Terrace Energy Corp.

TSX VENTURE : TZR
OTCQX : TCRRF


Terrace Energy Corp.

February 26, 2013 08:00 ET

Terrace Plans Acquisition of Significant Oil & Gas Interests in South Texas

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 26, 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)(GERMANY:WKN) is pleased to announce it has entered into a non-binding letter of intent ("LOI") with BlackBrush Oil & Gas, LP ("BBOG"), which contemplates the Company and BBOG organizing a special purpose entity ("Newco") to acquire a 50% working interest (the "WI") in certain oil & gas leases covering approximately 147,000 net mineral acres in South Texas, USA (the "Target Acreage"). Newco would initially be owned and funded 50% by the Company and 50% by BBOG and would be ceded the responsibility of developing the Target Acreage. Newco would be managed equally by the parties and BBOG would be contracted by Newco to perform the duties of project operator.

BBOG is a privately owned partnership organized to explore and develop significant oil & gas interests, primarily in South Texas. BBOG is also a majority working interest partner and the named operator of the Company's STS Olmos Project.

The Target Acreage has the potential for 1,225 drilling locations (120 acre spacing) aimed at multiple active formations including: the Pearsall and Eagle Ford shales; and Buda and Georgetown formations. The Target Acreage is strategically located in a region of previous prolific conventional production as well as multiple successful vertical tests in the Pearsall and Eagle Ford. The Target Acreage is also covered by a 300 square mile proprietary 3-D seismic dataset. Newco will have full access to this dataset in order to plan and execute development programs.

Newco may secure the WI in the Target Acreage through a combination of cash payments and drilling obligations that total USD$65 million as development progresses, including reinvested cash flow from wells placed into production. Newco will be obligated to drill a minimum of four Pearsall horizontal wells and one Eagle Ford horizontal well on or before April 1, 2015. Work on the first well must commence in April, 2013. Under the terms of the LOI, the Company and BBOG would each contribute initial capital of USD$11 million into Newco which will fund certain lease acquisition costs and the estimated cost of the initial drilling program.

The agreement in principle reached among the parties is conditional upon, among other things, approval of the TSX Venture Exchange, the completion of a financing of not less than USD$15 million on terms acceptable to the Company and the review and acceptance of final documentation. There is no assurance that such conditions will be met and a definitive agreement concluded. Additional details will be announced upon acceptance of definitive documentation.

The Company has begun discussions with strategic capital providers regarding alternate finance arrangements, which could, but do not necessarily, include the issue of common shares or debt, or a combination thereof. The Company will announce specific terms at such time an agreement is reached.

Dave Gibbs, the Company's President, commented, "Securing this project would represent a significant step in the Company's evolution and would increase its net acreage position from approximately 5,000 to over 40,000 giving it a significant presence in the unconventional oil development that is taking place in South Texas. We are very pleased that our considerable efforts to position the Company as a valued partner in the development of oil & gas interests in this area have brought us this opportunity."

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.

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.

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Suite 270 - 666 Burrard St. Suite 407-202 Travis Street,
Vancouver B.C. V6C 2X8 Houston Texas 77002
Ph: 604 628-4552 Ph: 713.227.0010
Fax: 604 687 0885

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