Terra Energy Corp. ("Terra" or the "Company") (TSX:TT) is pleased to announce
the results of its year-end reserves evaluation, as prepared by GLJ Petroleum
Consultants Ltd. ("GLJ") as at December 31, 2013 (the "GLJ Report"). This
evaluation was performed in accordance with the requirements of National
Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI
51-101"). In addition, the Company would like to announce the results of its
independent valuation of undeveloped lands, as prepared by Seaton-Jordan &
Associates Ltd. ("Seaton-Jordan").
Highlights
As a result of efforts to reduce debt and strengthen the balance sheet, Terra
sold properties during calendar 2013 representing approximately 10,068 mboe of
proved and probable reserves ("2P reserves"), or approximately 38% of the
Company's December 31, 2012 2P reserves as estimated by GLJ. Total net debt has
been reduced in the Company from the level of approximately $77MM at December
31, 2012 to approximately $21MM at year-end 2013. Furthermore, as a result of
serious capital constraints during 2013, the Company expended an amount of only
$2.3MM of capital throughout the entire year. As a result of the Company's
efforts in creating efficiencies, seeking out cost savings and further
geotechnical work, the total 2P reserves estimate at year-end decreased by less
than the amount of 2P reserves that the Company sold.
The following are reserves evaluation highlights for year-end 2013, comparing
results as at December 31, 2013 and those as at December 31, 2012:
-- Total proved and probable reserves decreased 9,211 mboes or 35% from
26,571mboe to 17,360 mboe, after having sold approximately 10,068 mboe
or 38% of opening 2P reserves and after having produced 1,404 mboe
during the year
-- Net Present Value (before tax) of total proved and probable reserves
(NPV 10%) decreased from $183.4 million as at December 31,2012 by only
4% to $ 175.6 million as at December 31, 2013
-- Total proved reserves decreased 12 % from 13,258 mboe to 11,698 mboe
-- Reserve life index calculated at year-end 2013 is 9.1 years on total
proved reserves and 13.5 years on total proved and probable reserves,
using average daily production from the 4th quarter 2013 of 3,518 boe/d
-- NAV per share as at December 31, 2013 is estimated at approximately
$1.85 basic, and $1.81 diluted
Oil and Gas Reserves
The following tables summarize certain information contained in the GLJ reserves
report effective December 31, 2013. Detailed reserves information as required
under NI 51-101 will be included in Terra's Annual Information Form which will
be filed on SEDAR prior to March 30, 2014. Oil equivalent amounts have been
calculated using a conversion rate of 6,000 cubic feet of natural gas to one
barrel of oil.
Reconciliation Summary
Oil
Equivalent
(Mboe)
Proved Probable Total Proved
plus Probable
Opening Balance - Dec 31, 2012 13,258 13,313 26,571
Dispositions during year (2,312) (7,756) (10,068)
-----------------------------------------
Adjusted Reserves Base 10,946 5,557 16,503
Technical revisions 1,544 (525) 1,019
Drilling Extensions 271 557 828
Infill Drilling 133 59 192
Improved Recovery 244 113 357
Economic Factors (37) (98) (135)
Current Year Production (1,404) - (1,404)
-----------------------------------------
Closing Balance - Dec 31, 2013 11,697 5,663 17,360
-----------------------------------------
-----------------------------------------
Summary of Reserves by Category
-------------------------------------------------------------------------------------
December
31,
2012
December 31, 2013
Forecast
Prices
and Costs
Natural %
Change
Reserves Total Oil Gas Liquids Total
Total
Category (mboe) (mbbl) (mmcf) (mmbls) (mboe)
(mboe)
-------------------------------------------------------------------------------------
Proved Producing 8,442 862 37,090 738 7,781
-8%
Proved Non-Producing 4,816 843 16,603 306 3,917
-19%
-------------------------------------------------------------------------------------
Total Proved 13,258 1,705 53,693 1,044 11,698
-12%
Total Probable 13,313 1,316 23,722 392 5,663
-58%
-------------------------------------------------------------------------------------
Total Proved + Probable 26,571 3,021 77,415 1,437 17,360
-35%
-------------------------------------------------------------------------------------
The estimated future net revenues are presented before deducting future
estimated site restoration costs and are reduced for future abandonment costs
and estimated future capital for future development associated with
non-producing, undeveloped and probable additional reserves.
