CALGARY, April 24, 2012 /CNW/ - Terrex Energy Inc. ("Terrex" or the "Company") (TSXV: TER) is pleased to report crude oil and natural gas reserves information for the year ended December 31, 2011 and a summary of operational and financial results for the three months and year ended December 31, 2011.
DECEMBER 31, 2011 RESERVES SUMMARY
|-||Total Proved reserves (87% oil) increased to 1.01 million barrels of oil equivalent (Boe), a 724% increase over 2010.|
|-||Total Proved plus Probable reserves (89% oil) increased by 534% to 2.7 million Boe over 2010.|
|-||Total Proved plus Probable plus Possible reserves (90% oil) increased by 116% to 3.8 million Boe.|
|-||Future Development Costs, including chemicals, relating to Proved Undeveloped reserves are $9.77 per Boe; $17.45 per Boe for Probable reserves; and $1.62 for Possible reserves.|
"The significant reserve additions recognized in 2011 by our independent reserve evaluators, including the promotion of possible reserves to probable reserves, with only minimal field activity, reflects the solid technical work of the Terrex team and the economic viability of our projects" stated Kim Davies, President and CEO. "We look forward to additional increases in reserves and value as we execute our development programs and realize on the worth of these projects" added Ms. Davies.
At Strathmore, the Company's first Enhanced Oil Recovery ("EOR") project, reservoir simulations were completed to determine the optimum well patterns and resulting production forecast. Based upon core flood analysis, the optimal alkaline-surfactant-polymer ("ASP") chemical formulation was finalized. In addition to field rehabilitation and optimization, the construction of ASP facilities and a water plant were completed and are ready for installation to begin the chemical water-flood injection process.
Activities during 2011 also focused on various technical analyses, which included detailed fluid analysis, specialized core flooding work in addition to coarse and fine-grid reservoir simulations. These efforts were used in the evaluation, design and optimization of Improved Oil Recovery ("IOR") and EOR programs slated for the Company's properties at Two Creek.
Additionally at, Two Creek A, geological work supported by 3D seismic identified horizontal infill drilling locations. Reservoir simulation modeling further supported the drilling opportunities, as well as water-flood realignment and polymer flood potential. Work continues to define the optimal polymer flood design which will follow the other operations.
At Two Creek B, reservoir simulations support the feasibility of utilizing existing wells for injection in implementing a low pressure water-flood to recover significant additional reserves with the drilling of additional horizontal production wells.
GLJ Petroleum Consultants Ltd. ("GLJ"), an independent petroleum engineering firm, has completed a reserves assessment and evaluation of the Company's petroleum and natural gas properties as at December 31, 2011 and presented in their report dated April 16 , 2012. Select reserves information as presented below has been drawn from the report. Comparative reserves information as at December 31, 2010 has been taken from a report also prepared by GLJ. The December 31, 2011 and 2010 reserves assessments and evaluations have been prepared in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook ("COGEH").
Results of the Company's technical analysis, reservoir models and simulations were provided to GLJ to assist in their assessment and evaluation of the properties and support the Company's development plans. No additional reserves; proven, probable or possible, were recognized in relation to the low pressure water flood planned for the Jurassic B pool due to its early stage of development.
Terrex has filed its Annual Information Form on SEDAR at www.sedar.com, which contains additional reserves information as required under NI51-101.
The following table summarizes the Company's reserves at December 31, 2011 as compared to 2010:
|December 31, 2011||December 31, 2010|
|Reserves (1)|| Oil&NGLs
| % of
3 - P
|Proved & probable||2,425||1,822||2,728||71%||430||534%|
|Proved, probable & possible (2)||3,447||2,337||3,836||100%||1,774||116%|
Reported reserve volumes are gross volumes
Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves
Net Present Value of Reserves
The net present value associated with the Company's reserves at December 31, 2011 has been estimated based upon GLJ's commodity price forecast as at January 1, 2012. Estimated future net revenues are before the deduction of estimated future site restoration costs but are reduced for estimated future well abandonment costs and future capital associated with developing the reserves. The estimated values disclosed do not necessarily represent fair market value.
Net Present Value of Future Net Revenue
|Before Income Taxes Discounted at % per year - Forecast Prices and Costs|
|Proved & probable||33,190||22,008||16,804||13,844||11,229||7,856|
|Proved, probable & possible||$54,640||$37,876||$30,017||$25,580||$21,690||$16,718|
Future net revenue gives effect of the 2011 Hydrocarbon Purchase Agreement with Sandstorm Metals & Energy Inc. and receipt by the Company of the $14.7 million advance deposit relating to the forward production purchased.
