Terra Energy Corp.

Terra Energy Corp.

August 15, 2011 19:01 ET

Terra Energy Releases Second Quarter 2011 Results

CALGARY, ALBERTA--(Marketwire - Aug. 15, 2011) - Terra Energy Corp. ("Terra" or the "Company") (TSX:TT) announces its financial and operating results for the three and six month periods ended June 30, 2011. Copies of Terra's second quarter 2011 results may be obtained at www.sedar.com or www.terraenergy.ca.

Second Quarter Highlights

  • The Company generated revenues of $18,751,432.
  • Despite the major maintenance shutdown of a key processing facility, the Company produced and sold 5,993 boe per day.
  • Cash flow from operations increased 14.1% to $7,923,000 from $6,946,000 compared to the same quarter last year.
  • Net income increased to $3,419,722 (or $0.03 per share) compared to $216 during the same period last year.

Terra continues to take a prudent approach to capital management by limiting capital spending to cash flows received from operations. Operationally, the Company will continue to pursue the two parallel strategies as outlined in its most recent investor presentation available on the Company website. On the one hand, the Company will continue to target oilier prospects and liquids rich opportunities across its substantial land base. On the other hand, Terra will continue to advance its unconventional Montney gas play in Northeast British Columbia where the Company owns in excess of 100,000 net acres of Montney rights within the Montney Fairway.

Anticipated cash flow for 2011 is approximately $30.0 MM and is based on an estimated average natural gas price of $3.75 per mcf, an estimated oil price of $90.00 per barrel and an average production rate of approximately 6,000 boe/d.

Terra's Montney gas play is a "world class" asset, and will require substantial capital funding in order to continue the "de-risking" process in anticipation of full commercialization. At the same time, the size and scope of the Company's Montney play should be able to support the requisite, targeted funding, on its own. Accordingly, Terra will be seeking out private equity, farm-out opportunities, and possible joint ventures, as various alternative methods for funding the advancement of the Montney unconventional gas play on Terra's lands.

In addition, Terra's Montney lands have been assessed by GLJ Petroleum Consultants Ltd., in September of 2010, indicating a total resource best estimate of 11.9 Tcf net to the Company, comprised of 5.48 Tcf Discovered Petroleum Initially-In-Place (DPIIP) and 6.42 Tcf Undiscovered Petroleum Initially-In-Place (UDPIIP).

Terra previously announced that it had engaged GMP Securities LP and Scotia Capital Inc., as joint financial advisors, to assist the Company in raising private equity for the Company's unconventional Montney gas play. The Company anticipates that the overall process will continue into the month of September 2011. It is uncertain whether the current condition of capital markets will affect the timing of private equity funding. Successful completion of the targeted private equity funding will result in the Company re-visiting its 2011 capital expenditure plan.

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 directing cash flows towards and the pursuit of oilier (or liquids rich) projects, advancing the Company's unconventional Montney gas play, the Company's Montney play supporting the requisite, targeted funding on its own, Terra seeking out methods for funding its Montney unconventional gas play, limiting capital spending through cash flows received from operations, the timing of and the ability to raise private equity financing and revisiting the 2011 Capex Plan. 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

    Terra Energy Corp.
    Berk Sumen
    Manager, Corporate Affairs
    403.264.7189 (FAX)