Terra Energy Announces third quarter 2012 financial results
Thursday, Nov 15, 2012Terra Energy Corp. ("Terra" or the "Company") (TSX:TT) announces its financial and operating results for the three and nine month periods ended September 30, 2012. Complete copies of Terra's third quarter 2012 financial results may be obtained at www.sedar.com or www.terraenergy.ca.
During the third quarter of 2012, the industry witnessed a measure of relief from the natural gas price lows which hit a ten year bottom in late April, when AECO spot prices traded below $1.50 per mcf. The Company realized an average natural gas sales price for the third quarter of $2.31 per mcf compared to $1.84 per mcf in the second quarter and $2.15 per mcf in the first quarter of 2012.
The strengthening in natural gas prices has resulted in gross revenues of $10,783,000 and cash flows from operating activities of $61,000 from 4,873 boe/d of production, which production rate was affected by both sales of non-core assets and shut-ins of certain gas wells. Operating expenses were reduced to $16.97/boe in the third quarter from $21.51/boe in the second quarter of 2012. General and administrative expenses were also reduced to $4.52/boe from $4.73/boe during the same comparative periods, notwithstanding the inclusion of one time expenditures associated with the marketing of the Company's assets and fees related to debt restructuring and re-financings.
Subsequent to the third quarter, the Company announced the divestiture of more than $80 million dollars of assets, and that no further consideration would be given towards subordinate debt financing as a means to re-capitalize or strengthen the balance sheet. This recent development is tied to a number of asset sale transactions arising from the two major marketing processes which have been underway over the past few months, the details of which have yet to be fully disclosed. This re-capitalization will be dependent upon the successful closing of several transactions which are currently in the form of letters of intent or agreements for purchase and sale. The net proceeds of these asset sale transactions will be used to substantially pay down the Company's total indebtedness to a point that Terra will once again have a strong balance sheet.
Following the successful completion of the asset sale transactions, the Company will continue to have production capability of approximately 5,000 boe/d across its core operating areas located in the Peace River Arch in Alberta and British Columbia. In addition, the Company will have in excess of 350,000 net acres of undeveloped land, with many plays and prospects in hand. Simultaneously, the Company's ability to manage its revenue stream in the future will be restored by way of the ability to enter into multi-year commodity hedges.
Terra is a junior oil and gas corporation engaged in the exploration for, and development and production of, natural gas and oil in Western Canada. Terra's common shares trade on the Toronto Stock Exchange under the symbol 'TT'.
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