The following table summarizes future capital necessary to develop the company's reserves.
|Future Development Capital|
|Future Capital ($000s)||$4,580||$15,265||$1,800||$21,645|
Chemical injectant costs of $14.6 million relating to the planned EOR programs at Strathmore and Two Creek are not included in the above Future Development Capital amounts and have been included in operating costs for purposes of the reserves evaluation.
The following table reconciles changes in the Company's reserves at December 31, 2010 to reserves at December 31, 2011.
|(Mboe)||Proved||Probable|| Proved &
|Possible (1)|| Prov., Prob.,
& Poss. (1)
|Reserves, December 31, 2010||123||307||430||1,344||1,774|
|Reserves, December 31, 2011||1,014||1,714||2,728||1,108||3,836|
|(1)||Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.|
OPERATIONS AND OUTLOOK
During the second year of operations, field activities in Southern Alberta focused on the design and development of a chemical ASP flood for the Strathmore property. Final fluid and core flood analyses and reservoir simulations were completed and the overall EOR field plan was finalized. Construction of the EOR facilities, built in Wyoming is complete with delivery to the Strathmore site planned once surface preparations are complete. Other activities at Strathmore during the year concentrated on reactivating suspended well bores and pipelines, injector well conversions, and making repairs and modifications to existing facilities necessary for the EOR project. Production from the Strathmore property has doubled from 70 Boe/d at the time of acquisition to 140 Boe/d average during the fourth quarter of 2011.
On March 31, 2011, effective January 1, 2011, Terrex acquired its second producing property in the Two Creek area of central Alberta for $13 million. The property consists of 100% working interest in 4,320 acres of land including related infrastructure. Production from Two Creek averaged approximately 230 Boe/d in 2011 comprised of 190 Bbls of oil and natural gas liquids and 250 Mcf of natural gas. The Company commenced the planning, evaluation and development of optimization and EOR programs at Two Creek and during 2011 received approval from the Energy Resources Conservation Board of its application for an EOR program on the Jurassic A pool. Specialized analyses have commenced and cores are undergoing laboratory testing. Specifics of the polymer program are expected to be completed during the first half of 2012. Additionally, the Company has identified the locations for two horizontal in-fill wells in the Two Creek A pool and is proceeding with a water flood realignment and optimization program. At the Two Creek B pool, a low pressure water flood plan has been evaluated and an application is being prepared for submission to the Energy Resources Conservation Board.
During 2011 the majority of the technical, planning and development work relating to the Company's EOR programs at Strathmore and Two Creek was finalized and the projects are now ready for implementation. The Company requires additional capital to advance these projects and is currently and rigorously exploring various financing options necessary to fund its ongoing capital programs.
A special committee (the "Special Committee") of the board of directors has been formed and the Special Committee has engaged Nova Bancorp Securities Ltd., on a non-exclusive basis, to assist the Special Committee and management with the identification and evaluation of various financing strategies for the Company and its IOR and EOR programs at Strathmore and Two Creek.
The Company has elected not to provide market guidance at this time for 2012.
OPERATIONAL AND FINANCIAL SUMMARY
Terrex has filed its audited financial statements and related management's discussion and analysis (MD&A) for the year ended December 31, 2011 on SEDAR at www.sedar.com and the Company's website at www.terrex.ca. Certain selected financial and operational information for the periods ended December 31, 2011 and 2010 is set out below and should be read in conjunction with the Company's financial statements for the year ended December 31, 2011 and the related MD&A.
|THREE MONTH PERIODS ENDED DECEMBER 31|
|$000s except as noted||2011||2010|
|Average production, Boe/d||344||105|
|Capital expenditures, including acquisitions,||$3,369||$1,182|
|Revenue, net of royalties,||$1,695||$555|
|Funds flow from operations (1)||$(237)||$(556)|
|Per share, basic and diluted||$(0.003)||$(0.007)|
|Operating (loss) (1)||$(578)||$(574)|
|Per share, basic and diluted||$(0.007)||$(0.007)|
|Per share, basic and diluted||$(0.029)||$(0.013)|
(1) Funds flow from operations and operating loss are non-IFRS measures.
|TWELVE AND ELEVEN MONTH PERIODS ENDED DECEMBER 31|
|$000s except as noted||2011||2010|
|Average production, Boe/d||343||82|
|Capital expenditures, including acquisitions||$21,798||$2,721|
|Revenue, net of royalties||$6,586||$1,425|
|Funds flow from operations (1)||$(808)||$(1,507)|
|Per share, basic and diluted||$(0.010)||$(0.026)|
|Operating (loss) (1)||$(2,066)||$(1,507)|
|Per share, basic and diluted||$(0.025)||$(0.028)|
|Per share, basic and diluted||$(0.051)||$(0.061)|
(1) Funds flow from operations and operating loss are non-IFRS measures.
