Terrex Energy Inc. Announces First Operations Report and Second Quarter 2010 Results
August 18 2010 - 6:10PM
PR Newswire (Canada)
CALGARY, Aug. 18 /CNW/ -- /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. IV. OUTLOOK
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
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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
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(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. Non-GAAP Measures 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. Kim
Davies, President & CEO or Norm Knecht, VP Finance & CFO at
(403) 264-4430 or visit our website at www.terrexenergy.com
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