Summary of Net Present Values of Future Net Revenue ($000's) Discounted
Before Income Taxes
----------------------------------------------------------------------------
Forecast Prices December 31, 2012 December 31, 2013 % Change
Reserves Category 0% 10% 0% 10% 0% 10%
----------------------------------------------------------------------------
Proved Producing 117,173 75,639 128,708 84,713 10% 12%
Proved Non-Producing 68,614 33,172 61,749 39,620 -10% 19%
----------------------------------------------------------------------------
Total Proved 185,787 108,811 190,457 124,332 3% 14%
Total Probable 217,703 74,618 108,231 51,290 -50% -31%
----------------------------------------------------------------------------
Total Proved + Probable 403,490 183,429 298,688 175,622 -26% -4%
----------------------------------------------------------------------------
The forecast prices used in the GLJ reserves report were GLJ's forecast prices
as at January 1, 2014 as presented below.
--------------------------------------------------------------------
AECO (CDN$/mmBtu)
Dec 31, 2012 Dec 31, 2013 % Difference
Year Evaluation Evaluation Year over Year
--------------------------------------------------------------------
2014 $3.83 $4.03 5.2%
2015 $4.28 $4.26 -0.5%
2016 $4.72 $4.50 -4.7%
2017 $4.95 $4.74 -4.2%
2018 $5.22 $4.97 -4.8%
--------------------------------------------------------------------
WTI (US$/BBL)
--------------------------------------------------------------------
2014 $92.50 $97.50 5.4%
2015 $95.00 $97.50 2.6%
2016 $97.50 $97.50 N/C
2017 $97.50 $97.50 N/C
2018 $97.50 $97.50 N/C
--------------------------------------------------------------------
(1)Inflation is accounted for at 2.0% per year
Land Valuation
Terra's gross undeveloped land holdings decreased from 641,584 gross acres
(527,954 net) as at December 31, 2012 to 462,693 gross acres (311,921 net) as at
December 31, 2013, representing a decrease of 28% (41% net). The decrease was
largely attributable to undeveloped land expiring and being sold by the Company.
Below is a summary of the Company's undeveloped land holdings, broken down by
province:
----------------------------------------------------------------------------
Province December 31, 2013 December 31, 2012
Gross Net Gross Net
Acreage Acreage Acreage Acreage
----------------------------------------------------------------------------
Alberta 206,191 159,764 374,727 333,408
British Columbia 256,095 152,117 266,533 194,546
Saskatchewan 406 40 325 GOR
----------------------------------------------------------------------------
Totals 462,693 311,921 641,585 527,954
----------------------------------------------------------------------------
-------------------------------------------------------------
Province Undeveloped Land Values % Change
2013 2012
-------------------------------------------------------------
Alberta $12,453,639 $18,243,575 (31.73%)
British Columbia $20,909,598 $43,198,979 (51.60%)
Saskatchewan $15,403 $644 2292%
-------------------------------------------------------------
Totals $33,378,640 $61,443,198
-------------------------------------------------------------
The undeveloped land holdings of the Company were evaluated as at December 31,
2013 by Seaton-Jordan. The value of Terra's net undeveloped land holdings is
estimated to be approximately $33.3 million as at December 31, 2013. This
valuation represents a decrease of 46% compared to last year's valuation of
undeveloped land as prepared by Seaton-Jordan.
Net Asset Value (NAV)
Terra's NAV per share as at December 31, 2013 is calculated as follows:
-----------------------------------------------------------------
As at December 31
($000's) 2012 2013
-----------------------------------------------------------------
P+P Reserves (NPV 10%) $ 183,430 $ 175,622
Undeveloped Land (1) $ 61,443 $ 33,379
Net Debt $ (77,247) $ (20,982)
---------------------------------
Net Asset Value $ 167,626 $ 188,019
---------------------------------
Shares Outstanding 101,663 101,663
Basic NAV per Share $ 1.65 $ 1.85
---------------------------------
Option and Warrant Value $ 7,271 $ 4,316
Option and Warrant Shares 6,378 4,795
Diluted Net Asset Value $ 174,897 $ 192,335
Diluted Shares Outstanding 108,041 106,458
Fully Diluted NAV per Share $ 1.62 $ 1.81
-----------------------------------------------------------------
(1) Based on December 31, 2012 and 2013 Seaton-Jordan reports
Terra Energy Corp. is a junior oil and gas company engaged in the exploration
for, and the 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.
