Terra Energy provides updates on operations, reserves evaluation and land values

    TSX-V: TTR

    CALGARY, Oct. 31 /CNW/ - Cas H. Morel, President and Chief Executive
Officer of Terra Energy Corp. ("Terra Energy" or the "Company"), is pleased to
provide this update on operations, on the Company's reserves evaluation and
also on undeveloped land values. As stated in a prior media release, the
Company engaged Scotia Waterous to assist the Company in unlocking shareholder
value. In connection with this process, the Company has had its oil and gas
reserves re-evaluated as at September 30, 2008. Similarly, the Company has
updated its third party evaluation of undeveloped lands.

    Operational Summary

    Year to date, the Company has drilled 12 wells (10 net) in our Fort St.
John core area, consisting of six wells at Sunrise, two at Red Creek, and one
each at Parkland, Goose, Wilder and Boudreau.
    At Sunrise, Terra Energy has drilled and completed 6 wells (4 net) this
year. To date, 6 of these wells have been completed in the Doig Sands
formation with gas rates ranging from 0.5 mmcf/d to 2.8 mmcf/d. Each of these
wells was drilled as a vertical well, and targeted 2-4 prospective formations.
Each of these wells has been completed with 1-2 producing zones per well.
Terra is currently waiting for licenses to drill 1-2 additional Sunrise
locations this year. These wells have confirmed the Company's geological model
and mapping of the Doig Sands.
    Three of the Sunrise wells have been completed as gas wells in the Doig
Phosphate formation. Production tests have ranged from 0.5 mmcf/d to
0.75 mmcf/d from the completions in the Doig Phosphate in these vertical
wells. The Doig Phosphate represents a new development opportunity for the
Company. Terra Energy has approximately one township of land which has been
mapped as having potential in the Doig Phosphate. Detailed core analysis
through the Phosphate and log analysis indicates porosity values ranging as
high as 10% in a sand sequence (2.0 to 2.5 meters) sandwiched within the Doig
Phosphate shale. It is speculated that this sand sequence creates a natural
conduit for the production of gas from the sand itself, as well as the Doig
Phosphate shales above and below. Terra Energy plans to drill a horizontal
well within this 2 meter sand sequence, with the intention of carrying out
multi-staged fractures along the horizontal length. It is estimated that 2 to
3 wells per section will be required to fully develop this potential. Terra
Energy is in the process of licensing 6 horizontal wells targeting the Doig
Phosphate at Sunrise.
    In addition to the Doig Sands and the Doig Phosphate, the Sunrise wells
have proved up potential for an extensive play within the Halfway formation.
The Halfway formation performs as a tighter sand formation in Sunrise with
test rates ranging from 0.25 mmcf/d to 0.5 mmcf/d when production tested, Like
many tighter formations, the Halfway is now being evaluated for its potential
to be developed utilizing horizontal wells and multi-stage fracture
    At Red Creek (100% WI), an existing Doig horizontal oil well was fracture
stimulated in 5 locations along the horizontal length. The well encountered a
new reservoir and successfully tested at 50 BOED, however, early problems
arose trying to pump the well with conventional bottom hole pumps as result of
sand issues. The Company continues to evaluate artificial lift systems to
improve productivity. A new well was also drilled at Red Creek 03-16. This
well was successful in proving up the geological model of the reservoir but
encountered tight sands with only limited net pay.
    Exploratory wells drilled at Parkland, Goose and Boudreau encountered
hydrocarbons in the primary formations targeted, but each appears to display
compartmentalization and limited reserves in the primary target. These wells
are being evaluated for potential in secondary targets. The exploratory well
drilled at Wilder appears to have encountered gas in two of its targeted
formations, and is awaiting completion and testing.

    Infrastructure Projects

    Terra Energy has completed the 2nd and 3rd phases of the Sunrise and
Eight Mile pipelines, completing a gathering trunk from the south end of the
Sunrise field up to the Tower Compression and Dehydration facility. In
anticipation of additional volumes from the new Sunrise and Eight Mile
pipelines, construction has begun on expansion of the Tower Compression and
Dehydration facility. Expansion includes the addition of a second 1,500hp
compressor and a slug catcher for production from the Sunrise and Eight Mile
pipelines. With the addition of a second compressor, facility design capacity
is expected to increase from 10 mmcf/d to 20 mmcf/d. Completion of the
facility expansion work is scheduled for the first week of November, and is on


