Terra Energy Corp.
TSX VENTURE : TTR

Terra Energy Corp.

October 31, 2008 23:59 ET

Terra Energy Provides Updates on Operations, Reserves Evaluation and Land Values

CALGARY, ALBERTA--(Marketwire - Oct. 31, 2008) - Cas H. Morel, President and Chief Executive Officer of Terra Energy Corp. (TSX VENTURE:TTR) ("Terra Energy" or the "Company"), is pleased to provide this update on operations, on the Company's reserves evaluation and also on undeveloped land values. As stated in a prior media release, the Company engaged Scotia Waterous to assist the Company in unlocking shareholder value. In connection with this process, the Company has had its oil and gas reserves re-evaluated as at September 30, 2008. Similarly, the Company has updated its third party evaluation of undeveloped lands.

Operational Summary

Year to date, the Company has drilled 12 wells (10 net) in our Fort St. John core area, consisting of six wells at Sunrise, two at Red Creek, and one each at Parkland, Goose, Wilder and Boudreau.

At Sunrise, Terra Energy has drilled and completed 6 wells (4 net) this year. To date, 6 of these wells have been completed in the Doig Sands formation with gas rates ranging from 0.5 mmcf/d to 2.8 mmcf/d. Each of these wells was drilled as a vertical well, and targeted 2-4 prospective formations. Each of these wells has been completed with 1-2 producing zones per well. Terra is currently waiting for licenses to drill 1-2 additional Sunrise locations this year. These wells have confirmed the Company's geological model and mapping of the Doig Sands.

Three of the Sunrise wells have been completed as gas wells in the Doig Phosphate formation. Production tests have ranged from 0.5 mmcf/d to 0.75 mmcf/d from the completions in the Doig Phosphate in these vertical wells. The Doig Phosphate represents a new development opportunity for the Company. Terra Energy has approximately one township of land which has been mapped as having potential in the Doig Phosphate. Detailed core analysis through the Phosphate and log analysis indicates porosity values ranging as high as 10% in a sand sequence (2.0 to 2.5 meters) sandwiched within the Doig Phosphate shale. It is speculated that this sand sequence creates a natural conduit for the production of gas from the sand itself, as well as the Doig Phosphate shales above and below. Terra Energy plans to drill a horizontal well within this 2 meter sand sequence, with the intention of carrying out multi-staged fractures along the horizontal length. It is estimated that 2 to 3 wells per section will be required to fully develop this potential. Terra Energy is in the process of licensing 6 horizontal wells targeting the Doig Phosphate at Sunrise.

In addition to the Doig Sands and the Doig Phosphate, the Sunrise wells have proved up potential for an extensive play within the Halfway formation. The Halfway formation performs as a tighter sand formation in Sunrise with test rates ranging from 0.25 mmcf/d to 0.5 mmcf/d when production tested, Like many tighter formations, the Halfway is now being evaluated for its potential to be developed utilizing horizontal wells and multi-stage fracture technology.

At Red Creek (100% WI), an existing Doig horizontal oil well was fracture stimulated in 5 locations along the horizontal length. The well encountered a new reservoir and successfully tested at 50 BOED, however, early problems arose trying to pump the well with conventional bottom hole pumps as result of sand issues. The Company continues to evaluate artificial lift systems to improve productivity. A new well was also drilled at Red Creek 03-16. This well was successful in proving up the geological model of the reservoir but encountered tight sands with only limited net pay.

Exploratory wells drilled at Parkland, Goose and Boudreau encountered hydrocarbons in the primary formations targeted, but each appears to display compartmentalization and limited reserves in the primary target. These wells are being evaluated for potential in secondary targets. The exploratory well drilled at Wilder appears to have encountered gas in two of its targeted formations, and is awaiting completion and testing.

Infrastructure Projects

Terra Energy has completed the 2nd and 3rd phases of the Sunrise and Eight Mile pipelines, completing a gathering trunk from the south end of the Sunrise field up to the Tower Compression and Dehydration facility. In anticipation of additional volumes from the new Sunrise and Eight Mile pipelines, construction has begun on expansion of the Tower Compression and Dehydration facility. Expansion includes the addition of a second 1,500hp compressor and a slug catcher for production from the Sunrise and Eight Mile pipelines. With the addition of a second compressor, facility design capacity is expected to increase from 10 mmcf/d to 20 mmcf/d. Completion of the facility expansion work is scheduled for the first week of November, and is on target.

