Terra Energy Corp.

Terra Energy Corp.

January 31, 2011 21:42 ET

Terra Energy Announces 2011 Capital Expenditure Plan

CALGARY, ALBERTA--(Marketwire - Jan. 31, 2011) - Terra Energy Corp. ("Terra" or the "Company") (TSX:TT) is pleased to announce its Capital Expenditure Plan and Budget for 2011 ("2011 Capex Plan"). Total capital spending on exploration and development is targeted at approximately $29 million.

Cash flow from operations has been forecasted by the Company at approximately $32.5 million for 2011, based upon an estimated average natural gas price of $3.50 per mcf for the calendar year, an estimated average oil price of $85.00 per barrel and an average 2011 production rate of approximately 6,800 boe/d. 

"2010 saw Terra advance our unconventional Montney gas play into a world class asset. Terra's focus during 2011 will continue to be on moving this play forward at an accelerated pace of development. The immediate challenge will be to unlock the tremendous upside in our Montney play, which, in turn, should unlock the potential of Terra's capital stock." said Cas H. Morel, President and CEO. "What has changed for 2011 is the recognition that the play is now big enough to carry itself going forward. To this end, the Company will be seeking new capital, from private equity sources or through possible joint venture arrangements, which will allow quicker development. Not simply to develop higher levels of commercial production and cash flows, but to continue de-risking the play and proving up the resource. Our ability to raise new capital by finding a partner for our Montney play will, in turn, allow Terra to direct the cash flows from our non-Montney operations towards oilier projects and towards the development of new unconventional/resource plays within our substantial land base across Alberta and British Columbia."

The 2011 Capex Plan has been designed to maintain the Company's current daily average production rate through 2011 and limit capital spending to cash flows received from operations. The Company will primarily pursue projects having one or more oil (or liquids rich) targets while continuing to advance its Montney unconventional gas play. Approximately 90 percent of the 2011 Capex Plan is directed at non-Montney operations which can and should foster a new cycle of growth opportunities.

On November 15, 2010, the Company announced that it had engaged GMP Securities LP and Scotia Capital Inc., as joint financial advisors, to assist the Company in raising private equity for the Company's Montney operations. Successful completion of the targeted funding will certainly have a significant impact on that portion of the 2011 Capex Plan allocated towards Montney operations, and may also result in the Company re-visiting that portion of the 2011 Capex Plan allocated towards non-Montney operations. The Company continues to work with its financial advisors in this regard and will provide appropriate updates to the market during the coming months.

The Montney consistently ranks among the best shale gas plays in North America in terms of technical merits, size and economics. Terra has heavily invested in and built up a substantial asset in its unconventional Montney gas play of over 100,000 net acres, and is today one of the largest holders of Montney rights within the British Columbia Montney gas fairway. In September of 2010, the Company engaged an independent evaluator to estimate the resource potential of its Montney assets, and the resulting best estimate was approximately 11.90 Tcf of "Original Gas in Place" net to the Company (including both Discovered and Undiscovered Categories) as referred to in the November 1, 2010 press release.

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

Forward Looking Statements

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 moving the Montney play forward and potentially accelerating the pace of development, unlocking the potential of the Montney play, unlocking the potential of Terra's capital stock, the Montney play being big enough to carry itself going forward, continuing to de-risk the play and proving up the resource as a world class asset, directing cash flows towards and the pursuit of oilier (or liquids rich) projects and towards the development of new unconventional resource plays within Terra's land base, targeting 2011 average daily production of 6,800 boe/d, maintaining a stable production rate while holding total spending below 2011 anticipated cash flow, the fostering of a new cycle of growth opportunities, the ability to raise private equity financing and revisiting the 2011 Capex Plan allocated towards non-Montney operations. 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.

The information set out herein regarding the cash flow from operations forecasted by the Company, including pricing assumptions and production rate, is "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Terra's reasonable expectations to the anticipated results of its business activities for 2011. Readers are cautioned that the financial outlook may not be appropriate for other purposes.

Information Regarding Discovered and Undiscovered Petroleum Initially-In-Place

This news release contains references to estimates of gas classified as discovered and undiscovered petroleum initially in place (DPIIP and UDPIIP) in the Montney Fairway of northeast British Columbia which are not, and should not be confused with, oil and gas reserves.

"Best estimate" is defined in the COGE Handbook with respect to entity-level estimates, as the value derived by an evaluator using deterministic methods that best represent the expected outcome with no optimism or conservatism. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

"Discovered Petroleum Initially-in-Place" ("DPIIP") (equivalent to discovered resources) is defined in the COGE Handbook as that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of DPIIP includes production, reserves, and contingent resources; the remainder is unrecoverable. A recovery project cannot be defined for this volume of DPIIP at this time. There is no certainty that it will be commercially viable to produce any portion of the resources.

"Undiscovered Petroleum Initially-In-Place" ("UDPIIP") (equivalent to undiscovered resources) is defined in the COGE Handbook as that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of UDPIIP is referred to as "prospective resources," the remainder as "unrecoverable." A recovery project cannot be defined for this volume of UDPIIP at this time. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

There is no certainty that it will be economically viable or technically feasible to produce any portion of this DPIIP and UDPIIP. Resources do not constitute, and should not be confused with, reserves.

This estimate of remaining recoverable resources (unrisked) includes contingent resources that have not been adjusted for risk based on the chance of development. It is not an estimate of volumes that may be recovered. Actual recovery may be less.

Contact Information

  • Terra Energy Corp.
    Berk Sumen
    Manager, Corporate Affairs
    403.264.7189 (FAX)