Terrace finalizes farm-in agreement to develop Buda Limestone Formation in South Texas
VANCOUVER, Feb. 24, 2014 /CNW/ - Terrace Energy Corp. (the "Company" or "Terrace") (TSXV: TZR) (OTCQX: TCRRF) (Germany: 2TR) is pleased to announce it has reached an agreement to acquire and develop significant new acreage in Zavalla and Dimmit Counties, which is on trend with recent, highly successful discovery wells in the emerging Buda Limestone formation in South Texas.
The Company has entered into a Farm-in Agreement (the "Agreement") to acquire a 75% working interest ("WI") in several leases that cover approximately 10,000 gross (6,700 net) mineral acres. Under the terms of the Agreement, the Company has the opportunity to drill, at its expense, a series of "Earning Wells" to test the Buda Limestone formation. Each Earning Well will secure a 75% WI and a 56.25% net revenue interest (proportionately adjusted as to the Farmor's current working interest) in a 640 acre production unit (the "Production Unit"). The Company has the option to secure additional Production Units by drilling additional Earning Wells each within 120 days from the completion date of the previous Earning Well. Each Production Unit may contain up to seven additional drilling locations. The Farmor has the right to participate in the development of additional wells proposed by the Company in each Production Unit by paying 25% of the development costs to earn a net revenue interest of 18.75%. The Farmor may, at its sole discretion, convert its working interest into an overriding royalty interest of 5% in which case the Company would pay 100% of the development costs to earn a net revenue interest of 70% in each of the additional wells (proportionately reduced as to Farmor's current working interest). The Company must drill the initial Earning Well by August 1, 2014 or the Agreement may be terminated by the Farmor without penalty.
The project acreage is located in the core of the Eagle Ford Trend and in close proximity to a number of prolific horizontal wells drilled into the naturally fractured Buda Limestone, including the publicized Hughes Heitz 302 3H, which produced over 250,000 barrels of light sweet crude oil in its first 18 months of reported production, according to the Texas Railroad Commission. Utilizing leading edge underbalanced drilling techniques and recently available 3D seismic data, operators have reported achieving production results comparable to or exceeding Eagle Ford Shale wells in the area at significantly lower capital costs. Typical horizontal Buda wells in the area are being drilled and completed for capital costs in the range of $3.0 - $4.0 million as compared to Eagle Ford Shale wells, which typically cost in the range of $6.0 - $8.5 million.
Dave Gibbs, the Company's President and Chief Executive Officer commented: "We are very excited that we were able to secure this acreage. It represents another milestone in our corporate strategy of securing development rights to historically productive oil formations in South Texas along the Eagle Ford Trend and creating value by applying unconventional drilling and completion techniques that have proven successful on our other projects, including our prolific STS Olmos Project. We believe the Buda Limestone formation, which is also present on our Maverick County Project, is highly prospective and will be a core focus for our Company as we implement our growth model in South Texas."
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 with a particular focus on South Texas.
ON BEHALF OF THE BOARD OF DIRECTORS
Dave Gibbs, President and Chief Executive Officer
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.
This press release includes "forward-looking information" within the meaning of applicable Canadian securities laws, including information regarding the costs to develop and complete wells in the Buda Limestone formation and their expected performance. Users of forward-looking information are cautioned that actual results may vary from the forward-looking information disclosed in this press release. The material risk factors that could cause actual results to differ materially from the forward-looking information contained in this press release include, changes to production rates , changes to the Company's ability to access infrastructure in the vicinity of the project at a reasonable price, costs for and availability of required goods and contract services, regulatory changes and all of the other risks and uncertainties normally associated with the exploration for and development and production of oil and gas. The forward-looking information contained in this press release represents management's best judgment of future events based on information currently available. The material assumptions used to develop the forward-looking information include: that future costs and performance of Buda Limestone wells will approximate historical costs and past performance, that the Company will be able to access infrastructure in the vicinity of the project on reasonable terms, that the Company will be able to access the goods and contract services necessary in order to conduct further exploration, development and production on reasonable terms, that regulatory requirements will not change in any material respect and that other aspects of the Company's operations will not be affected by unforeseen events. The Company does not assume the obligation to update any forward-looking information, except as required by applicable law.
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