Terra Energy Corp. (TSX: TT) has announced that it will devote the majority of its 2011 Capex to funding its activity in Canada’s Montney gas play. Total capital spending on exploration and development is targeted at approximately $29 million.
"2010 saw Terra advance our unconventional Montney gas play into a world class asset," said Cas H. Morel, president and chief executive officer of Terra. "Terra's focus during 2011 will continue to be on moving this play forward at an accelerated pace of development. The immediate challenge will be to unlock the tremendous upside in our Montney play, which, in turn, should unlock the potential of Terra's capital stock."
Cash flow from operations has been forecasted by the company at approximately $32.5 million for 2011, based upon an estimated average natural gas price of $3.50 per Mcf for the calendar year, an estimated average oil price of $85.00 per barrel and an average 2011 production rate of approximately 6,800 boe/d.
"What has changed for 2011 is the recognition that the play is now big enough to carry itself going forward," added Morel. "Terra's focus during 2011 will continue to be on moving this play forward at an accelerated pace of development. The immediate challenge will be to unlock the tremendous upside in our Montney play, which, in turn, should unlock the potential of Terra's capital stock."
On November 15, 2010, the Company announced that it had engaged GMP Securities LP and Scotia Capital Inc., as joint financial advisors, to assist the company in raising private equity for the company's Montney operations.
"To this end, the company will be seeking new capital, from private equity sources or through possible joint venture arrangements, which will allow quicker development," said Morel. "Not simply to develop higher levels of commercial production and cash flows, but to continue de-risking the play and proving up the resource. Our ability to raise new capital by finding a partner for our Montney play will, in turn, allow Terra to direct the cash flows from our non-Montney operations towards oilier projects and towards the development of new unconventional/resource plays within our substantial land base across Alberta and British Columbia."
Successful completion of the targeted funding will certainly have a significant impact on that portion of the 2011 Capex Plan allocated towards Montney operations, and may also result in the Company re-visiting that portion of the 2011 Capex Plan allocated towards non-Montney operations. The company continues to work with its financial advisors in this regard and will provide appropriate updates to the market during the coming months.
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