Terrex Energy Inc. - Terrex Reports 2010 Financial Results and Reserves

CALGARY, April 27 /CNW/ -- 
CALGARY, April 27 /CNW/ - Terrex Energy Inc. ("Terrex" or the "Company")
 (TSXV: TER) reports financial and operating results for the year and
 fourth quarter ended December 31, 2010, together with the independent
 evaluation of the Company's reserves at December 31, 2010. The full
 text of Management's Discussion and Analysis and the Company's audited
 financial statements are available on the Company's website at www.terrexenergy.ca and on SEDAR at www.sedar.com. A Statement of Reserves, prepared in accordance with National
 Instrument 51 -101 ("NI 51-101") is contained in the Company's 2010
 Annual Information Form, which is also available on the Company's
 website and on SEDAR.


"Our goal in creating Terrex was that of building a unique oil company
 focused on Enhanced Oil Recovery (EOR) and to extend the life of
 existing mature oil fields through the application of proven
 technologies", stated Ms. Kim Davies, President and CEO of Terrex.
 "Although December 31, 2010 marks the first year of operations for
 Terrex, it is really just six months since our initial private
 placement and listing on the TSX Venture exchange in late June. During
 this period, we have made significant steps toward realizing on our
 goal and we look forward to reporting continued progress throughout
 2011".


2010 Highlights


    --  Building an experienced management team and technical group;

    --  Establishing a strong Board of Directors;

    --  Acquiring and commencing development of the Company's first EOR
        project;

    --  Securing $15 million of equity financing; and

    --  Listing on the TSX Venture Exchange.



2010 activities have positioned Terrex to pursue its business plan and
 strategy into 2011 as evidenced by the previously announced acquisition
 of its second EOR project at Two Creek in west central Alberta on March
 31, 2011 and the closing of a creative $14.7 million financing through
 the Hydrocarbon Purchase Agreement announced on March 21, 2011.


Operations  


During 2010, Terrex focused on the design of a chemical
 alkaline-surfactant-polymer (ASP) flood for the Strathmore property and
 the Company's plans were approved by the Alberta Energy Resources
 Conservation Board (ERCB) on January 21, 2011. In the field, Terrex
 concentrated on field rehabilitation activities, including the
 re-activation of well bores and pipelines, injector well conversions
 and modifications and repairs of existing facilities in preparation for
 the EOR project scheduled to commence with the injection of chemicals
 during the second half of 2011.


Operational and Financial Summary 


 ____________________________________________________________
|Periods ended December 31, 2010  |Three Months|Eleven Months|
|_________________________________|____________|_____________|
|Average production, boe/d        |         105|           82|
|_________________________________|____________|_____________|
|Capital expenditures             |  $1,105,703|   $2,720,590|
|_________________________________|____________|_____________|
|Revenue, net of royalties        |    $554,834|   $1,425,367|
|_________________________________|____________|_____________|
|Funds flow from operations (1)   |  $(556,012)| $(1,506,911)|
|_________________________________|____________|_____________|
|     Per share, basic and diluted|    $(0.007)|     $(0.029)|
|_________________________________|____________|_____________|
|Operating loss (1)               |    $599,968|   $1,653,908|
|_________________________________|____________|_____________|
|     Per share, basic and diluted|      $0.007|       $0.029|
|_________________________________|____________|_____________|
|Net loss                         |    $669,862|   $2,403,096|
|_________________________________|____________|_____________|
|     Per share, basic and diluted|      $0.008|       $0.042|
|_________________________________|____________|_____________|





          (1)   Funds flow from operations and operating loss are
          non-GAAP measures and are addressed in the "Advisories"
          section.





As anticipated, the Company has incurred losses during its initial
 start-up year. Throughout the year, the Company's only revenue
 producing property was the Strathmore field which, prior to the
 implementation of the planned EOR program, does not produce sufficient
 revenue to offset expenses due to low production rates and high
 operating costs typical of a very mature field.


2010 Reserves


All of the Company's reserves were evaluated by GLJ Petroleum
 Consultants Ltd. ("GLJ") as at December 31, 2010 in accordance with NI
 51-101 and the reserve evaluation has been approved by the Board of
 Directors of Terrex.


Strathmore


All of Terrex's reserves as at December 31, 2010, as summarized below,
 are located in the Strathmore area of southern Alberta.  Proved and
 probable reserves relate to existing and ongoing operations at
 Strathmore and are referred to as "conventional reserves". Possible
 reserves totalling approximately 1.3 million barrels of oil equivalent
 have been assigned by GLJ to the planned ASP flood at Strathmore due to
 the early stage of its development. Possible reserves, under NI 51-101,
 are defined as 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.


