Terrace increases the appraised value of its STS Olmos reserves by 500% and outlines a 2014 development drilling program

VANCOUVER, April 10, 2014 /CNW/ - Terrace Energy Corp. (the "Company" or "Terrace") (TSXV: TZR, OTCQX: TCRRF; Germany: 2TR) is pleased to announce it has received an independent appraisal report of its estimated proved and probable reserves as at its January 31, 2014 fiscal year-end (the "Report"), which was prepared by DeGolyer and MacNaughton of Dallas Texas, a qualified reserves evaluator pursuant to National Instrument 51-101 of the Canadian Securities Administrators.

The Report indicates that the pre-tax net present value of the Company's share of estimated future net revenues attributed to the STS Olmos project's proved-plus-probable reserves of oil, condensate, natural gas liquids and natural gas, using forecast prices and costs and a 10% discount rate, is approximately US$99 million as at January 31, 2014 compared to approximately US$19 million as at January 31, 2013. This represents a 500% increase in the project's appraisal estimate from year to year.

The significant increase in the appraised value of these net reserves is primarily the result of a substantial increase in the proved and probable reserve estimates that resulted from a successful 2013 delineation drilling program, which better defined the reservoir and significantly decreased the project's risk profile.  As previously reported, the Company and its development partner have drilled nine successful wells on STS Olmos, which comprises approximately 17,000 gross acres in McMullen and LaSalle Counties, Texas. Three discovery and confirmation wells drilled and completed in 2012 established economic viability of the project. Five widely-spaced delineation wells drilled in 2013 established consistent productivity across the leasehold position with average 30 day initial production rates approximating 1,000 BOEPD (83% liquids). The final delineation well, the recently drilled STS 1-4H, also showed consistent drilling results and is scheduled for completion.

Based on the success of the 2013 STS Olmos delineation program, the Company has identified approximately 145 additional drilling locations, only 60 of which are currently considered in estimating future net revenues in the Report. We anticipate adding additional locations into subsequent appraisal reports as the drilling activity continues to delineate the prospect area. We are currently in the final stages of planning for the launch of an aggressive drilling program in the second half of 2014. The plan includes the use of two three-well pads and one six-well pad drilling platforms that allow for the drilling of multiple wells from a single location. The use of these pads will improve capital efficiency and accelerate development of the project.

The Company is presently negotiating a definitive loan agreement with a preferred project lender situated in Houston Texas to secure the capital needed to fund the 2014 and 2015 drilling programs at the STS Olmos project. The final terms and conditions will be disclosed if and when such agreement is reached. 

Dave Gibbs, the Company's President and CEO commented "We are extremely pleased with the results of our 2013 delineation drilling program for STS Olmos. The results substantially de-risk the project and set us up for continuing improvements in reserves and economics. The year-over-year reserve improvement is in line with our expectations and allows us to consider non-dilutive financing options to optimize its development economics. Just as important, we believe we have significantly improved our company risk profile and validated our business model."

The Report also provides appraisal estimates for the Company's other direct and indirect interests in the Cutlass and Maverick County projects (the "Other Projects").The pre-tax net present value of the Company's share of estimated future net revenues attributed to the Other Projects' proved-plus-probable reserves of oil, condensate, natural gas liquids and natural gas, using forecast prices and costs and a 10% discount rate, is approximately US$14 million as at January 31, 2014 compared to approximately US$8 million as at January 31, 2013. The Company owns 50% of a company that has the right to earn a 50% working interest in the Maverick County project. The total appraisal estimate of the Other Projects' proved-plus-probable reserves includes the Company's share of the Maverick County reserves as if they were owned directly.    

The Company considers the STS Olmos project ready for large scale development. The Other Projects still require additional project delineation drilling and evaluation in order to materially improve reserve and appraisal estimates and allow for larger scale development. The Company is preparing an evaluation program for its Other Projects and other recently acquired assets to test the Buda Limestone, Olmos, Eagle Ford Shale and Pearsall Shale through a series of delineation wells. Details of these campaigns will be reported as plans are finalized.

Complete reserves disclosure on Forms 51-101F1, F2 and F3 covering all of the Company's projects will be filed on www.sedar.com on or before May 31, 2014 together with the Company's audited year-end financial statements and Management's Discussion & Analysis.

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"

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.

Cautionary Statement and Forward-Looking Information

Estimates of net present value of future net revenues attributable to reserves do not represent fair market value. Average 30-day initial production rates disclosed in this news release are not necessarily indicative of long-term performance or of ultimate recovery.

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: all information relating to the Company's estimated reserves and future net revenue as at January 31, 2014; the Company's plans for further development of the STS Olmos project (hereafter, the "Project"), including its 2014 drilling plans; expectations regarding the potential number of additional drilling locations on the Project; performance characteristics of the Project; and the Company's plans for financing the development of the Project. 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: uncertainties associated with estimating oil and natural gas reserves; the risk that unexpected geological results are encountered, completion techniques require further optimization or production rates do not match the Company's assumptions; changes to the Company's ability to access infrastructure in the vicinity of the Project at a reasonable price; changes to the Company's ability to access materials, equipment and services at a reasonable price; the impact of general economic conditions; volatility in market prices for oil and natural gas; currency fluctuations; risks and uncertainties associated with potential changes in environmental or other regulations, permitting processes or taxation; the risk that the Company is unable to access required debt or equity financing; and other risks and uncertainties 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.

Readers are cautioned that the assumptions used in the preparation of forward-looking 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 information. The material assumptions used to develop the forward-looking information include: production from the wells at the Project will continue as projected and modelled; reserve recoveries are consistent with management's expectations; the Company will be able to access infrastructure in the vicinity of the Project on reasonable terms; the Company will be able to access the goods and services necessary in order to conduct further exploration, development and production at the Project on reasonable terms; regulatory requirements will not change in any material respect; oil and gas prices will remain in their current range; finance and debt markets will continue to be receptive to financing the Company; and that other aspects of the Company's operations will not be affected by unforeseen events. Statements regarding future drilling locations are based on geologic interpretations which are subject to revision as further data is developed. The reader is cautioned that the appraisal estimates set out in this press release are impacted by a number of factors and assumptions regarding forecast oil and gas prices and costs, development, production, abandonment and reclamation costs, production and ad valorem tax rates, and transportation costs. They should only be regarded as estimates that may change as new production history and additional information becomes available. The reader should not place undue reliance on such estimates before reading the Company's annual filings on Forms 51-101F1, F2 and F3 in respect of its year ended January 31, 2014, when published. The reader is also cautioned that the Company assumes it will successfully conclude its negotiations to secure financing for the Project. However, there can be no assurances that the Company will reach an agreement on terms acceptable to the Company or at all. If not successful, the Company will have to seek and secure alternative financing arrangements or risk losing some of its working interest in the Project.

The Company does not assume the obligation to update any forward-looking information, except as required by applicable law.

SOURCE: Terrace Energy Corp.

please contact: [email protected], www.terraceenergy.net; Canadian Address: Suite 1012 - 1030 West Georgia St. Vancouver B.C. V6E 2Y3, Ph: 604 282-7897, Fax: [phone]; US Address: Suite 400-202 Travis Street, Houston Texas 77002, Ph: 713 227 0010