Terra Energy Corp.

Terra Energy Corp.

March 11, 2011 20:07 ET

Terra Energy Releases 2010 Year-End Financial Results

CALGARY, ALBERTA--(Marketwire - March 11, 2011) - Terra Energy Corp. ("Terra" or the "Company") (TSX:TT) is pleased to announce its 2010 audited consolidated financial statements and management's discussion and analysis ("MD&A") and information relating to its 2010 - fourth quarter and year-end results. Terra's 2010 year-end financial results may be obtained at www.sedar.com or www.terraenergy.ca.

"Terra made the strategic decision in 2009 to advance its Montney unconventional gas play in British Columbia, and to embrace science and technology as the basis for our future success. During 2010, Terra's efforts to build our Montney assets were highly successful. The Montney is ranked as one of the five best shale gas plays in North America by many leading analysts. Terra is fortunate to be positioned as one of the premier companies in this premier of resource plays." Stated Cas H. Morel, President and CEO. "Large scale resource plays are exceptionally capital intensive. The size and scale of our Montney assets allows us to seek the requisite funding from the Montney assets themselves. For 2011, Terra will continue to advance the Montney play, largely on the strength of our existing Montney assets. At the same time, the Company will reinvest cash flow to pursue oil and liquids targets from our extensive portfolio of conventional plays." 

2010 Highlights

  • Notwithstanding an approximate 30% decline in forward pricing for gas, Terra increased total proved and probable reserves, net of 2010 production, by 31% to 31,342 mboe at December 31, 2010, or approximately 12.5% on a per share basis
  • Average daily production for the year increased 15.1% to 6,842 boe/d
  • As a result of increased production, revenue for the year increased 27.0% to $79.9 million
  • As a result of declining natural gas prices, a net loss of $8.7 million was incurred, however cash flow from operations of $24.1 million was generated
  • The Company successfully drilled its first (100%) Montney horizontal well in Altares, resulting in a production test rate of 13.2 mmcf/d at a flowing pressure of 1,200 psi
  • Terra completed the acquisition of certain oil and natural gas assets, including 100% of the Square Creek gas field at one of the lowest metrics for major deals in 2010
  • The Company commissioned GLJ Petroleum Consultants to provide an independent resource assessment for the Company's Montney landholdings, which indicated a total resource estimate of 11.90 tcf (net) to Terra, comprising of 5.48 tcf Discovered Petroleum Initially-In-Place (DPIIP) and 6.42 tcf Undiscovered Petroleum Initially-In-Place (UDPIIP)
  • Drilled 20 net wells, of which 7 net wells were drilled largely as Montney tests to preserve the Company's vast Montney landholdings and to advance the science and understanding of the play
  • Terra's undeveloped landholdings increased by 32.5% to 656,842 (net) acres
  • Land value increased 57.7% to $113.7 million, providing greater opportunity for exploration and development activity in the future. Much of the new lands acquired were focused on the Montney play and on areas having potential oil resource plays in Alberta

Recent Events and 2011 Guidance

Terra announced its 2011 Capital Expenditure Plan and Budget ("2011 Capex Plan") on January 31, 2011. Total capital spending on exploration and development is targeted at approximately $29 million and was designed to maintain the Company's current daily average production rate through 2011 and limit capital spending to cash flows received from operations. 

Cash flow from operations has been forecasted at approximately $32.5 million for 2011, based upon an estimated average natural gas price of $3.50 per mcf for the calendar year, an estimated average oil price of $85.00 per barrel and an average 2011 production rate of approximately 6,800 boe/d. The Company currently has approximately 30% of its gas production for April 2010 through to March 2011 hedged at $4.00 Cdn per GJ.

2011 Objectives

The 2011 Capex Plan was designed to maintain the Company's current daily average production rate through 2011 and limit capital spending to cash flows received from operations. Approximately 90 percent of the 2011 Capex Plan is directed at non-Montney operations which will foster a new cycle of growth opportunities. The Company will primarily pursue projects having one or more oil (or liquids rich) targets. 

At the same time, Terra will continue to advance the unconventional Montney gas play. The size and scope of the Company's Montney assets should be able to support the requisite, targeted funding. The Company will be seeking out private equity, farm-out opportunities, and possible joint ventures, as various alternative methods of funding the advancement of the Montney play, without diluting the inherent value of our stock.

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, pursuing oil and liquids rich natural gas targets while simultaneously developing the Montney unconventional gas play by actively seeking alternative methods of funding, maintain the Company's current daily average production rate through 2011, limit capital spending to cash flows received from operations, the plan to spend 90% of the 2011 budget towards non-Montney operations and fostering a new cycle of growth opportunities and the Company's Montney assets supporting the requisite, targeted funding. 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.

The information set out herein regarding the Company's forecasted cash flow from operations, including pricing assumptions and production rate is "financial outlook" within the meaning of applicable securities laws. The purpose of this financial outlook is to provide readers with disclosure regarding Terra's reasonable expectations as to the anticipated results of its business activities for 2011. Readers are cautioned that this financial outlook may not be appropriate for other purposes.

Information Regarding Discovered and Undiscovered Petroleum Initially-In-Place

This news release contains references to estimates of gas classified as discovered and undiscovered petroleum initially in place (DPIIP and UDPIIP) in the Montney Fairway of northeast British Columbia which are not, and should not be confused with, oil and gas reserves.

"Best estimate" is defined in the COGE Handbook with respect to entity-level estimates, as the value derived by an evaluator using deterministic methods that best represent the expected outcome with no optimism or conservatism. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

"Discovered Petroleum Initially-in-Place" ("DPIIP") (equivalent to discovered resources) is defined in the COGE Handbook as that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of DPIIP includes production, reserves, and contingent resources; the remainder is unrecoverable. A recovery project cannot be defined for this volume of DPIIP at this time. There is no certainty that it will be commercially viable to produce any portion of the resources.

"Undiscovered Petroleum Initially-In-Place" ("UDPIIP") (equivalent to undiscovered resources) is defined in the COGE Handbook as that quantity of petroleum that is estimated, on a given date, to be contained in accumulations yet to be discovered. The recoverable portion of UDPIIP is referred to as "prospective resources," the remainder as "unrecoverable." A recovery project cannot be defined for this volume of UDPIIP at this time. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

There is no certainty that it will be economically viable or technically feasible to produce any portion of this DPIIP and UDPIIP. Resources do not constitute, and should not be confused with, reserves.

This estimate of remaining recoverable resources (unrisked) includes contingent resources that have not been adjusted for risk based on the chance of development. It is not an estimate of volumes that may be recovered. Actual recovery may be less.

Contact Information

  • Terra Energy Corp.
    Bud Love
    Vice President of Finance, & Chief Financial Officer
    403.264.7189 (FAX)
    Terra Energy Corp.
    Berk Sumen
    Manager, Corporate Affairs
    403.264.7189 (FAX)