Production

Production for Q3 averaged approximately 4,372 BOED. This volume is approximately 300 BOED less than anticipated due to operational issues experienced as a result of a third party operator at the West Doe facility. Terra Energy is working with the third party operator to resolve these operational issues, through a reconfiguration of flow for raw gas and produced liquids.

Petroleum and Natural Gas Reserves

The Company has re-engineered its petroleum and natural gas reserves. The report was prepared in accordance with NI 51-101 Standards of Disclosure for Oil and Gas Activities by GLJ Petroleum Consultants Ltd. as at September 30, 2008. A summary of the results is as follows:



Reserves At September 30, 2008

------------------------------

Natural Gas Liquids

----------- ---------

Category Oil (bbls) (mmcf) (bbls) Total (BOE)

-------- ----------- ----- ------ -----------

Proved Producing 511,000 37,207 1,801,000 8,513,167

Proved Non-

-----------

Producing 203,000 16,324 735,000 3,658,667

--------- ----------- ----------- --------- -----------

Total Proved 714,000 53,531 2,536,000 12,171,833

Total Probable 434,000 23,476 1,095,000 5,441,667

-------------- ----------- ----------- --------- -----------

Total P+P 1,148,000 77,007 3,631,000 17,613,500

6.5% 72.9% 20.6%



Forecast Prices and Costs Before Tax Net Present Value of Net Production

Income - Sept 30, 2008

Undiscounted Discounted

0% 5% 10% 15% 20%

-- -- --- --- ---

$245,637,000 $189,338,000 $157,036,000 $135,790,000 $120,590,000

$ 88,062,000 $ 64,400,000 $ 50,952,000 $ 42,071,000 $ 35,720,000

------------ ------------ ------------ ------------ ------------

$333,699,000 $253,738,000 $207,988,000 $177,861,000 $156,310,000

$170,207,000 $100,494,000 $ 69,911,000 $ 52,807,000 $ 41,840,000

------------ ------------ ------------ ------------ ------------

$503,906,000 $354,232,000 $277,899,000 $230,668,000 $198,150,000



Evaluation of Undeveloped Oil and Gas Properties

------------------------------------------------

The Company has re-evaluated its undeveloped oil and gas properties.
The report was prepared in accordance with NI 51-101 Standards of Disclosure
for Oil and Gas Activities by Seaton-Jordon & Associates Ltd. as at
September 30, 2008. A summary of the results is as follows:

Area Gross Acres Net Acres Value $

-------------------------------------------------------------------------

Alberta 31,200.0000 18,004.6910 1,811,548

British Columbia Other 10,156.0000 3,217.7280 106,245

FSJ North Peace 53,313.9590 50,461.7160 10,517,058

FSJ South Peace 94,464.8960 86,007.3610 35,613,478

Saskatchewan 2,559.7750 2,397.2750 1,793,423

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TOTALS 191,694.6300 160,088.7710 49,841,752

Outlook

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With the completion of the Sunrise and Eight Mile pipelines and the expansion of the Tower Compression and Dehydration facility, Terra Energy expects that it will reach its forecast target exit rate for 2008 of 5,700 BOED as early as November. The Company continues to grow its production and reserves base, in both quality and magnitude. The recent update gives the Company over 17.6 MM BOED of P+P reserves. The combined values of the Company's oil and gas reserves (P+P at 10%) and undeveloped land values exceeds $325 MM, with only approximately 76 MM common shares issued and outstanding. The Company continues to benefit from a strong balance sheet and a focused asset base.

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.

This media release contains forward-looking statements including expectations of future production and a possible transaction or transactions that are intended to realize what management perceives to be an undervalued share price. There is no assurance that future expected production will be met or that a strategic transaction will be identified or completed.

All evaluations and reviews of future net cash flow are stated prior to any provision for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimated future net cash flow shown below is representative of the fair market value of the Corporation's properties. There is no assurance that such price and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of crude oil, NGLs and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, NGLs and natural gas reserves may be greater than or less than the estimates provided herein.

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