Terrace continues restructuring plans and provides update

VANCOUVER, May 25, 2016 /CNW/ - Terrace Energy Corp. (the "Company" or "Terrace") (TSXV: TZR, OTCQX: TCRRF; Germany: 2TR) provides the following update to stakeholders of the Company.

Financial Restructuring Plans

The Company's wholly-owned subsidiary, Terrace STS, LLC ("STS"), was unable to satisfy certain financial ratio covenants set out in the credit agreement with its secured lender. STS and the lender, as a consequence, entered into agreements whereby: the Company contributed subordinated inter-company loans in the approximate aggregate amount of USD$10.8 million towards the equity of STS; and the lender converted its secured debt, in the approximate amount of USD$25,500,000, into ninety five per cent (95%) of the membership units of STS (the "Debt Settlement"). The Company will continue to own the remaining five per cent (5%) and will manage STS pursuant to a management services contract that will pay the Company USD$40,000 per month. In addition, the Company has negotiated the right to receive additional distributions of future cash flows from STS after certain financial milestones are achieved. STS is the owner of the Company's STS Olmos and NW AWP Projects (the "Olmos Projects"), which presently consists of interest in 19 gross producing wells and approximately 3,300 net undeveloped acres.

Dave Gibbs, the President and Chief Executive Officer of the Company commented: "The loss of the Company's majority interest in the Olmos Projects is a consequence of current of oil and gas prices and not the result of an underperforming asset. The Company, on behalf of STS, was, however, able to successfully negotiate: i) the settlement of  over USD$25 million in secured debt without having to pay cash or issue shares of the Company; and ii) a fair contract services agreement to manage the care, maintenance and future development of the Olmos Projects.  

The Company remains committed to the development of prospective acreage in the LaSalle and McMullen Counties of South Texas. Newly acquired acreage that is in proximity to the Olmos Projects and an area of mutual interest agreement with the Company's development partner were not part of the Debt Settlement and represent a significant growth opportunity for the Company." 

As previously reported, the Company entered into a Plan of Arrangement wherein it has exchanged  previously issued 8% unsecured notes, in the aggregate amount of CDN$38,590,000, maturing in April 2018 for new non-interest bearing notes maturing in April 2021.The new notes are secured by a general security agreement over the remaining assets of the Company. The note exchange will save the Company approximately CDN$3 million in interest payments per annum and defer the repayment of principal for an additional three years.

The Company recently established a consulting and management services business to generate consulting revenues to substantially offset its salary burden. Management and staff have voluntarily modified their employment contracts to substantially reduce salaries, eliminate key long-term employment benefits and  have secured third-party management services agreements to substantially fund salaries and keep the Company's management team together.  

Dan Carriere, the Company's Chairman of the Board commented: "This accommodation is critical to the future success of the Company. Without a viable management team it would be very difficult to carry on business with the expressed aim of recovering value for all stakeholders when industry circumstances are more favorable."    

Operational Developments

The Company and its partner were successful in renegotiating the development schedule for its 147,000 acre Maverick County Project. As a result, all material capital expenditures have been deferred until late 2017.

The Company and its partner have also established an area of mutual interest (the "AMI") covering more than 200,000 acres surrounding the Olmos Projects. This agreement ensures that Terrace and its partner's interests are aligned and that they will work together to identify, evaluate and acquire prospective development acreage. During the third quarter of 2015, the Company and its partner acquired approximately 8,000 gross acres (4,000 net to the Company), immediately adjacent to the Olmos Projects, with the same geological characteristics as the developed acreage that comprises the Olmos Projects. This acreage is under a three-year, primary term lease which will allow the Company to defer any capital drilling commitments until as late as calendar 2018. This acquisition more than replaces the amount of acreage relinquished in connection with the Debt Settlement.


Dave Gibbs further commented: "The past year has proven to be one of the most challenging years the oil & gas industry has faced. The precipitous drop in commodity prices, while recently showing signs of "bottoming out", is not yet showing a clear trend towards long term price increases. Consequently, the Company has maintained its defensive posture to preserve assets and weather the storm until conditions improve.

The Company will continue to focus its efforts on maximizing, wherever possible, its leasehold and drilling location inventory and work with its advisors to evaluate different financial options, including, but not limited to, raising additional capital, joint venturing the exploration and development of existing assets, the sale of certain assets and the combination of the Company with a strategic partner."

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.


"Dave Gibbs"
Dave Gibbs, CEO


Forward-Looking Information

This press release includes forward-looking information and forward-looking statements (together, "forward-looking information") within the meaning of applicable Canadian and United States securities laws. Forward-looking information includes statements regarding the effect of the cost reductions, the deferral of capital expenditures and interest payments, prospective growth opportunities and the liquidity of the Company following these actions. Forward looking statements also include references to any potential outcomes of strategic alternative processes or discussions. 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, among other things, that the Company may not obtain necessary approvals or otherwise satisfy the conditions to the Arrangement and are described under the heading "Risk Factors" and elsewhere in the Company's most recent Annual Information Form and other documents filed with Canadian securities regulators at www.sedar.com. The Company does not assume the obligation to update any forward-looking information, except as required by applicable law.

SOURCE Terrace Energy Corp.

For further information: please contact: terrace@terraceenergy.net, www.terraceenergy.net; Canadian Address: PO Box 21546, 1424 Commercial Drive, Vancouver, BC, V5L 5G2, Ph: 604 282-7897, Fax: 604 629 0418; US Address: Suite 400-202 Travis Street, Houston, Texas, 77002, Ph: 713 227 0010

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Terrace Energy Corp.

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