TSX-V: TTR
CALGARY, Nov. 15 /CNW/ - Terra Energy Corp. (TSX VENTURE:TTR) ("Terra Energy" or the "Company") is pleased to release its consolidated financial statements and Management's Discussion and Analysis for the three and nine month periods ended September 30, 2007. Copies of Terra Energy's financial statements and Management's Discussion and Analysis may be obtained via SEDAR at www.sedar.com or at the Company's website at www.terraenergy.ca.
OPERATING
The Company increased production to an average of 3,706 BOED for the three month period ended September 30, 2007. The increased production was achieved though the completion of the East Boudreau Pipeline allowing the Company to tie-in an additional 500 BOED in Q3, and from the benefit of having the Tower-Septimus pipeline (announced May 2, 2007) on stream for the entire third quarter. The combined effect of these two factors increased average production for the quarter by 700 BOED as compared the previous quarter.
FINANCIAL
Petroleum and natural gas revenues for Q3 as compared to Q2 rose only 1.3% to $12,439,938, despite an increase in average production of 700 BOED, due to falling commodity prices. Natural gas prices received by the Company for Q3 averaged $5.15/mcf ($30.90/BOED) compared to $7.28/mcf ($43.68/BOED) received in Q2. This sharp reduction in commodity prices has resulted in cash flow from operations decreasing in Q3 to $3,671,403, from $4,659,989 in Q2, and resulting in a net loss for the quarter of $1,161,031. Production expenses on a per unit of production basis rose marginally by 2.4% quarter over quarter primarily due to a temporary increase in field expenses during the tie-in of the new production. The Company expects that ultimately the higher production levels will lead to a reduction of operating expenses as higher production volumes provide economies of scale.
OUTLOOK
Early this year, Terra Energy announced its Capital Expenditure Plan for 2007, which reflected the two primary objectives set by management and by the Board of Directors for the year. The first objective was the completion of four major infrastructure projects in our Fort St. John Core Operating Area, which were targeted at bringing additional volumes of 'behind-pipe' gas reserves on production. The second objective was for Terra Energy to carry out an exploration program targeted at adding substantial new reserves to the Company's bottom line, and in the process honouring the Company's commitment to expend 'qualifying expenditures' for renunciation to flow-through subscribers.
On May 2, 2007, the Company announced the completion of the first of these four major infrastructure projects, namely the Tower-Septimus Pipeline. This project resulted in incremental production for the Company of approximately 500 BOED.
On September 12, 2007, the Company announced the completion of the second of these four major infrastructure projects, namely the East Boudreau Pipeline. This project involved a combination of 4 inch and 6 inch diameter pipe, stretching approximately 19.5 kilometers from the Company's East Boudreau gas field to the Red Creek gas plant. This project resulted in incremental projection for the Company of approximately 500 BOED.
The third major infrastructure project being carried out in 2007 is the completion by the Company of pipelines and well site facilities at our Eight Mile South gas field, in conjunction with the development by a third party midstreamer of a new sour gas processing plant at Doe Creek in British Columbia together with a gathering line to such plant. Terra Energy has committed to 3.25 MMcf per day (approximately 500 BOED) of firm service at this plant commencing upon start-up. The start-up of the plant and connecting gathering line was originally scheduled for late September of 2007, but it is now not anticipated to be operational until December. The construction of the new plant by the midstreamer is well underway, and the Company has commenced the construction of its connecting pipelines and wellsite facilities. The Company has substantially more than the 3.25 MMcf per day of gas awaiting tie-in at Eight Mile South, but it is likely that the Company will be limited to producing at its firm service commitment level as a result of plant capacity limitations.
The fourth major infrastructure project being carried out in 2007 is the construction by Terra Energy of a dehydration and compression facility at the Company's Tower gas field. This new dehydration and compression facility is located right on the Company's Tower-Septimus Pipeline, where it intersects with the new Peace River Crossing. The Company's new facility has a design capacity for 10 to 12 MMcf per day of gas, with expansion potential up to 20 MMcf per day. In connection with this project, the Company currently has 10 MMcf per day of firm service committed through both the Peace River Crossing and the McMahon gas plant, together with an additional 10 MMcf per day of interruptible service. The Company has been notified that the Peace River Crossing has now been constructed with the expectation that it will be fully operational on or about December 1, 2007. The Company has received all requisite permits and approvals for the construction of this new facility, and construction work is now almost complete. The Company is currently in the process of completing the mechanical work, with the expectation that electrical work will be completed within the next week or so, for an expected on-stream date co-inciding with December 1, 2007. This new facility and the diversion of gas through it will result in the de-bottlenecking of gas production at Tower and the ability by the Company to produce approximately 500 BOED of incremental production from the Tower gas field. An additional benefit to the Company will be the freeing-up of capacity at the Wilder gas plant, making it available for new reserves and production from Wilder and potentially from the Monias area.
Terra Energy is continuing with its 2007 Drilling Program. The Company (at 60% BPO and 76% APO), together with an industry partner (at 40% BPO and 24% APO), are drilling a deep Devonian test well at Monias. This play has been developed with the use of 3D seismic data. The Company owns 100% of the deep rights to a ten (10) section block of lands which completely contains the targeted play. The results of this well are anticipated only upon completion of drilling, logging and testing, expected to occur late in the year.
The Company is proceeding with the drilling of other wells also, including two or three in the Company's Eight Mile gas field. The results of the Company's drilling will be made known at a later date.
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'.
In this news release the calculation of barrels of oil equivalent (boe)
is calculated at a conversion rate of 6,000 cubic feet (Mcf) of natural
gas for one barrel (Bbl) of oil based on an energy equivalency conversion
method. boes may be misleading particularly if used in isolation. A boe
conversion ratio of 6 Mcf: 1Bbl is based on an energy equivalency
conversion method primarily applicable to the burner tip and does not
represent a value equivalency at the wellhead.
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 any of them do so what
benefits Terra Energy will derive there from. Terra Energy disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.
TSX VENTURE EXCHANGE DOES NOT ACCEPT RESPOSIBILTY FOR THE
ACCURACY OR ADEQUACY OF THIS MEDIA RELEASE.
%SEDAR: 00007598E