    Production for Q3 averaged approximately 4,372 BOED. This volume is
approximately 300 BOED less than anticipated due to operational issues
experienced as a result of a third party operator at the West Doe facility.
Terra Energy is working with the third party operator to resolve these
operational issues, through a reconfiguration of flow for raw gas and produced

    Petroleum and Natural Gas Reserves

    The Company has re-engineered its petroleum and natural gas reserves. The
report was prepared in accordance with NI 51-101 Standards of Disclosure for
Oil and Gas Activities by GLJ Petroleum Consultants Ltd. as at September 30,
2008. A summary of the results is as follows:

    Reserves At September 30, 2008

                                     Natural Gas      Liquids
                                     -----------     ---------
       Category          Oil (bbls)     (mmcf)         (bbls)    Total (BOE)
       --------        -----------      -----          ------    -----------
    Proved Producing       511,000        37,207     1,801,000     8,513,167
    Proved Non-
     Producing             203,000        16,324       735,000     3,658,667
     ---------         -----------   -----------     ---------   -----------
    Total Proved           714,000        53,531     2,536,000    12,171,833

    Total Probable         434,000        23,476     1,095,000     5,441,667
    --------------     -----------   -----------     ---------   -----------
    Total P+P            1,148,000        77,007     3,631,000    17,613,500
                               6.5%         72.9%         20.6%

    Forecast Prices and Costs Before Tax Net Present Value of Net Production
    Income - Sept 30, 2008

    Undiscounted                           Discounted
         0%             5%             10%            15%            20%
         --             --             ---            ---            ---
    $245,637,000   $189,338,000   $157,036,000   $135,790,000   $120,590,000
    $ 88,062,000   $ 64,400,000   $ 50,952,000   $ 42,071,000   $ 35,720,000
    ------------   ------------   ------------   ------------   ------------
    $333,699,000   $253,738,000   $207,988,000   $177,861,000   $156,310,000

    $170,207,000   $100,494,000   $ 69,911,000   $ 52,807,000   $ 41,840,000
    ------------   ------------   ------------   ------------   ------------
    $503,906,000   $354,232,000   $277,899,000   $230,668,000   $198,150,000

    Evaluation of Undeveloped Oil and Gas Properties

    The Company has re-evaluated its undeveloped oil and gas properties. The
report was prepared in accordance with NI 51-101 Standards of Disclosure for
Oil and Gas Activities by Seaton-Jordon & Associates Ltd. as at September 30,
2008. A summary of the results is as follows:

           Area                    Gross Acres      Net Acres        Value $
    Alberta                        31,200.0000    18,004.6910      1,811,548
    British Columbia Other         10,156.0000     3,217.7280        106,245
    FSJ North Peace                53,313.9590    50,461.7160     10,517,058
    FSJ South Peace                94,464.8960    86,007.3610     35,613,478
    Saskatchewan                    2,559.7750     2,397.2750      1,793,423
    TOTALS                        191,694.6300   160,088.7710     49,841,752


    With the completion of the Sunrise and Eight Mile pipelines and the
expansion of the Tower Compression and Dehydration facility, Terra Energy
expects that it will reach its forecast target exit rate for 2008 of
5,700 BOED as early as November. The Company continues to grow its production
and reserves base, in both quality and magnitude. The recent update gives the
Company over 17.6 MM BOED of P+P reserves. The combined values of the
Company's oil and gas reserves (P+P at 10%) and undeveloped land values
exceeds $325 MM, with only approximately 76 MM common shares issued and
outstanding. The Company continues to benefit from a strong balance sheet and
a focused asset base.


    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.
    This media release contains forward-looking statements including
expectations of future production and a possible transaction or transactions
that are intended to realize what management perceives to be an undervalued
share price. There is no assurance that future expected production will be met
or that a strategic transaction will be identified or completed.
    All evaluations and reviews of future net cash flow are stated prior to
any provision for interest costs or general and administrative costs and after
the deduction of estimated future capital expenditures for wells to which
reserves have been assigned. It should not be assumed that the estimated
future net cash flow shown below is representative of the fair market value of
the Corporation's properties. There is no assurance that such price and cost
assumptions will be attained and variances could be material. The recovery and
reserve estimates of crude oil, NGLs and natural gas reserves provided herein
are estimates only and there is no guarantee that the estimated reserves will
be recovered. Actual crude oil, NGLs and natural gas reserves may be greater
than or less than the estimates provided herein.

    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'.


    %SEDAR: 00007598E

For further information:

For further information: Mr. Bud Love, Vice President of Finance and
Chief Financial Officer, Tel: (403) 699-7777

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