Terra Energy Corp.
TSX VENTURE : TTR

Terra Energy Corp.

November 30, 2006 07:00 ET

Terra Energy Reports Continued Growth and Operational Improvements for Q3-2006

CALGARY, ALBERTA--(CCNMatthews - Nov. 30, 2006) - Terra Energy Corp. (TSX VENTURE:TTR) ("Terra Energy" or the "Corporation") is pleased to release its 2006 third quarter results. The Q3 - 2006 Consolidated Interim Financial Statements and the Management Discussion and Analysis have been posted on www.sedar.com and on Terra Energy's website at www.terraenergy.ca.

HIGHLIGHTS Q3 - 2006

- Revenues for the nine months ended September 30, increased approximately 32.8% over Q3 - 2005 to $35,687,750

- Cash flow from operations for the nine months ended September 30, increased approximately 93% over Q3 - 2005 from $8,105,320 to $15,652,457

- Average daily production for the nine months ended September 30, increased by 35.8% over Q3 - 2005

- Production expenses per unit of production, for the nine months ended September 30 declined by 29.8% over Q3 - 2005

- Operating netbacks for the nine months ended September 30, increased by approximately 67% overall and 23% per boe

OPERATIONAL HIGHLIGHTS

Terra Energy increased production by 51.9% in 2006 compared to Q3 - 2005 as a result of an increase in natural gas production (78.3%) and natural gas liquids (29.1%) from new wells brought on-stream late in Q1 - 2006. Terra Energy completed three key pipeline projects late in Q1 - 2006 and early Q2 - 2006 which tied-in between 800 - 1,000 boe/d of new production. Crude oil production fell 12.4% as a result of the divestiture by Terra Energy of approximately 150 bbls/d of non-core crude oil production at the end of Q4 - 2005 offset by new oil production adds in 2006.



Three months ended September 30 2006 2005 % Growth
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Average Average
Oil (bbl/d) 396 452 (12.4)
Natural gas (mcf/d) 13,676 7,672 78.3
Liquids (bbl/d) 256 198 29.1
Total (boe/d) 2,931 1,929 51.9
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Nine ended months September 30 2006 2005 % Growth
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Average Average
Oil (bbl/d) 371 534 (30.5)
Natural gas (mcf/d) 13,329 8,476 57.2
Liquids (bbl/d) 301 184 63.6
Total (boe/d) 2,894 2,131 35.8
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FINANCIAL HIGHLIGHTS

