Terra Energy Corp.
TSX VENTURE : TTR

Terra Energy Corp.

October 30, 2006 14:35 ET

Terra Energy Corp. Provides Operational Update

CALGARY, ALBERTA--(CCNMatthews - Oct. 30, 2006) - Terra Energy Corp. (TSX VENTURE:TTR) ("Terra Energy" or the "Company") is pleased to release this update on operations and activities to date, including land developments, drilling activities and infrastructure development.

Land Developments

At the time of this media release, the Company has an interest in more than 240 Sections (approximately 153,000 acres) of land in its Fort St. John core area, with an average working interest of approximately 86%. This core area is comprised of a number of separate fields and day-to-day operations are run out of the Company's Fort St. John field office. In addition to increasing our position in other parts of the Fort St. John core area, the Company has assembled a significant land position covering its plays at Eight Mile. At Eight Mile, the Company currently has an interest in 73 Sections (approximately 45,000 acres) of land, with an average working interest of 80%. The increase in the Company's land position at Fort St. John this year has been accomplished within an environment, which has become very competitive, with land prices having increased substantially over the past 24 months.

Drilling Activities

Earlier this year, in the Company's June 9, 2006 media release, Terra Energy announced that it would curtail capital expenditures as a result of lower than anticipated commodity prices. The Company is heavily weighted towards natural gas, with approximately 80% of our current production being natural gas. As a result, the Company's drilling activities this year have largely been confined to development and delineation drilling, targeting the numerous pools discovered as part of the Company's successful 2005 Summer Drilling Program. Of the 14 MMBOE of Proved and Probable reserves reported by the Company at December 31, 2005, approximately 2/3 were "non-producing".

In total, the Company has drilled 14 wells to date this year, which has resulted in 10 being completed, 2 are D&A candidates and 2 remain standing awaiting further work. The Fort St John area has attracted the attention of many of our industry competitors, as evidenced by increased crown mineral lease postings and significantly higher sale prices, and also an increase in drilling activity. As result, Terra Energy continues to maintain specific details concerning its drilling operations confidential. Many of the wells drilled by Terra Energy in 2006 were targeted at "proving-up" reserves which had been previously recognized but given only "probable" status. Many of these wells, more specifically the four wells drilled by the Company in Tower this year, have also been designed to increase the level of certainty and deliverability in conjunction with the Company's plan of building a pipeline connection across the Peace River to the McMahon Plant at Taylor, British Columbia. With the recent drilling and testing results from the Company's drilling at Tower, the Company wishes to report that previously announced "potential" production has been "proven-up" and Terra Energy now estimates that it has more than 1,500 boe/d of sustainable production capability in the Tower Field awaiting infrastructure development.

At Eight Mile, the Company, together with industry partners to which it has farmed out an interest, are drilling two wells at locations north of the Kiskatinaw River. These two wells are primarily targeting formations of Triassic Age. The Company is participating in these wells and will be retaining its status as "Operator". If circumstances permit, the Company intends on drilling one additional well at Eight mile this year. This well will be targeting various formations, including the Doig and Montney formations. This well will be a step out well to the very successful 3-3 well drilled last year, which flowed at rates in excess of 6 MMcf/day on initial production test. Success on these three upcoming wells will result in many new development locations being identified for the further expansion of our plays at Eight Mile.

Infrastructure Projects

As a result of the magnitude and the complexity of the infrastructure challenges in its Fort St. John core area, Terra Energy hired on a full-time facilities engineer in spring of 2006. Significant progress has been made to date in regards to the detailed planning and development of both the Boudreau/Red Creek gathering system and the South Peace gathering system.

As stated above, Terra Energy has in excess of 1,500 boe/d of sustainable production capability awaiting infrastructure in Tower. Terra Energy has previously announced its plan to build a crossing of the Peace River in order that its raw gas south of the Peace River, including both the Tower Field and the Eight Mile Field, is able to be processed at the McMahon Plant. The river crossing itself is a complex project and there is merit in developing a larger diameter pipe crossing of the river in order to accommodate raw gas produced by industry. To this end, Terra Energy is hoping to make an announcement concerning this river crossing within the next few weeks, which will reflect the involvement of mid-streamers and/or industry partners in this river crossing project. To date, Terra Energy has been conducting archeological and geotechnical studies of the pipeline right-of-way, and the approaches on either side of the Peace River are being surveyed. Terra Energy anticipates submitting an application to the British Columbia Oil and Gas Commission for this project as early as December of this year. Depending upon regulatory processes, Terra Energy anticipates construction to take place in June and July of 2007, with a commissioning date in August 2007. At such time, all existing wells in the Tower Field will be placed on production, and any additional new wells drilled can also be easily placed on production.

Terra Energy has approximately 500 boe/d of "behind pipe" capability awaiting infrastructure in East Boudreau. The Company has proposed a gathering line be constructed from East Boudreau to the Company's Red Creek gas plant. The primary well being tied-in was flowed at rates in excess of 6 MMcf/day on initial production test. This pipeline project is currently being held up as a result of the need to accommodate the interests of surface landowners along the right-of-way, and is in the process of mediation and arbitration at this time. Subject to the existing mediation and arbitration processes, the pipeline construction is scheduled to proceed in February of 2007.

Outlook

The natural gas sector of the industry currently finds itself in a challenging business environment with rapidly inflating capital costs and high commodity price volatility. As a result of these considerations Terra Energy has scaled back its capital expenditure program for the balance of 2006 in order to allow the Company to continue to focus its attention on key infrastructure projects. In light of the previously discussed regulatory processes and delays associated with the completion of its major infrastructure projects, Terra Energy expects production to stay flat through the end of 2006 at rates of approximately 3,000 boe/d. The Company anticipates cash flow from operations for the year to approximate $18.9 million ($0.26 per share basic).

With our continued drilling success, strong land position and advancing infrastructure projects, Terra Energy remains confident in its direction and in its ability to build value for its shareholders.

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.

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