Terra Energy Corp.

Terra Energy Corp.

May 25, 2006 09:00 ET

Terra Energy Corp. Announces Increased Credit Facility

CALGARY, ALBERTA--(CCNMatthews - May 25, 2006) - Terra Energy Corp. (TSX VENTURE:TTR) ("Terra Energy" or the "Corporation") is pleased to announce that it has entered into a new senior credit facility in the amount of $55,000,000 with a syndicate of lenders led by the TD Canada Trust and including National Bank of Canada. The terms of the credit facility are such that any portion which is drawn down will be considered to be 'long term' indebtedness. This new credit facility represents a $15,000,000 increase in debt capacity above the Corporation's former credit facility which was in the amount of $40,000,000.

In addition to cash flow from operations and the proceeds from the exercise of certain outstanding warrants/options, Terra Energy will utilize its expanded debt capacity, as necessary, to fund the $66MM Capital Expenditure Plan which was announced by the Corporation on March 9, 2006.

As a consequence of the strong market which currently exists for oil and gas properties, Terra Energy is in the process of considering the rationalization of certain non-core assets with a view towards optimizing its share value and strengthening its balance sheet. Terra Energy has engaged Sayer Energy Advisors in connection with the marketing of an initial package of three non-core properties.

In the meantime, the Corporation is preparing for its 2006 Summer Drilling Program which is anticipated to begin in the latter part of June. The Corporation currently has two drilling rigs committed and is in the process of negotiating a contract for a third drilling rig. The Corporation plans to drill approximately 25 wells during 2006, the majority of which will be drilled during the summer months and the majority of which will be located within its Fort St. John Core Area.

Reader Advisory

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 including expectations of future production, cash flow and earnings. 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.

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.

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.

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 TSX Venture Exchange under the symbol 'TTR'.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

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