Strathmore Reserve Summary



                                                

                                               Net Present Value Before
 December                                               Tax,
 31, 2010   Oil, Mbbl   Gas, MMcf  Total, Mboe            M$

           Gross   Net Gross   Net Gross   Net     5%   10%         15%
Proved
Producing     78    72   266   250   123   114    401   363         329

Total         78    72   266   250   123   114    401   363         329
Proved

Probable     289   266   107   100   307   283  2,309 1,417         796

Total,
Proved &     368   338   373   350   430   396  2,710 1,780       1,125
Probable

Possible   1,158   958 1,120 1,028 1,344 1,130 16,573 8,152       3,174

Total
Proved,
Probable &
Possible   1,526 1,296 1,493 1,378 1,774 1,526 19,283 9,932       4,299





Two Creek


On March 31, 2011, effective as at January 1, 2011, the Company acquired
 certain producing assets in the Two Creek area of west central Alberta.
 As at December 31, 2010, the Two Creek assets were evaluated by GLJ.
 The assets were evaluated effectively on a "blow down" basis without
 any assignment of reserves resulting from planned future optimization
 and EOR activities. The following table summarizes the Two Creek
 reserve evaluation:


Two Creek Reserve Summary



                                              

                                             Net Present Value Before
December  Oil & NGL's,                                 Tax,
31, 2010      Mbbl     Gas, MMcf Total, Mboe            M$

          Gross    Net Gross Net Gross   Net     5%   10%         15%
Proved
Producing   402    315   371 334   464   370  9,002 7,915       7,065

Total       402    315   371 334   464   370  9,002 7,915       7,065
Proved

Probable    112     87    91  82   125   102  2,242 1,648       1,256

Total,
Proved &
Probable    513    402   462 416   589   472 11,244 9,563       8,321





Combined Strathmore/Two Creek Reserves


The following table reflects the impact of the Two Creek acquisition on
 the Company's reserves on a pro forma basis as though the Company
 acquired the Two Creek properties on December 31, 2010.


Combined Pro Forma Strathmore and Two Creek Reserve Summary



                                                

                                               Net Present Value Before
December  Oil & NGL's,                                  Tax,
31, 2010      Mbbl      Gas, MMcf  Total, Mboe            M$

          Gross    Net Gross   Net Gross   Net     5%    10%        15%
Proved
Producing   481    387   637   584   587   484  9,403  8,278      7,394

Total       481    387   637   584   587   484  9,403  8,278      7,394
Proved

Probable    401    353   198   182   432   385  4,551  3,065      2,052

Total,
Proved &    882    741   835   766 1,019   868 13,954 11,343      9,446
Probable

Possible  1,158    958 1,120 1,028 1,344 1,130 16,573  8,152      3,174

Total
Proved,
Probable
&
Possible  2,039  1,698 1,955 1,794 2,363 1,998 30,527 19,495     12,620





Hydrocarbon Purchase Agreement : $14.7 Million Financing


On March 24, 2011, the Company entered into a Hydrocarbon Purchase
 Agreement (the "Agreement") effective April 1, 2011, with Sandstorm
 Metals & Energy Ltd. ("Sandstorm"). Under the Agreement, the Company
 sold forward 15% of hydrocarbons produced from the Strathmore property,
 25% of hydrocarbons produced from the Two Creek Jurassic A pool, and
 25% of hydrocarbons produced from the Two Creek Jurassic B pool for a
 period of five years. As consideration, Terrex received an up-front
 deposit of $14.7 million, which was used in part to purchase the Two
 Creek property. Additionally, the Company will receive ongoing per unit
 payments of $15.00/bbl of crude oil, $8.00/bbl of natural gas liquids
 and $1.00/mcf of natural gas delivered to Sandstorm.  Sandstorm is
 responsible for royalties and direct transportation costs associated
 with purchased production. Terrex has provided Sandstorm with a
 guarantee that Sandstorm will receive minimum before tax payments of
 $0.5 million in 2011, $1.1 million in 2012, $1.8 million in 2013, $2.2
 million in 2014, $2.6 million in 2015, $2.4 million in 2016, $2.2
 million in 2017, and $1.9 million in 2018.  Under the Agreement, Terrex
 has the right to buy back half of the future production, for a period
 of 24 months upon payment to Sandstorm of $9.55 million.


The Agreement does not affect GLJ's estimate of the combined Strathmore
 and Two Creek reserves. The Agreement does, however, affect the
 valuation of the combined Strathmore and Two Creek reserves as
 disclosed above. Based upon an evaluation conducted by GLJ with an
 effective date as of December 31, 2010, the Agreement has the impact of
 reducing the net present value of future net revenue before income
 taxes from the combined Strathmore and Two Creek properties, discounted
 at 10% per year, by $6.6 million to $12.9 million.


Board of Directors


On April 21, 2011, Mr. James Hutton resigned from the Board of Directors
 of Terrex. Mr. Hutton, as Chairman of Terra Ventures Inc. ("Terra") was
 instrumental in the formation of Terrex through establishing the
 Company as a subsidiary of Terra. With the successful spin-out of
 Terrex from Terra, Mr. Hutton has chosen to devote his attention and
 efforts to other ventures. Management and the Board wish to thank Mr.
 Hutton for his contribution, advice and guidance in the formation of
 the Company and look forward to his ongoing support. The Board of
 Directors has determined not to replace Mr. Hutton with a new director
 and the Company will continue with five directors: being Harry L.
 Knutson (Chairman), Tony Angelidis, R. James Brown, Kim N. Davies, and
 Jonathan Lexier.


