood in the Red Creek Doig "C" pool. Facilities are already in place for the water flood and water injection should commence in the third or fourth quarter of 2010. Preliminary estimates indicate there is potential for secondary recovery of incremental oil under a water flood scheme which could increase recovery of the original oil-in-place by as much as 5 to 8% from the current primary recovery of 11%. The field has produced approximately 870 mstb of oil to date on primary.

In the Inga/Fireweed area of British Columbia, the Company will consider participating in a horizontal well targeting the Doig formation. The Company's lands in Inga/Fireweed are on trend with the Breaker a-85-I / 94-A-12 Hz well which was reported by its operator to flow gas and gas condensate at a combined rate of 1,000 boed on an initial production test. Success on such a well could result in numerous follow-up locations.

In the Karr/Gold Creek area of Alberta, the Company owns approximately two townships of land in this newly identified "potential resource corridor". The Company plans on drilling two Doig/Halfway wells and may also evaluate the potential of other geological horizons for future development on this large land block.

In the Grande Prairie/Wembley area of Alberta, the Company will be drilling 2 horizontal wells, targeting "oily" formations. In addition, the Company will be drilling at least one Montney gas well in the area.

In the Balsam area of Alberta, the Company has drilled and is in the process of completing an oil well adjacent to an existing oil field. This well is directly offsetting one or more vertical wells producing oil at rates above 200 bbl/d. The Company has plans for at least one additional follow-up oil well in this play.

In the Boundary Lake/Worsley area of Alberta, one Halfway oil well and one Baldonell oil well were successfully drilled and cased in February. These are in the process of being completed. At least one follow-up oil well is planned.

In the Cecil area of Alberta, Terra Energy has drilled a gas well in the first quarter and is in the process of completing and tie-ing it in for production. The Company plans on drilling an additional gas well to further develop this play in the second half of 2010.

Other projects and operations are being planned in both British Columbia and Alberta, many of which are confidential in nature. The 2010 Capex Plan provides direction to management of the Company for minimum capital expenditures of $65 Million during calendar 2010, with the understanding that the 2010 Capex Plan may be increased in order to accelerate development plans at any time.


Cash flow from operations has been forecasted by the Company at approximately $49 million for 2010, based upon an estimated average natural gas price of $5.50 per GJ for the calendar year, an estimated average oil price of $75.00 per barrel and an average 2010 production rate by the Company of approximately 7,100 boed. The Company intends to fund its 2010 Capex Plan from a combination of cash flow and available credit lines. The Company exited 2009 with approximately $57 Million of total net debt (based upon unaudited financial results) on an $80 Million bank line.


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.

The media release may contain forward-looking statements or information ("forward-looking statements") including statements regarding unlocking the potential of the Terra Energy Montney play, drilling and recompletion plans, facility construction, project and operational planning, advancing work on non-conventional plays, shifting the balance of the Company's commodity mix, maximizing Alberta Drilling Incentive Credits, benefitting from the British Columbia royalty program, expectations of capital expenditures, future production, cash flow, net debt, sources of funding and statements as to the reliance on science and technology. 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. 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 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 information under the heading "Guidance" is "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Terra Energy's reasonable expectations as to the anticipated results of its proposed business activities of the Company for 2010. Readers are cautioned that this financial outlook may not be appropriate for other purposes.

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