Terra Energy Corp.

Terra Energy Corp.

November 14, 2012 17:10 ET

Terra Energy Announces Third Quarter 2012 Financial Results

CALGARY, ALBERTA--(Marketwire - Nov. 14, 2012) - Terra Energy Corp. ("Terra" or the "Company") (TSX:TT) announces its financial and operating results for the three and nine month periods ended September 30, 2012. Complete copies of Terra's third quarter 2012 financial results may be obtained at www.sedar.com or www.terraenergy.ca.

During the third quarter of 2012, the industry witnessed a measure of relief from the natural gas price lows which hit a ten year bottom in late April, when AECO spot prices traded below $1.50 per mcf. The Company realized an average natural gas sales price for the third quarter of $2.31 per mcf compared to $1.84 per mcf in the second quarter and $2.15 per mcf in the first quarter of 2012.

The strengthening in natural gas prices has resulted in gross revenues of $10,783,000 and cash flows from operating activities of $61,000 from 4,873 boe/d of production, which production rate was affected by both sales of non-core assets and shut-ins of certain gas wells. Operating expenses were reduced to $16.97/boe in the third quarter from $21.51/boe in the second quarter of 2012. General and administrative expenses were also reduced to $4.52/boe from $4.73/boe during the same comparative periods, notwithstanding the inclusion of one time expenditures associated with the marketing of the Company's assets and fees related to debt restructuring and re-financings.

Subsequent to the third quarter, the Company announced the divestiture of more than $80 million dollars of assets, and that no further consideration would be given towards subordinate debt financing as a means to re-capitalize or strengthen the balance sheet. This recent development is tied to a number of asset sale transactions arising from the two major marketing processes which have been underway over the past few months, the details of which have yet to be fully disclosed. This re-capitalization will be dependent upon the successful closing of several transactions which are currently in the form of letters of intent or agreements for purchase and sale. The net proceeds of these asset sale transactions will be used to substantially pay down the Company's total indebtedness to a point that Terra will once again have a strong balance sheet.

Following the successful completion of the asset sale transactions, the Company will continue to have production capability of approximately 5,000 boe/d across its core operating areas located in the Peace River Arch in Alberta and British Columbia. In addition, the Company will have in excess of 350,000 net acres of undeveloped land, with many plays and prospects in hand. Simultaneously, the Company's ability to manage its revenue stream in the future will be restored by way of the ability to enter into multi-year commodity hedges.

Terra is a junior oil and gas corporation engaged in the exploration for, and 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.

The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil (6 mcf/bbl.) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this report are derived from converting gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Forward-Looking Statements

This media release may contain certain statements which constitute forward-looking statements or information ("forward-looking statements") including: net proceeds to be used to substantially pay down total indebtedness to a point that Terra will once again have a strong balance sheet, the Company continuing to have production capability of approximately 5,000 boe/d, the Company continuing to have 350,000 net acres with many plays and prospects in hand, and the company's ability to manage the revenue stream in the future by way of hedging. Although Terra believes that the expectations reflected in our forward-looking statements are reasonable, our forward-looking statements have been based on expectations, factors and assumptions concerning future events which may prove to be inaccurate, including satisfactory due diligence by purchasers of the assets, receipt of requisite approvals, the entering into definitive purchase and sale agreements and the satisfaction of conditions to the closing of the asset sales. Those expectations, 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. Risks include, but are not limited to: the entering into of definitive agreements, the satisfaction of all requisite due diligence and approvals, the satisfaction of conditions to the sale of the assets and risks associated with the oil and gas industry. 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.
    Bud Love
    Vice President of Finance & Chief Financial Officer

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