Terra Energy Corp.

Terra Energy Corp.

August 30, 2005 20:33 ET

Terra Energy Reports Q2 Results


Terra Energy Corp. (TSX VENTURE:TTR)("Terra Energy" or the "Company") announces its financial and operating results for the three and six month periods ended June 30, 2005.

Q2 Highlights

- Repayment of $10 million mezzanine financing.

- Continued production growth averaging 2,342 boed, up 116% from Q2-2004.

- Increased cashflow of $4.2 million, up 29% from Q2-2004.

- Closed $12.3 million (net) in common and flow-through equity, reducing debt and providing liquidity.

- Increased undeveloped land holdings to 85,763 net acres, up 659% from Q2-2004.

Summary of Q2 results

three six three six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
Production 2005 2005 2004 2004
Average daily
production (boed) 2,381 2,342 1,137 1,081
Exit production (boed) 2,078 2,078 1,109 1,109
Undeveloped land
(net hectares) 85,763 85,763 11,296 11,296

three six three six
months months months months
ended ended ended ended
June 30, June 30, June 30, June 30,
Financial 2005 2005 2004 2004
Revenue $ 8,413,842 $16,345,523 $4,395,322 $7,994,272
Cashflow from operations $ 364,659 $ 4,174,270 $1,748,401 $3,243,141
Per share - basic $ 0.01 $ 0.08 $ 0.07 $ 0.12
Per share - diluted $ 0.01 $ 0.08 $ 0.06 $ 0.12
Net income (loss) $(1,841,190)$(2,834,914)$ 395,301 $ 746,841
Per share - basic $ (0.03)$ (0.05)$ 0.02 $ 0.03
Per share - diluted $ (0.03)$ (0.05)$ 0.02 $ 0.03
Revenue per boe $ 39.54 $ 40.43 $ 45.56 $ 44.78
Operating netback per boe $ 10.44 $ 16.84 $ 24.41 $ 25.39


Terra Energy continued to add production throughout the second quarter, averaging 2,381 boed, an increase of 122% over Q2-2004.

Terra Energy's focus during the second quarter was the development of its drilling program for the remainder of the year and the optimization of its current production.

The Company modified its Boudreau facility to process increased gas production from bypassed pay completions. Production is now at the facility's natural gas maximum of approximately 400 boed. Terra Energy is evaluating installing a new pipeline to its 100% owned Red Creek facility to process additional gas.

At the Red Creek Field, Terra Energy optimized production by working over several wells. This optimization program resulted in an incremental increase in production of approximately 60 boed. Terra Energy installed a compressor at Eagle 02-02-85-18-W6M increasing production an additional 50 boed.

At Lousana, the Company's 14-32-36-21W4M oil well ceased pumping necessitating a major workover. The workover resulted in a loss of production of approximately 50 boed for a period of four weeks and added approximately $300,000 to the period operating costs.

June's production was curtailed due to planned gas plant turnarounds at several plants most notably the McMahon Gas Plant at Fort St. John and the Gordondale East gas plant in Northwest Alberta. A significant portion of Terra Energy's natural gas production is in close proximity to Fort St. John and is processed at the McMahon Gas Plant, which was shut in for two weeks at the end of June and on into the month of July. The Gordondale East gas plant also experienced a 100% shut down for several days in June for plant maintenance. These two plant shutdowns contributed to a lower production exit rate for the Company at the end of its second quarter.

At Sextet in northern British Columbia, one well was shut-in due to high water production levels. This well will be returned to production once the surface access conditions permit access to the well.


Cash flow for the six months ended June 30, 2005 increased to $4,174,000, up 29% over the same period for 2004.

The Net Loss for the six month period ended June 30, 2005 was $2,834,914. This amount can largely be attributed to the "one-time" deferred financing cost in the amount of $2,969,500, associated with the repayment of the $10 million mezzanine financing, extraordinary operating costs in the second quarter at Lousana and Red Creek in the approximate amount of $900,000, and to a lesser extent by commodity price hedging which resulted in unrealized revenues.

Cash flow for the second quarter compared to the first quarter is low. This is primarily the result of two factors: royalties payable on production and operating expenses, as stated. Royalties payable on production were impacted by (1) a low accrual of British Columbia crown royalties in the first quarter, (2) 2004 annual gas cost allowance adjustment for Alberta production levied in the second quarter, and (3) an increased royalty rate in the second quarter on British Columbia production as higher volume wells are brought on stream. With respect to operating expenses, the second quarter operating expenses appear high as a result of: (1) certain one time costs being booked in the second quarter, including $900,000 of expenses related to workovers, (2) a larger accrual for workovers in progress at quarter end, and (3) annual adjustments received from an industry partner for prior periods during the second quarter.

Complete unaudited financial results for the period ended June 30, 2005 along with the Management Discussion and Analysis ("MD&A") are available on SEDAR at www.sedar.com.


The primary focus of the Company during 2005 will be on the growth of its reserves base. The Company has targeted an exit rate of 4,000 boed for 2005 through a combination of development and exploration activities. As some of the development drilling will be directed towards opportunities which will simply change the category of reserves from Non-Producing or Probable into the Proved Producing category, the aggressive exploration program is intended to ensure that our Total Proved + Probable reserves will increase at least in proportion to our overall production rate.

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'.

Volume Reporting

The term, boe, may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Forward Looking Statements:

Certain information set forth in this media release contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Terra Energy's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Terra Energy's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and , accordingly, no assurance can be given that any of the events anticipated by the forward looking-statements will transpire or occur, or if any of them do so what benefits Terra Energy will derive therefrom.


Contact Information

  • Terra Energy Corp.
    Mr. Bud Love
    Vice-President of Finance and Chief Financial
    (403) 699-7777