/NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR RELEASE TO US NEWS WIRE SERVICES/
CALGARY, Aug. 18 /CNW/ - Terrex Energy Inc. (TSX-V - TER) ("Terrex" or the "Company") announces operating and financial results for the second quarter of 2010. The full text of the Company's Management Discussion and Analysis and unaudited financial statements is available on the Company's website, www.terrexenergy.ca and on SEDAR at www.sedar.com.
I. Corporate HIGHLIGHTS
During our first five months of operations, much of our activity has focused on our initial property acquisition and corporate financing.
Achievements during this period include:
- securing a total of $15 million of equity financing (including the
July 15th issue);
- listing on the TSX Venture Exchange;
- recruiting a strong Board of Directors;
- building an experienced management team and technical group,
- acquiring the Company's first oil property and EOR project;
- refining our comprehensive EOR selection criteria; and
- initiating the sourcing and evaluation of additional oil properties
II. MESSAGE TO SHAREHOLDERS
Terrex is engaged in growing reserves and production through applying proven technologies for improved and enhanced oil recovery ("IOR" and "EOR") to known, existing, under-exploited, large original oil in place reservoirs in the Western Canadian Sedimentary Basin.
Historically, under primary and secondary recovery, 15% to 30% of the original oil-in- place in conventional reservoirs is recovered. An assessment of reservoirs in Canada and elsewhere indicate that an additional 5% to 20%, and in some instances even more, of the original oil-in-place may be recovered through enhanced recovery processes, depending on reservoir characteristics and the technology applied.
Successful enhanced oil recovery projects can entail an extended planning and implementation period requiring considerable up-front capital, the results, however, are the recognition of significant additional, recoverable reserves and a relatively stable, long-life production base. These projects create minimal new environmental footprints as they are applied to already existing oil pools and utilize, for the most part, existing wells and infrastructure.
Terrex intends to access, through acquisitions, joint venture and participation arrangements, producing oil properties where IOR and EOR potential has been identified by management. Although a variety of technologies have been, and are being developed, successful methods are reservoir specific. Our strategy is to apply a limited number of proven procedures to specific reservoirs where analogous reservoirs have demonstrated the success of these technologies.
III. FIELD OPERATIONS
Terrex commenced operations on February 1, 2010, with the acquisition of the Strathmore property for $650,000. The property is located approximately 40 miles south of Calgary and is comprised of a 100% working interest in 3,840 acres of primarily freehold land. The Strathmore field was discovered in 1985 and has produced approximately 4.8 million barrels of crude oil. As at February 1, 2010, based upon an evaluation prepared by the independent engineering firm Sproule Associates Limited, proved reserves were estimated to be 160,500 boe with a 10% net present value of approximately $1.6 million. Management has assessed the property as having excellent EOR potential and based upon a reserve evaluation prepared by the independent engineering firm DeGolyer MacNaughton Canada Limited, probable reserves associated with EOR at Strathmore are estimated to be 1.6 million barrels of light oil.
An EOR development plan is currently being prepared for the property with implementation, subject to regulatory requirements and equipment procurement, planned to commence during the fourth quarter of 2010. In the interim, activities have focused on reducing and controlling operating costs, assessing optimization opportunities and making necessary repairs and modifications to existing facilities in preparation for the EOR program.
Operating costs associated with Strathmore are reflective of very mature, conventional oil production and minimal recent optimization. This combined with work undertaken during the period in advance of the enhanced recovery plan, has resulted in abnormally high costs that are not, in management's opinion, indicative of future, normalized costs.
Production from Strathmore averaged 69 boe/d and 78 boe/d respectively for the first and second quarters of 2010.
The Company's Board has approved a capital investment budget of $6.5 million for the last half of 2010. The budget is primarily directed towards implementing the first stage of the Company's 3 phase EOR project at Strathmore. Spending, subject to regulatory approvals and equipment availability, is planned to commence during the later part of the third quarter with initial results anticipated in early to mid 2011.
In addition to the development of the Strathmore property, the Company is actively pursuing additional properties having improved and enhanced oil recovery potential consistent with the criteria developed by the Company.
