Terrex Energy Inc. reports year end 2011 reserves, operational, and financial results

    




 CALGARY, April 24, 2012 /CNW/ - Terrex Energy Inc. ("Terrex" or the  "Company")  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 

 Highlights  

  





    - 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. 

 2011 Activities 

 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. 

 Reserves Summary 

 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:  





    Reserves                                                                  
    Summary

                          December 31, 2011                     December 31, 2010

    Reserves (1)     Oil&NGLs    Gas    Total           % of         Total      Change
                      (Mbbls)  (MMcf)  (Mboe)           3 - P       (Mboe)        %

    Proved                                                                             

          Proved           439                               14%         123           
    producing                      639     546                                     344%

    Total proved           882     795   1,014               26%         123       724%

         Probable        1,543   1,027   1,714               45%         307       458%

    Proved &             2,425   1,822   2,728               71%         430       534%
    probable

          Possible
    (2)                  1,022     515   1,108               29%       1,344       (2)%

    Proved,                                     
    probable &
    possible (2)         3,447   2,337   3,836              100%       1,774       116%











    (1)  Reported reserve volumes are gross volumes
    (2)  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

    ($000s)                   0%      5%      8%      10%     12%     15%

    Proved                                                                

          Proved producing  $6,664  $5,564  $5,098  $4,840  $4,614  $4,322

    Total proved            13,908  10,253   8,793   8,007   7,333   6,482

    Probable                19,281  11,755   8,011   5,837   3,896   1,374

    Proved & probable       33,190  22,008  16,804  13,844  11,229   7,856

    Possible                21,450  15,868  13,213  11,737  10,461   8,862

    Proved, probable &     $54,640 $37,876 $30,017 $25,580 $21,690 $16,718
    possible






  

 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

    Reserves               Proved   Probable   Possible    Total

    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. 





    Reserves                                                   
    Reconciliation

                                        Proved &              Prov., Prob.,
    (Mboe)              Proved Probable Probable Possible (1)  & Poss. (1)

                                                                           

    Reserves, December     123      307      430        1,344         1,774
    31, 2010

    Infill drilling        302      110      412          268           680

    Improved Recovery      190    1,230    1,420        (374)         1,046

    Technical revisions     83     (59)       24        (130)         (106)

    Acquisitions           441      126      567            -           567

    Production           (125)        -    (125)            -         (125)

    Reserves, December   1,014    1,714    2,728        1,108         3,836
    31, 2011






  





    (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            $3,369         $1,182
    acquisitions,

    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)

    Net (loss)                               $(2,373)       $(1,048)

          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           $21,798         $2,721
    acquisitions

    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)

    Net (loss)                               $(4,198)       $(3,501)

          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. 

 ABOUT TERREX 

 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.  

 ADVISORIES 

 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. 

 Forward-Looking Information 

 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.  

   

   

Terrex Energy Inc


CONTACT:  CONTACT INFORMATIONFor additional information please contact Kim Davies, President & CEO,or Norman Knecht, VP Finance and CFO, at [phone], or visit theCompany's website at www.terrexenergy.ca 


    

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