Comparative figures for 2010 are for the three and eleven month periods ended December 31, 2010 and have been restated to reflect International Financial Reporting Standards ("IFRS") adopted in 2011.
Production and revenue for the three month period and year ended December 31, 2011 increased significantly over the comparable periods in 2010, primarily as a result of the acquisition of the Two Creek property, as of January 1, 2011. Production averaged 344 Boe/d during the fourth quarter of 2011, an increase of 239 Boe/d over the fourth quarter of 2010. Production for the year ended December 31, 2011 averaged 343 Boe/d, an increase of 261 Boe/d over 2010. This increase in production together with increased commodity prices is reflected in the year over year increase in revenue. Realized 2011 commodity prices, on a Boe basis, increased approximately 20% over 2010.
As expected, the Company has continued to incur losses in advance of the implementation of optimization and EOR projects. As the Company's EOR and optimization projects progress, production and revenue are anticipated to increase significantly.
Terrex Energy Inc. is a Calgary based junior oil company that focuses on the application of proven enhanced oil recovery ("EOR") methods to improve oil production from existing mature fields. Terrex targets underexploited and undercapitalized light to medium oil reservoirs in Western Canada. The Company's common shares are listed on the TSX Venture Exchange under the trading symbol "TER".
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.
Basis of Presentation
Production and reserve information is commonly expressed in units of a barrel of oil equivalent ("Boe"). For purposes of computing such units, natural gas is converted to equivalent barrels of crude oil using a conversion factor of six thousand cubic feet of natural gas to one barrel of oil. This conversion ratio of 6:1 is based on an energy equivalency at the burner tip and does not represent a value equivalency at the well head. Used in isolation, barrels of oil equivalent may be misleading.
This News Release contains forward-looking information within the meaning of applicable Canadian securities laws. All information other than historical fact is forward-looking information. Forward-looking information relates to future events or future performance and is based on Terrex's current internal expectations, estimates, projections, assumptions and beliefs. Forward-looking information is often, but not always, identified by the use of words such as "expect", "project", "proposed", "intend", "seek", "anticipate", "budget", "plan", "continue", "estimate", "forecast", "may", "will", "predict", "potential", "targeting", "could", "might", "should", "believe" and similar expressions.
Although management considers the assumptions and estimates, reflected in forward-looking information, to be reasonable, based on information currently available, there can be no assurance that such information will prove to be correct. As a consequence, actual results may differ materially from those anticipated.
In particular, this News Release contains forward-looking information relating to estimates and values of recoverable petroleum and natural gas reserves. Information relating to reserves is forward-looking as it involves the implied assessment, based on certain estimates and assumptions, that the reserves exist in the quantities estimated and that they will be commercially viable to produce in the future. Estimates and assumptions upon which reserve information is based include assumptions as to future commodity prices, currency exchange rates, well production rates, well drainage areas, success rates for future drilling, the timing, implementation and effectiveness of tertiary production programs, and the availability of labour and services.
Undue reliance should not be placed on forward-looking information which is inherently uncertain, and subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward looking information will not occur. These risks include, but are not limited to risks associated with oil and natural gas exploration, development and production, financial risks, the history of losses, substantial capital requirements, political and government risks, government regulations, environmental, prices, dependence on key personnel, availability and access to equipment, risks may not be insurable, licenses, resource estimates, variations in exchange rates. Further information regarding these factors may be found under the heading "Risk Factors" in the company's Annual Information Form. Readers are cautioned the foregoing list of factors that may affect future results is not exhaustive.
The forward-looking statements contained in this news release are made as of the date hereof and Terrex does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
This news release makes reference to terms commonly used in the oil and gas industry including funds flow from operations and operating loss. Such terms do not have a standard meaning as prescribed by IFRS and therefore may not be comparable with the determination of similar measures for other entities. These measures are identified as non-IFRS 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 IFRS.
For further information:
For additional information please contact Kim Davies, President & CEO, or Norman Knecht, VP Finance and CFO, at (403) 264-4430, or visit the Company's website at www.terrexenergy.ca