In this early stage of the Company's development, uncertainties impacting future performance are compounded by the lack of meaningful historical corporate data. Accordingly, the Company has elected not to provide guidance for the balance of 2010.
V. Financial Summary
Periods ending June 30, 2010 Three Months Five Months
Average production (boe/d) 78 75
Capital expenditures, including
acquisitions $ 142,923 $ 997,733
Funds flow from operations(1) $ (392,537) $ (501,845)
Per share: basic and diluted $ (0.013) $ ($.017)
Operating loss(1) $ (434,731) $ (564,785)
Per share: basic and diluted $ (0.014) (0.020)
Net (loss) $ (992,934) $ (1,122,988)
Per share: basic and diluted $ (0.033) $ (0.039)
Revenue, net of royalties $ 366,169 $ 573,488
(1) non-GAAP measures
As expected, the Company has incurred losses during start-up. Net (losses) of $(992,934) and $(1,122,988) respectively, were recorded for the three and five month periods ended June 30, 2010.
The major contributor to these losses was stock based compensation expense of $540,743 recognized during the second quarter, relating to the implementation of the Company's stock option plan.
Additionally, the Company's sole revenue producing property is the Strathmore field and as previously discussed, due to its current status, abnormally high operating costs and low production rates have resulted in the field operating at a loss of $105,745, determined as revenue less operating and transportation costs, for the five months ended June 30, 2010. General and administrative expenses, including certain start-up costs, also contributed to the losses.
Terrex Energy Inc. was incorporated under the Business Corporations Act (Alberta) on January 19, 2010 as a wholly owned subsidiary of Terra Ventures Inc. ("Terra"), a public, Vancouver based junior mining company. Pursuant to a plan of arrangement, Terra distributed the common shares of Terrex held by Terra to its shareholders on June 14, 2010. Concurrent with the closing of a private share placement, on June 23, 2010, Terrex common shares were listed for trading on the TSX Venture Exchange, under the symbol TER. This interim report is the Company's first report to shareholders since its common stock was listed for trading.
Funds Flow From Operations and Operating Earnings (Loss) are non-GAAP measures used by Management in measuring the Company's performance.
Funds flow from operations is used to asses the Company's ability to finance capital programs and is determined as cash from operating activities before changes in non-cash working capital. Operating Earnings (Loss) provides for a comparison of operating results between periods after eliminating certain items, subject to significant volatility, that are largely non-operational and non-cash in nature. Net losses have been adjusted to eliminate stock based compensation and accretion of asset retirement obligations in the determination of Operating Losses.
Non-GAAP measures should not be considered as more meaningful than measures determined in accordance with GAAP.
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-looking Information - Certain information set out herein constitutes forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "intend", "could", "might", "should", "believe", and similar expressions.
Forward-looking statements are based upon the opinions and expectations of management of Terrex as at the effective date of such statements and, in certain cases, information provided or disseminated by third parties. Although Terrex believes that the expectations reflected in the forward-looking statements contained herein, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included in this document, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause actual results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. Readers are cautioned that this list of risk factors should not be construed as exhaustive. These statements are made as at the date of this news release and, except as required by applicable law, Terrex does not intend to update any of the forward-looking statements to confirm these statements or actual results.
Boe Presentation - Production volumes and reserves are commonly expressed on a barrel of oil equivalent ("boe") basis whereby natural gas volumes are converted at the ratio of six thousand cubic feet to one barrel of oil based on an energy equivalency at the burner tip and does not represent a value equivalency at the wellhead. Used in isolation, barrels of oil equivalent may be misleading.
Non-GAAP Measures - Management's discussion and analysis makes reference to terms commonly used in the oil and gas industry including funds flow, funds flow from operating earnings (loss). Such terms do not have a standard meaning as prescribed by Canadian generally accepted accounting principles ("GAAP") and therefore may not be comparable with the determination of similar measures for other entities. These measures are identified as non-GAAP measures and are used by management to analyze operating performance and leverage. These measures should not be construed as an alternative to, or more meaningful than measures determined in accordance with GAAP.
SOURCE Terrex Energy Inc.
For further information: For further information: Kim Davies, President & CEO or Norm Knecht, VP Finance & CFO at (403) 264-4430 or visit our website at www.terrexenergy.com