Terra Energy Corp.
TSX VENTURE : TTR

Terra Energy Corp.

June 27, 2008 09:00 ET

Terra Energy Announces Expanded 2008 Capital Plan

CALGARY, ALBERTA--(Marketwire - June 27, 2008) - Terra Energy Corp. (TSX VENTURE:TTR) ("Terra Energy" or the "Company") is pleased to announce that its Board of Directors has expanded the 2008 Capital Expenditure Plan and Budget. The Company now plans to spend a total of approximately $52 Million, virtually all of which will be spent in its Fort St. John Core Area. The expanded plan calls for the Company to drill a total of 16 gross wells and is targeting an exit production rate for 2008 of 5,700 BOED.

"The combination of higher forecast natural gas prices and the elimination of our debt allows Terra Energy to accelerate our organic growth", said Cas H. Morel, President and Chief Executive Officer. "Terra Energy has been considered to be a 'value' play in the marketplace for some time, but is now poised to become a compelling 'growth' story for investors."

Terra Energy will be carrying out three principal activities this year. The first involves the development of the Company's Sunrise Gas Field. Terra Energy's only major infrastructure project for 2008 is the construction of a 25.4 kilometre, 8" pipeline connecting its Sunrise Gas Field to its Tower Dehydration and Compression Facility, together with the installation of a second compressor which will expand the design capacity of the facility to approximately 20 MMcf per day. The expansion of the Tower facility is required to handle anticipated production volumes coming onstream this year from North Eight Mile and Sunrise. Included in the expanded capital plan are a minimum of 7 wells in Sunrise, each of which will be targeting the Doig sand as the primary target and each of which will have one or more secondary targets.

The Company's second principal activity for 2008 will be the exploitation of the Company's Red Creek Oil Pool. The Company plans two projects at Red Creek in 2008. The first is the re-entry and recompletion of an existing horizontal well using multi-stage frac techniques with a view towards ascertaining the most cost efficient method of extracting the oil. The second project planned for Red Creek is the drilling of a vertical well with a view towards expanding the total size of the pool to the west and to the north. It is hoped that the two projects together will set the Company up for a major oil development opportunity for 2009.

The third principal activity for 2008 consists of a series of exploration plays in the Fort St. John area. The Company has just under 200 net sections of land in the vicinity of Fort St. John, which area has demonstrated hydrocarbon prospectivity in more than 20 different formations. Included in the exploration plans are two or more wells which could be considered high impact plays and which could provide the Company with additional development drilling opportunities in 2009.

The total budget of $52 million is broken down into approximately 60% drilling and completions costs, approximately 30% equipping and infrastructure, and the remaining 10% being allocated to land, seismic and other costs. Of significance is the reduction of the percentage of the budget being allocated to infrastructure costs as compared to 2006 and 2007. With the substantial capital investment which was made by Terra Energy over the past two years in pipelines and facilities, the Company can now dedicate a higher percentage of its capital on growing the production base and reserves. With most of the major infrastructure now in place, the Company can look forward to being able to tie-in new production without undue delays.

The Board of Directors also approved the ratification of the granting of 1,417,700 replacement stock options to participants in the Company's Employee Stock Option Plan, which replaced stock options exercised during the period April 1, 2008 to June 24, 2008, of which 2,500 stock options were granted to a senior officer and 35,000 stock options were granted to a junior officer. The total number of stock options currently outstanding under the Company's Employee Stock Option Plan is approximately 6,550,000 or approximately 8.6% of the Company's outstanding commons shares.

Guidance for 2008

With the expanded 2008 Capital Expenditure Plan, the Company is targeting a production exit rate of approximately 5,700 BOED. Total Revenues are forecast to be approximately $85 Million based upon an estimated natural gas price of $8.75 per Mcf and $100 per bbl of oil, resulting in a forecast cash flow from operations of approximately $40 million or $0.52 per common share (basic).

READER ADVISORY

A BOE conversion ratio of six thousand cubic feet per barrel (6 mcf/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.

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 media release.

Contact Information

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