Information Regarding Disclosure in Oil and Gas Reserves and Operational Information
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. Additionally,
given the value ratio based on the current price of crude oil compared to
natural gas is significantly different from the energy equivalent of 6:1,
utilizing a conversion ratio of 6:1 may be misleading as an indication of value.
In accordance with Canadian practice, production volumes are reported on a
company gross basis, before deduction of Crown and other royalties, unless
otherwise stated. Unless otherwise specified, all reserve volumes in this media
release and all information derived there from are based on "company interest
reserves" using forecast prices and costs. "Company interest reserves" consist
of "company gross reserves" (as defined in National Instrument 51-101 adopted by
the Canadian Securities Regulators ("NI 51-101") plus Terra's royalty interests
in reserves. "Company interest reserves" are not a measure defined in NI 51-01
and does not have a standardized meaning under NI 51-101. Accordingly our
Company interest reserves may not be comparable to reserves presented or
disclosed by other issuers. Our oil and gas reserves statement for the year
ended December 31, 2010, which will include complete disclosure of our oil and
gas reserves and other oil and gas information in accordance with NI 51-101,
will be contained within our Annual Information Form which will be available on
our SEDAR profile at www.sedar.com. In relation to the disclosure of estimates
in the operations update discussion, such estimates for individual properties
may not reflect the same confidence level as estimates of reserves for all
properties, due to the effects of aggregation.
In relation to the disclosure of net asset value ("NAV"), the NAV table shows
what is normally referred to as a "produce-out" NAV calculation under which the
current value of the Company's reserves would be produced at forecast future
prices and costs and do not necessarily represent a "going concern" value of the
Company. The value is a snapshot in time and is based on various assumptions
including commodity prices and foreign exchange rates that vary over time. The
future net revenues estimated by GLJ do not represent the fair market value of
the reserves, nor should it be assumed that Terra's internally estimated value
of its undeveloped land holdings represent the fair market value of the lands.
Forward Looking Statements
All forward looking statements contained herein that are not clearly historical
in nature constitute forward looking statements, and the words "may", "will",
"should", "could", "expect", "plan", "intend", "anticipate", "believe",
"estimate", "propose", "predict", "potential", "continue", or the negative of
these terms or other comparable terminology are generally intended to identify
forward looking statements. Although Terra believes that the expectations
reflected in our forward-looking statements are reasonable, our forward-looking
statements have been based on expectations, factors and assumptions concerning
future events which may prove to be inaccurate and are subject to numerous risks
and uncertainties, certain of which are beyond the Company's control, including,
without limitation: volatility in the market prices for oil and natural gas;
liabilities inherent in oil and natural gas operations; uncertainties associated
with estimating oil and natural gas reserves; competition for, among other
things, capital, acquisitions of reserves, undeveloped lands and skilled
personnel; incorrect assessments of the value of acquisitions; geological,
technical, drilling and processing problems; fluctuations in foreign exchange or
interest rates; health, safety and environmental risks; stock market volatility;
global economic events or conditions; and other factors, many of which are
beyond the control of the Company. We caution that the forgoing list of risks
and uncertainties is not exhaustive.
Terra's actual results, performance or achievement could differ materially from
those anticipated in these forward-looking statements and accordingly, no
assurance can be given that any events anticipated by the forward-looking
statements will transpire or occur. 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 further detail in our Annual Information Form and other
documents available at www.sedar.com.
The reader is cautioned that historical results are not necessarily indicative
of future performance. 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 Company and its management believe that the financial outlook information
contained herein has been prepared on a reasonable basis, reflecting the best
estimates and judgements, and represent, to the best of management's knowledge
and opinion, the Company's expected expenditures and results of operations.
However, because this information is highly subjective and subject to numerous
risks, including the risks discussed herein and in Terra's Annual Information
Form and Management's Discussion and Analysis, it should not be relied on as
necessarily indicative of future results. Except as required by applicable law,
Terra undertakes no obligation to update any financial outlook information.
FOR FURTHER INFORMATION PLEASE CONTACT:
Terra Energy Corp.
Bud Love
Vice President of Finance, & Chief Financial Officer
403.699.7777
403.264.7189 (FAX)
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