Terra Energy Corp.
TSX : TT

Terra Energy Corp.

February 28, 2011 14:57 ET

Terra Energy Announces 2010 Year-End Reserves Evaluation and Related Metrics

CALGARY, ALBERTA--(Marketwire - Feb. 28, 2011) - Terra Energy Corp. ("Terra" or the "Company") (TSX:TT) is pleased to announce the results of its year end reserves evaluation, as prepared by GLJ Petroleum Consultants Ltd. ("GLJ") as at December 31, 2010 (the "GLJ Report"). 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").

"Overall, Terra achieved solid year-over-year reserves growth, both on an absolute basis (approx. 7.3 mboe) and on a per share basis (approx. 12.5%). This growth was achieved during a period of time when natural gas prices have been under considerable pressure. Despite a 38% lower forecast natural gas price utilized by GLJ in its evaluation, Terra's Total Proved plus Probable Reserves increased, year over year, from approximately 24 Mboe to over 31.3 mboe." said Cas H. Morel, President and CEO. "More importantly, the Company has succeeded in assembling a 'world class' asset in its Montney gas play. Terra has put together one of the largest positions in the unconventional Montney gas play in Northeastern British Columbia, comprised of more than 100,000 net acres of Montney lands located in the heart of this burgeoning resource play. Our strategy has been to not rush and place this Montney gas on production at a time when prices are below $4.00 per mcf. Instead, we have invested our capital towards acquiring more lands and advancing the science and technology associated with the play, field by field."

Highlights

The following are reserves evaluation highlights for 2010, comparing results as at December 31, 2010 and those as at December 31, 2009:

- Total proved and probable reserves increased 31% from 24,003 mboe to 31,342 mboe

- Net Present Value (before tax) of proved and probable reserves (NPV 10%) estimated at $305 million as at December 31, 2010, compared to $314 million as at December 31, 2009, despite an approximate 38% lower forecast natural gas pricing

- Total proved reserves increased 19% from 15,955 mboe to 19,064 mboe

- Reserve life index is 7.4 years on total proved reserves and 12.1 years on total proved plus probable reserves using Q4-10 average daily production of 7,073 boed.

- 5-year finding and development costs of $12.64/boe (proved plus probable) including future capital and abandonment costs

- Undeveloped land holdings increased 33% to 656,842 net acres

- Undeveloped land values increased 58% to $113.7 million

- NAV per share as at December 31, 2010 is estimated at $3.21 basic, and $3.00 diluted

Oil and Gas Reserves

Terra increased total proved and probable reserves, net of 2010 production, by 31% from 24,003 mboe to 31,342 mboe at December 31, 2010, based upon forecast prices and costs. The breakdown of the Company's reserves consisted of 81% natural gas, 7% crude oil and 12% natural gas liquids as at December 31, 2010.

The following tables summarize certain information contained in the GLJ reserves report effective December 31, 2010. Detailed reserves information as required under NI 51-101 will be included in Terra's Annual Information Form which will be filed on SEDAR prior to March 31, 2011. 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

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Forecast Prices December 31, %
and Costs 2009 December 31, 2010 Change

Reserves Category Total Oil Natural Gas Liquids Total Total
(mboe) (mbbl) (mmcf) (mbbls) (mboe) (mboe)
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Proved Producing 11,790 1,212 58,567 1,620 12,593 7%

Proved Non-Producing 4,165 143 33,260 784 6,470 55%
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Total Proved 15,955 1,355 91,827 2,404 19,064 19%

Total Probable 8,048 859 59,900 1,436 12,278 53%
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Total Proved +
Probable 24,003 2,213 151,727 3,841 31,342 31%
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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

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Forecast Prices December 31, 2009 December 31, 2010 % Change
Reserves Category 0% 10% 0% 10% 0% 10%
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Proved Producing 287,404 179,688 238,653 150,878 -17% -16%

Proved Non-Producing 92,467 58,545 101,829 52,240 10% -11%
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Total Proved 379,871 238,233 340,482 203,118 -10% -15%

Total Probable 205,423 75,551 275,487 101,665 34% 35%
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Total Proved + Probable 585,294 313,784 615,969 304,783 5% -3%
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The forecast prices used in the GLJ Report were GLJ's forecast prices as at January 1, 2011 as presented below. The January 1, 2011 forecast prices for natural gas reflect a substantial reduction from the January 1, 2010 forecast pricing.



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AECO (CDN$/GJ)
% Difference
Year Dec 31, 2009 Evaluation Dec 31, 2010 Evaluation Year over Year
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2011 $ 6.79 $ 4.16 -38.7%
2012 $ 6.89 $ 4.74 -31.2%
2013 $ 6.95 $ 5.31 -23.6%
2014 $ 7.05 $ 5.77 -18.2%
2015 $ 7.16 $ 6.22 -13.1%
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WTI (US$/BBL)
Year Dec 31, 2009 Evaluation % Difference
----------------------------------------------------------------------------
2011 $ 83.00 $ 88.00 6.0%
2012 $ 86.00 $ 89.00 3.4%
2013 $ 89.00 $ 90.00 1.1%
2014 $ 92.00 $ 92.00 0.0%
2015 $ 93.84 $ 95.17 1.4%
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(1) Inflation is accounted for at 2.0% per year


Finding and Development Costs

Terra added 9,833 mboe of proved plus probable reserves in 2010 (net of production). As Terra 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 $73.2 million (as per GLJ's estimate), Terra's 2010 and five year F&D costs per boe on a proved plus probable basis is $13.81 and $12.64 respectively.



