Terra Energy Corp.

Terra Energy Corp.

November 11, 2011 18:14 ET

Terra Energy Provides Update on Operations, Ongoing Efforts to Fund Montney and Announces New Marketing Process for Duvernay

CALGARY, ALBERTA--(Marketwire - Nov. 11, 2011) - Terra Energy Corp. ("Terra" or the "Company") (TSX:TT) is pleased to provide this update highlighting it's recent drilling activities and completions operations, its previously announced process to secure private equity for its unconventional Montney assets and a new process to market the Company's Duvernay rights located in west-central Alberta.

Operations: Early in 2011, Terra announced a plan to take a prudent approach to capital investment and operational spending during 2011, with a key strategy of focusing on oil and liquids rich targets. Consistent with this strategy, Terra has drilled, completed and proved up (on a 100% working interest basis) a new Triassic oil pool in northeast British Columbia. This test well brought on 70 bbls/d of light oil production from a single vertical well. Additionally, this test well has given rise to at least four follow-up development/step-out locations to be licensed.

In the Valhalla area of west-central Alberta, Terra has successfully drilled a vertical well into the Doig formation resulting in a test rate of over 100 bbls/day of oil and associated gas of 150 boe/d. This oil well is currently awaiting tie-in. The results from this well reflect the potential for developing this area utilizing unconventional techniques, including horizontal drilling and multi- stage fracking. Industry partners have demonstrated successful results from the same formation directly north of Terra's lands utilizing horizontal drilling and multi-stage fracking. Terra intends to license at least four horizontal locations in the area for potential resource style oil development.

On the natural gas side, Terra is targeting the Belloy formation in the greater Peace River area and has drilled two wells into the formation. The first well (50% working interest) was drilled, completed and tested at 4 mmcf/d. The second well (100% working interest) has been drilled and is awaiting completion prior to year end. It is anticipated that these two wells will be tied-in as soon as gathering lines can be constructed to existing processing infrastructure. Earlier in 2011, the Company completed a highly successful Belloy step-out well (50% working interest) which was brought on production in March at an initial rate of 6 mmcf/d. This well continues to produce at or near its initial production rate.

In the Monias area of British Columbia, the Montney formation remains very prospective, with higher than anticipated porosity and reservoir pressures being recorded. In addition, liquids yields are approximately 20 bbls/mmcf. Ongoing technical work is being conducted to license several horizontal locations in the area in anticipation of the funding being secured for development. At the same time, Terra has an application ready for submission for a 25 mmcf/d processing facility to process future Montney gas production in the area.

In the Hamelin Creek area of west-central Alberta, Terra has been active in recompleting multiple zones in three different wells. These recompletion activities are anticipated to add an incremental 3 mmcf/d of production net to Terra, depending upon access to existing sour gas processing facilities. Gathering lines and field infrastructure in the area are already in place, and as a result, Terra anticipates placing this production onstream before the year end of 2011. These recompletion operations result in extraordinarily low F&D costs for any reserves which are proved up.

In total, Terra anticipates adding the above mentioned additional production, subject to receiving the requisite regulatory and infrastructure approvals, of approximately 800-1,000 boe/d during the remainder of 2011 and early 2012. These production additions are separate and apart from our production capabilities in Farrell Creek, where the Company is awaiting approval of a 25 mmcf/d gas processing facility.

Montney: During the summer months, Terra has endeavoured to secure private equity funding to advance its unconventional Montney gas play in northeastern British Columbia. The volatility in global financial markets and the state of the natural gas market in North America have resulted in the process taking longer than originally anticipated, and have prevented Terra from reporting a private equity deal to this date. At the same time, interest in the unconventional Montney gas play in British Columbia has only increased as LNG export on the west coast moves closer to becoming a reality. Another major development in the unconventional Montney play in British Columbia is the recent success being demonstrated on offsetting lands in the Montney condensate play.

Accordingly, as we continue to seek capital to develop these major assets, Terra will expand efforts to secure funding by targeting alternative forms of capital, including capital from Asia and Europe in the form of more conventional joint venture deals such as those being announced by industry peers in the area. Terra will also consider the outright sale of the Montney assets to strategic players. Terra will continue to provide updates as any major new developments may occur.

Duvernay: Terra has engaged Macquarie Capital Markets Canada Ltd. to market certain specified assets located in west-central Alberta, in the Karr, North Ante Creek, Peoria and Sturgeon Lake areas. These assets are non-core to Terra and have no production or reserves currently attributed to them. Terra owns 100% of approximately 140,000 acres or approximately 218 sections in the aforementioned four areas. Included in this marketing process will be Terra's Duvernay assets.

Terra's Duvernay assets are located in the Karr and North Ante Creek areas, where Terra holds approximately 79 net sections (approximately 50,000 net acres) of Duvernay rights. The Duvernay is an emerging liquids-rich resource play that has attracted the attention of numerous major industry players as it is widely believed to be the next significant resource play in Western Canada. Terra's Duvernay assets are predominantly located in two large contiguous blocks in a geologically prospective area of the Duvernay. A presentation on Terra's Duvernay assets is available for viewing on the Company's website at www.terraenergy.ca. In the event of a successful sale transaction, the Company would utilize the proceeds both to pay down bank debt and to advance its two key strategies, namely a shift towards oil/liquids and the advancement of the Montney assets in British Columbia.

Terra will release its third quarter 2011 financial results on November 14 after market close.

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.

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.

Forward-Looking Statements

This media release may contain certain statements which constitute forward-looking statements or information ("forward-looking statements") including, adding additional production in 2011 and 2012, the intentions to license additional horizontal locations for oil development, the tie-in of additional wells, the submission of an application for a new processing facility, the private equity funding of the Company's Montney unconventional gas play, the timing of the financing process and expanding the process and simultaneously targeting alternative forms of development funds in other geographic regions, the marketing and sale of certain Duvernay assets of the Corporation, the use of proceeds from the sale of Terra's Duvernay assets, the Duvernay being widely believed to be the next significant resource play in Western Canada, and the timing of the release of financial results. There is a risk that the financing process may not occur within the expected timeframe or at all. 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
    403.264.7189 (FAX)