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. Terrex 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.


Advisories


Reserve Information and Barrels of Oil Equivalent


Information relating to reserves of petroleum and natural gas contained
 herein represent estimates, which were prepared by the vendor's
 independent reserve evaluators in accordance with National Instrument
 51-101. Estimating quantities of proved petroleum and natural gas
 reserves is a subjective, complex process that is dependent on a number
 of assumptions and variable factors. Estimates of proved plus probable
 reserves are made assuming the development of the property, without
 consideration as to the availability of funding necessary for that
 development.


Production volumes and reserve information 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 of natural gas to one
 barrel of oil 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.


Non-GAAP Information


Included in this news release are references to terms commonly used in
 the oil and gas industry including funds flow from operations and
 operating loss. Such terms do not have 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. As used in this news release funds flow
 from operations is calculated as cash flow from operating activities
 less changes in non-cash working capital an, operating loss is
 calculated as net loss before stock based compensation and accretion of
 asset retirement obligations. Funds flow from operations is used by
 management in assessing the Company's ability to fund capital programs
 and operations and operating loss provides a comparison of operating
 results between periods, excluding non-cash items subject to
 significant volatility. The foregoing Non-GAAP measures should not be
 considered an alternative to, or more meaningful than cash provided by
 operating activities and net loss determined in accordance with GAAP.


Forward-Looking Statements


Certain statements contained in this news release constitute
 forward-looking statements and forward-looking information
 (collectively referred to herein as "forward-looking statements")
 within the meaning of applicable Canadian securities laws.  Such
 forward-looking statements relate to future events or future
 performance and are based on Terrex's current internal expectations,
 estimates, projections, assumptions and beliefs, including, among other
 things, assumptions with respect to production, future capital
 expenditures and cash flow.  Readers are cautioned that the assumptions
 used in the preparation of such information may prove incorrect.  All
 statements other than statements of historical fact may be
 forward-looking statements.  Such forward-looking statements are often,
 but not always, identified by the use of words such as "seek",
 "anticipate", "budget", "plan", "continue", "estimate", "expect",
 "forecast", "may", "will", "project", "predict", "potential",
 "targeting", "intend", "could", "might", "should", "believe" and
 similar expressions.  These statements involve known and unknown risks,
 uncertainties and other factors that may cause actual results or events
 to differ materially from those anticipated in such forward-looking
 statements.  Terrex believes the expectations reflected in those
 forward-looking statements are reasonable but no assurance can be given
 that these expectations will prove to be correct and such
 forward-looking statements included in, or incorporated by reference
 into, this new release should not be unduly relied upon.  These
 forward-looking statements speak only as of the date of this news
 release.


In particular, this news release contains forward-looking statements
 pertaining to the following: 


    --  business strategies
    --  exploration and development plans
    --  the characteristics of the Strathmore Property and the Two
        Creek Property
    --  implementation, benefits and timing of enhanced oil recovery
        ("EOR") programs
    --  the quantity and value of oil and natural gas reserves
    --  net present values of future net revenues from reserves
    --  other expectations, beliefs, plans, goals, objectives,
        assumptions or statements about future events or performance



Statements relating to "reserves" are forward-looking statements, as
 they involve the implied assessment, based on certain estimates and
 assumptions that the reserves described exist in the quantities
 predicted or estimated and can profitably be produced in the future.


Forward-looking statements are based on Terrex's current beliefs as well
 as assumptions made by, and information currently available to, Terrex
 concerning business prospects, strategies, regulatory developments, the
 ability to obtain equipment in a timely manner to carry out development
 activities, the ability to obtain financing on acceptable terms, the
 benefits of IOR and EOR programs and the terms of the Hydrocarbon
 Purchase Agreement.  Although management considers these assumptions to
 be reasonable based on information currently available to it, they may
 prove to be incorrect.


Undue reliance should not be placed on forward-looking statements, which
 are inherently uncertain, are based on estimates and assumptions, and
 are 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 statements will
 not occur.  There can be no assurance that the plans, intentions or
 expectations upon which forward-looking statements are based will in
 fact be realized.  Actual results will differ, and the difference may
 be material and adverse to Terrex and its shareholders.  These factors
 include, but are not limited to risks associated with oil and natural
 gas exploration, financial risks, the history of losses, substantial
 capital requirements, political and government risks, government
 regulation, environmental, prices, dependence on key personnel,
 availability of drilling equipment and access, 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.


 


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p Kim Davies, President & CEO, or Norm Knecht, VP Finance and CFO, at  [phone], or visit the Company's website at a href="http://www.terrexenergy.ca"www.terrexenergy.ca/a. /p 

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