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5 year
Proved Reserves 2010 2006 - 2010
---------------- ----------------- ---------------
Reserves Adds (boe) 5,602,243 18,427,310

Net Capital Spent $ 92,278,660 $ 251,412,947
Change in Future Capital Required $ 21,032,000 $ 26,992,000
----------------- ---------------
$ 113,310,660 $ 278,404,947

F&D Costs (including Future
Capital/Abandonment Costs)/BOE $ 20.23 $ 15.11
F&D Costs (Excluding Future
Capital/Abandonment Costs)/BOE $ 16.47 $ 13.64

Proved Plus Probable Reserves
------------------------------
Reserve Add (boe) 9,833,410 25,674,810

Net Capital Spent $ 92,278,660 $ 251,412,947
Change in Future Capital Required $ 43,513,000 $ 73,218,000
----------------- ---------------
$ 135,791,660 $ 324,630,947

F&D Costs (including Future
Capital/Abandonment Costs)/BOE $ 13.81 $ 12.64
F&D Costs (Excluding Future
Capital/Abandonment Costs)/BOE $ 9.38 $ 9.79
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Land Valuation

Terra's gross undeveloped land holdings increased from 622,902 gross acres (495,558 net) as at December 31, 2009 to 782,061 gross acres (656,841 net) as at December 31, 2010. This represents an increase of 26% (33% net). Below is a summary of the Company's undeveloped land holdings, broken down by province:



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Province December 31, 2010 December 31, 2009
Gross Acreage Net Acreage Gross Acreage Net Acreage
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Alberta 426,032 391,824 289,838 260,681
British Columbia 355,481 264,551 331,151 233,127
Saskatchewan 548 466 1,913 1,750
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Totals 782,061 656,841 622,902 495,558
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(1) "Gross Acreage" is the total acres in which Terra has or had an
interest.
(2) "Net Acreage" is the aggregate of the total acres in which Terra has or
had an interest multiplied by Terra's working interest percentage held
therein.


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Province Undeveloped Land Values % Change
2010 2009
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Alberta $ 21,810,279 $ 10,777,393 102%
British Columbia $ 91,904,046 $ 60,727,102 51%
Saskatchewan $ 14,621 $ 633,789 -4,235%
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Totals $ 113,728,946 $ 72,138,284 58%
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The undeveloped land holdings of the Company were evaluated as at December 31, 2010 by Seaton-Jordan. The value of Terra's net undeveloped land holdings is estimated to be approximately $113.7 million as at December 31, 2010. This valuation represents an increase of 58% over last year's valuation of undeveloped land as prepared by Seaton-Jordan.

Net Asset Value (NAV)

Terra's NAV per share as at December 31, 2010 is calculated as follows:



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As at December 31
($000's) 2009 2010
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P+P Reserves (NPV 10%) $ 313,784 $ 304,783
Undeveloped Land (656,841 net acres) 1 $ 72,138 $ 113,729
Seismic at Book Value $ 5,200 $ 7,508
Net Debt $ (56,831) $ (99,000)
-----------------------------
Net Asset Value 2 $ 334,291 $ 327,020
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Shares Outstanding 87,989M 101,964M
Basic NAV per Share $ 3.80 $ 3.21
-----------------------------

Option and Warrant Value $ 24,532 $ 25,646
Option and Warrant Shares 15,062M 15,465M

Diluted Net Asset Value $ 358,823 $ 352,666
Diluted Shares Outstanding 103,051M 117,429M

Fully Diluted NAV per Share $ 3.48 $ 3.00
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(1) Based on December 31, 2009 and 2010 Seaton-Jordan reports
(2) Information based on unaudited financial statements


Comparative Growth

The Company's track record of value creation continued during 2010, with growth of Total Proved plus Probable Reserves of approximately 12.5% on a per-share basis.

To view a graph of P+P Reserves per Thousand Shares, please visit the following link: http://media3.marketwire.com/docs/228tt1.pdf

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

Reader Advisory

All amounts in Canadian dollars unless otherwise specified.

Unaudited Financial Information

Certain financial and operating information included in this media release for the year ended December 31, 2010, 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, 2010 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'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, 2010, 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 represent a fair market 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 the Seaton-Jordan estimated value of Terra's undeveloped land holdings represent the fair market value of its 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'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

This media release may contain certain statements which constitute forward-looking statements or information ("forward-looking statements"). Although Terra 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 available to the Company. 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. 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 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.
    Berk Sumen
    Manager, Corporate Affairs
    403.699.7777
    403.264.7189 (FAX)
    or
    Terra Energy Corp.
    Bud Love
    Vice President, Finance & Chief Financial Officer
    403.699.7777
    403.264.7189 (FAX)