Terrex Energy Inc. reports Q2 2012 operational, and financial results
August 13 2012 - 12:29AM
PR Newswire (Canada)
CALGARY, Aug. 16, 2012 /CNW/ - Terrex Energy Inc. ("Terrex" or the
"Company") reports its operational and financial results for the
three and six months ended June 30, 2012. The Company has filed its
unaudited condensed interim financial statements and related
management's discussion and analysis ("MD&A") for the three and
six months ended June 30, 2012 on SEDAR at www.sedar.com and on the
Company's website at www.terrexenergy.ca. Certain selected
financial information for the period, as set out below, should be
read in conjunction with the Company's unaudited condensed
financial statements and related MD&A for the period ended June
30, 2012. PRESIDENT'S MESSAGE From inception, Terrex has focused on
growing reserves and production through applying proven
technologies for improved reservoir performance and enhanced oil
recovery ("EOR") to under-exploited, mature, oil reservoirs with
significant remaining original oil-in-place. From the outset,
execution of the Company's business plan has been dependent on
access to capital. Consistent with its business plan, the mature
Strathmore and Two Creek properties were acquired. To date, a
significant amount of the technical analyses, evaluation, planning
and preparatory work relating to optimization and EOR projects,
including reservoir and production simulations under various
parameters has been completed. The programs are now largely ready
for implementation but require significant additional capital to
proceed. Second quarter 2012 operations, as expected, continued to
result in a loss. As outlined above, our properties were acquired
with the objective of enhancing production, cash flow and revenue
through the development of the properties subsequent to their
acquisition. Various actions have been taken to control and change
our cost structure; however, further losses are expected until our
production profile is enhanced through implementation of a capital
program. Current economic conditions have eroded investor
confidence creating serious liquidity concerns for many companies
and creating an extremely challenging environment for capital
raising activities. Traditional equity capital, particularly for
small companies like Terrex has been severely curtailed. In such
times, companies must evaluate their options and also their
long-term goals. We have undertaken a re-evaluation of our
properties and are fortunate that both Two Creek and Strathmore, in
addition to their EOR potential, provide us with conventional
in-fill drilling and water flood realignment opportunities. These
activities, in advance of more extensive EOR programs and at a much
more modest level of capital spending, would have a positive and
immediate impact on production and cash flow. Terrex, however,
currently has limited cash reserves and requires an infusion of new
development and working capital to proceed with such a program.
Additionally, pursuant to the Hydrocarbon Purchase Agreement with
Sandstorm Metals & Energy Ltd., the Company is required to
incur certain capital expenditures during the third quarter of
2012. Currently, Terrex does not have the financial resources to
meet these requirements and may default under the agreement.
Management and the Board of Directors continue to work with our
financial advisors, Nova Bancorp, to seek all reasonable means of
financing in order to improve production, develop new reserves and
realize on our potential. We have canvassed traditional and
non-traditional sources of capital, evaluated dispositions, and
discussed with various parties, a mutual interest in our
properties, projects and opportunities. These efforts continue as
we work with all our stakeholders to build a future for Terrex.
OPERATIONS AND OUTLOOK Field activities during the first half of
2012 were limited due to the Company's current financial position.
At Strathmore, an overall EOR field plan has been finalized and the
design and development of a chemical alkaline-surfactant-polymer
("ASP") flood, including final fluid and core flood analyses and
reservoir simulations are complete. This plan is currently in
abatement as the project is not economic on a risk adjusted basis,
in the current commodity price environment. Alternatively,
management has identified an investment program of phased infill
drilling, and water flood modifications. This plan is more fiscally
prudent and achievable at a lower risk and with a more modest
capital exposure. At Two Creek the Company has identified locations
for a possible three in-fill well drill program in the Jurassic A
Pool and is proceeding with the design of a water flood
optimization program. Based on the success of this activity,
additional development opportunities are available. Additionally,
at Two Creek, analyses have commenced and cores have been delivered
for laboratory testing as the Company continues to evaluate an
optimum EOR plan for the Jurassic A Pool. At the Two Creek B Pool,
a low pressure water flood plan has been developed and an
application is being prepared for submission to the Energy
Resources Conservation Board. The implementation of these
optimization programs and EOR plans, both at Strathmore and Two
Creek, will not be implemented until sufficient funding is assured.
The Company is actively exploring various financing options to fund
these capital programs. To this end, a special committee (the
"Special Committee") of the Board of Directors has been formed and
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. The Company has elected not to provide market guidance
at this time for 2012. OPERATIONAL AND FINANCIAL SUMMARY Periods
ending June 30, Three Months Six Months ($000's except as noted)
2012 2011 2012 2011 Average production, Boe/d 274 343 305 348
Capital expenditures, $ 387 $ 1,975 $ 971 $ 17,019 including
acquisitions, Revenue, net of $ 1,304 $ 1,689 $ 2,869 $ 3,340
royalties, Funds flow from $ (384) $ 9 $ (732) $ (412) operations
(1) Per share, basic and $ (0.005) $ 0.000 $ (0.009) $ (0.005)
diluted Operating (loss) (1) $ (674) $ (286) $ (1,307) $ (1,011)
Per share, basic and $ (0.008) $ (0.003) $ (0.016) $ (0.012)
diluted Net (loss) $ (730) $ (345) $ (1,401) $ (1,045) Per share,
basic and $ (0.009) $ (0.004) $ (0.017) $ (0.013) diluted (1) Funds
flow from operations and operating loss are non-IFRS measures.
Production for the three months ended June 30, 2012 decreased from
the comparable period in 2011 primarily as the result of down hole
mechanical problems at significant oil and gas producing wells in
both the Two Creek and Strathmore fields, and a turn around at a
third party gas processing facility at Two Creek. Repairs to
several of the oil wells were completed during the quarter and
repairs to the gas wells are being deferred until natural gas
prices strengthen. Total revenues for the quarter also decreased as
a result of reduced oil and gas production and lower realized
natural gas and crude oil prices. 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. STOCK OPTIONS The grant of
4,170,000 stock options referred to in the Company's News Release
of May 24, 2012, has been ruled invalid by the TSX Venture
Exchange, due to the Company's low share price, and has since been
rescinded. 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 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
Forward-looking Information - Certain information as set out herein
constitutes 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. 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 interim report 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. 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-IFRS Measures - Management's Discussion and
Analysis makes reference to terms commonly used in the oil and gas
industry including funds flow, funds flow from operations and
operating earnings (loss). Such terms do not have a standard
meaning as prescribed by International Financial Reporting
Standards ("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: please contact Jonathan Lexier, President &
CEO, or NormanKnecht, VPFinance and CFO, at (403) 264-4430, or
visit the Company's websiteat www.terrexenergy.ca
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