Terrace Energy Corp.
TSX VENTURE : TZR
OTCQX : TCRRF
FRANKFURT : 2TR

Terrace Energy Corp.

March 14, 2013 14:28 ET

Terrace Announces Strategic Financing With LG and Convertible Note Offering

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 14, 2013) -

NOT FOR DISTRIBUTION TO UNITED STATES WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Terrace Energy Corp. (the "Company") (TSX VENTURE:TZR)(OTCQX:TCRRF)(FRANKFURT:2TR) is pleased to announce the following financing arrangements.

LG FINANCING

The Company has entered into agreements with LG Energy North America LLC ("LGENA") whereby LGENA will subscribe for 20,000,000 common shares of the Company at a price of $1.50 per share for aggregate gross proceeds of $30,000,000 (the "Private Placement") and will invest an additional $60,000,000 (the "SPV Financing") into a special purpose entity (the "SPV"), as further described below, to provide supplemental project financing for new exploration and development opportunities in the future. LGENA will be a subsidiary of LG International Corp. of Korea ("LG") on closing of the Private Placement.

The Company has also agreed to purchase a 10% interest in the SPV, valued at $6,000,000, from LG for 4,000,000 common shares of the Company at a deemed value of $1.50 each. The parties have agreed to use their commercially reasonable efforts to complete the SPV Financing and the Company's purchase of its interest in the SPV within 30 business days of the date on which the Private Placement closes.

The SPV Financing would be used by the SPV to finance the acquisition of working interests in new oil & gas prospects generated by the Company. The SPV will be jointly managed by representatives of the Company and LGENA. The Company would be granted the ability to earn an additional 20% equity interest in the SPV upon the SPV meeting certain financial milestones.

Dan Carriere, the Company's Chairman, commented: "We are extremely pleased with the opportunity to work together with LG to build Terrace Energy into a significant company. LG's decision to make their first foray into the acquisition and development of North American oil & gas interests through Terrace Energy clearly demonstrates the confidence they have placed in our projects, management and technical teams."

The Company has agreed to pay a 4% fee in respect of the Private Placement on closing.

On closing of the transactions set out above, LGENA would own approximately 27.5% of the then issued and outstanding common shares of the Company.

The Private Placement and the Company's purchase of a 10% interest in the SPV are conditional upon, among other things, the execution of definitive documentation and receipt of TSX Venture Exchange and shareholder approval. The SPV Financing is conditional upon closing the Private Placement and the execution of definitive documentation. There can be no assurances given that such transactions will close.

CONVERTIBLE NOTE FINANCING

In addition to the Private Placement, the Company is also carrying out a non-brokered private placement of convertible, unsecured promissory notes in the maximum aggregate principal amount of $25,000,000 (the "Convertible Notes") with the following material attributes:

Term: 5 years from closing
Interest rate: 8% per annum, payable quarterly
Conversion price: $2.00 per share

The principal amount owing under the Convertible Notes will be due and payable on the fifth anniversary of the closing date, unless earlier redeemed or converted pursuant to the terms of the Convertible Notes.

The Company would have the right to convert of all or part of the Convertible Notes into common shares at any time after 12 months from closing if the market price of the common shares on the TSX Venture Exchange trades at $2.80 or higher for a period of 30 consecutive trading days. In addition, the Company would have a limited right to redeem all or part of the Convertible Notes at any time after 12 months from closing by offering cash equal to 1.08 multiplied by the principal amount that is called for redemption.

Holders of the Convertible Notes may convert all or part of the outstanding principal amount of their Convertible Notes at the conversion price at any time during the term of the Convertible Notes, in accordance with the terms thereof. In the event of a change of control of the Company where a person acquires more than 50% of the outstanding common shares of the Company, holders of Convertible Notes will be entitled to require the Company to redeem the Convertible Notes in certain circumstances.

The Convertible Notes are non-transferable unless otherwise agreed to by the Company.

Insiders of the Company may purchase up to a maximum of 10% of the principal amount of the Convertible Notes issued.

The Company may pay a finders' fee to eligible brokers in respect of a portion of the principal amount of the Convertible Notes.

The issuance of the Convertible Notes is conditional upon, among other things, the receipt of final documentation and TSX Venture Exchange approval. There can be no assurance given that the proposed private placement of Convertible Notes will close.

The proceeds of the Private Placement and the Convertible Notes would be used to fund current and proposed financial commitments, including those arising from the proposed agreement announced on February 26, 2013, if closed, and for general working capital purposes.

About LG

LG International Corp. is a Korean conglomerate with 147 subsidiaries operating in over 50 countries with annual sales exceeding US$100 billion. LG has successfully invested and operated in the oil and gas exploration and production business outside of North America for over 20 years including current upstream oil and gas projects in Oman, Vietnam and Kazakhstan.

About Terrace Energy

Terrace Energy is an oil & gas development stage company that is focused on unconventional oil extraction in onshore areas of the United States. It currently has two principal properties situated in South Texas with targets in the "Olmos" and "Eagle Ford" formations and an option to acquire a third property in Kansas that targets the Mississippian Lime Trend. In addition, it has entered into a non-binding agreement to acquire an interest in significant acreage in Southern Texas with targets in four actively explored primarily oil shale formations (see press release dated February 26, 2013).

ON BEHALF OF THE BOARD OF DIRECTORS

Eric Boehnke, Chief Executive Officer

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the Company's securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "1933 Act"), or any state securities laws and may not be offered or sold within the United States or to U.S. persons unless registered under the 1933 Act and applicable state securities laws, or an exemption from such registration is available. Any public offering of securities in the United States must be made by means of a prospectus that contains detailed information about the Company and its management, as well as financial statements.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

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