Three months ended %
September 30 2006 2005 2006 2005 Growth
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($ / boe) ($ / boe) ($ / boe)
Revenues $10,994,495 $10,514,578 $40.77 $59.26 (31.2)
Royalties $ 2,027,512 $ 1,732,077 $ 7.52 $ 9.76 (23.0)
Production
Expenses $ 3,123,725 $ 4,130,800 $11.58 $23.29 (50.3)
Operating
Netback $ 5,843,258 $ 4,651,701 $21.67 $26.22 (17.4)
General &
Administrative
Expenses $ 730,754 $ 642,144 $ 2.71 $ 3.62 (25.1)
Interest Expense $ 666,064 $ 78,507 $ 2.47 $ 0.44 461.3
Realized
Foreign
Exchange
(Gain) $ (502,836) - $(1.86) - n/a
Non-cash
Expenses $ 4,918,998 $ 2,460,441 $18.24 $13.87 31.5%
Income Before
Income Taxes $ 30,278 $ 1,470,609 $ 0.11 $ 8.29 (98.6)
Income Tax
Expense $ 274,860 $ 865,612 $ 1.02 $ 4.88 79.1
Net Income
(Loss) $ (244,582) $ 604,997 $(0.91) $ 3.41 (126.6)
Cash Flow from
Operations $ 4,601,864 $ 3,931,050 $17.06 $22.15 (23.0)
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Nine months ended %
September 30 2006 2005 2006 2005 Growth
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($ / boe) ($ / boe) ($ / boe)
Revenues $35,687,750 $26,860,101 $45.18 $46.17 (2.2)
Royalties $ 6,837,832 $ 5,264,095 $ 8.66 $ 9.04 (4.3)
Production
Expenses $ 9,671,401 $10,136,673 $12.24 $17.43 (29.8)
Operating
Netback $19,178,517 $11,459,333 $24.28 $19.70 23.2
General &
Administrative
Expenses $ 2,943,947 $ 2,673,750 $ 3.73 $ 4.59 (18.8)
Interest
Expense $ 1,621,528 $ 645,716 $ 2.05 $ 1.11 84.9
Realized
Foreign
Exchange Gain $ (794,077) - $(1.01) - n/a
Non-cash
Expenses $13,106,403 $10,635,903 $16.59 $18.28 (9.2)
Income Before
Income Taxes $ 2,300,716 $(2,496,036) $ 2.91 $(4.29) n/a
Income Tax
Expense
(Recovery) $ 1,797,158 $ (266,119) $ 2.27 $(0.46) n/a
Net Income
(Loss) $ 503,558 $(2,229,917) $ 0.64 $(3.83) n/a
Cash Flow from
Operations $15,652,457 $ 8,105,320 $19.81 $13.93 42.2
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Revenues increased by 4.6% to $10,994,495 for the three month period ended September 30, 2006 compared to $10,514,578 for the same period ended September 30, 2005 as a result of a 51.9% increase in production and a 31.2% decrease in realized commodity prices. During the first half of 2006, Terra Energy completed three key infrastructure projects, the combination of which added approximately 800 boe/d of production. Terra Energy realized an all in price per unit of production for the three month period ended September 30, 2006 of $40.77 per boe, down 31.2% compared to the realized price per unit of production of $59.26 per boe for the same period ended September 30, 2005. Revenue on a per unit of production basis fell 6.3% compared to the quarter ended June 30, 2006 as a result of lower natural gas prices realized during the quarter ended September 30, 2006.

Production expenses on a per unit of production basis fell compared to previous quarters. Total production expenses fell 11.4% during the quarter compared to the three month period ended June 30, 2006. Production expenses on a per unit of production basis also fell 2.6% compared to the previous quarter and production expenses fell 50.3% to $11.58 per boe compared to $23.29 per boe for the corresponding period last year. The third quarter represents the fourth consecutive quarter of lower production expenses on a per unit of production basis. Terra Energy expects production expenses on a per unit of production basis to continue to improve as existing behind pipe production is brought on-stream.

OUTLOOK

The natural gas sector of the industry currently finds itself in a challenging business environment with rapidly inflating capital costs and high commodity price volatility. As a result of these considerations Terra Energy has scaled back its capital expenditure program for 2006 in order to allow the Company to continue to focus its attention on key infrastructure projects. With the scaled back capital expenditure forecast and Terra Energy's recently announced share offering, the Company expects to exit 2006 with net debt of approximately $40 million, inclusive of long term bank debt and current liabilities.

Terra Energy has two key pipeline projects to complete in 2007, to bring on-stream approximately 2,000 boe/d of existing behind pipe natural gas. Terra Energy has approximately 500 boe/d of "behind pipe" capability awaiting infrastructure in East Boudreau. The Company has proposed a gathering line be constructed from East Boudreau to the Company's Red Creek gas plant. Subject to the existing mediation and arbitration processes, the pipeline construction is scheduled to proceed in February of 2007.

Terra Energy has in excess of 1,500 boe/d of sustainable production capability awaiting infrastructure in Tower. The Company has previously announced its plan to build a crossing of the Peace River in order that its raw gas south of the Peace River, including both the Tower Field and the Eight Mile Field, is able to be processed at the McMahon Plant. Depending upon regulatory processes, Terra Energy anticipates construction to take place in June and July of 2007, with a commissioning date in August 2007. At such time, all existing wells in the Tower Field will be placed on production, and any additional new wells drilled can be immediately tied-in.

With our continued drilling success, strong land position and advancing infrastructure projects, Terra Energy remains confident in its direction and in its ability to build value for its shareholders.

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 (eg., 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. 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