Terra Energy Corp.
TSX VENTURE : TTR

Terra Energy Corp.

March 30, 2007 07:57 ET

Terra Energy Releases 2006 Operating and Financial Results

CALGARY, ALBERTA--(CCNMatthews - March 30, 2007) - Terra Energy Corp. (TSX VENTURE:TTR) ("Terra Energy" or the "Corporation") is pleased to release its audited consolidated financial statements and management discussion together with its Annual Information Form for the year ended December 31, 2006. The management discussion and analysis for the year ended December 31, 2006 includes discussion of the Corporations' fourth quarter results. The Annual Information Form includes the disclosure and reports relating to reserves data and other oil and gas information required pursuant to National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administration. Copies of Terra Energy's audited financial statements and management discussion and the Annual Information Form may be obtained via SEDAR at www.sedar.com or at the Corporation's website at www.terraenergy.ca.

Terra Energy curtailed its capital expenditures plan mid way through 2006 as a result of the combination of falling natural gas prices and escalating capital costs. The Corporation decided to limit its expenditures to available sources of capital and, as a result, exited the year with a total indebtedness of $45,810,513. Accordingly, the Corporation is better positioned to carry on its capital projects into 2007.

As a result of the curtailment of capital during 2006, the Corporation's efforts were largely focused on advancing infrastructure projects in Terra Energy's Fort St. John core area and the delineation of various new pools discovered by the Corporation during 2005. Entering 2007, Terra Energy has a substantial portfolio of high-grade exploration prospects and many development locations.

Highlights of the full year 2006:

- Revenues increased 18.9% to $47,880,220

- Cash flow from Operations increased 27.9% to $18,414,785

- Average daily production increased 36.2% to 2,819 boe/d

- Drilled 18 gross wells (13.8 net) with a 77% success rate

- Reserves increased from 14.2 mmboe to 16.2 mmboe (P+P)

- 3-year Recycle Ratio (Netback / 3-year F&D Costs) is greater than 2.2x

- Land position was substantially strengthened



Financial Highlights

for the twelve months ended Percent
December 31 2006 2005 Growth
----------------------------------------------------------------------------
Revenue $ 47,880,220 $ 40,256,230 18.9%
Cash flow From Operations $ 18,414,785 $ 14,396,980 27.9%
Earnings $ 887,652 $ 1,177,532 (24.6%)
Total Assets $ 147,561,394 $ 125,747,508 17.3%
Total Debt (including working
capital) 45,810,513 31,515,482 45.4%
Weighted Average Shares - Diluted 73,011,167 61,621,001 18.5%


Terra Energy's revenue increased by 18.9% to $47,880,220 in 2006 from $40,256,230 in 2005 due to a 36.2% increase in production. As a result of lower natural gas prices (Terra Energy's realized natural gas price of $6.63 was 28.2% lower than in 2005), Terra Energy's realized revenue per unit of production was 12.7% lower in 2006 compared to 2005.

Cash flow from Operations increased 27.9% in 2006 compared to 2005 as a result of higher production and lower production expenses on a per unit of production basis. Terra Energy had positive earnings for the fourth year in a row.



Operating Highlights

for the twelve months ended Percent
December 31 2006 2005 Growth
----------------------------------------------------------------------------
Average Daily Production (boe/d) 2,819 2,069 36.2%
Proved Plus Probable Reserves (boe) 16,160,167 14,191,400 13.9%
Reserve Value (P+P PV 10%) $ 210,365,000 $ 225,425,000 (6.7%)
Production Expenses ($ / boe) $ 12.92 $ 17.24 (25.1%)
Finding and Development costs
($ / boe) - P+P $ 23.55 $ 8.77 168.5%
Finding and Development Costs
($ / boe) - 3-year Average $ 12.15 n/a n/a
Drilling Success 77.6% 87.1% n/a


Terra Energy increased production by 36.2% to 2,819 boe/d in 2006 as a result of the completion of three pipeline projects in Mica, Septimus and the connection of Terra Energy's core area of Boudreau to the Corporation's underutilized Red Creek facility. Terra Energy's reserves after production grew by 2,992 mboe, replacing 2006 production by approximately 281.3%. The growth in reserves is attributable to the successful drilling program Terra Energy executed in 2006, Where Terra energy had a 77.6% drilling success rate. Production expenses on a per unit of production basis fell by 25.1% as a result of increased efficiencies associated with higher production volumes, and a cost control commitment by the Corporation. Terra Energy expects this trend of falling operating costs on a per unit of production basis to continue through 2007.

Terra Energy's rolling three-year finding and development ("F&D") for 2006 were $12.15 / boe on a proved plus probable basis inclusive of future capital costs. Terra Energy's F&D costs calculated for 2006 alone were $23.55 / boe on a proved plus probable basis inclusive of future capital costs. F&D costs increased in 2006 as a result of Terra Energy's significant investment in building its undeveloped land inventory ($11.8 million in 2006) and building infrastructure ($9.8 million), the combination of which represented 44.5% of Terra Energy's total 2006 capital expenditures for the year compared to only 26.3% of total expenditures in 2005. At the same time, the Corporation was focused largely on delineating new pools discovered during 2005, saving several high impact exploration prospects for 2007.

Land Holdings

Terra Energy significantly increased its land position during 2006 with the majority of the additions taking place in Terra Energy's core area of Fort St. John in North East BC by way of Crown land sales, strategic joint ventures and by swapping non-core lands for highly prospective lands contiguous to existing Terra Energy acreage.

Terra Energy's gross acreage increased to 187,878 (145,804 net) in 2006, from 147,282 acres (107,302 net), representing an increase of 27.6% (35.9%).



December 31, 2006 December 31, 2005
----------------------------------------------------------------------------
Area Gross Acreage Net Acreage Gross Acreage Net Acreage
Alberta 39,840 21,582 46,400 23,764
British Columbia 144,121 120,304 97,430 80,086
Saskatchewan 3,918 3,918 3,452 3,452
Totals 187,878 145,804 147,282 107,302


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 (e.g., 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.

Cash flow from operations ("Cash Flow"), representing cash generated from operating activities before changes in non-cash working capital items, is a non-GAAP measure. Management utilizes Cash Flow as a key measure to assess the ability of the Corporation to finance operating activities and capital expenditures. Additionally, Cash Flow has been described and presented in order to provide shareholders and potential investors with information regarding the Corporation's liquidity and its ability to generate funds to finance its operations. This performance indicator may not be comparable to similar measures used by other companies.

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
    Website: www.terraenergy.ca