June 2009
2009:
year of transformation
Slide Presentation
Advisory
Certain statements contained in this presentation contain forward-looking statements. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar statements are intended to identify forward-looking statements. 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. Forward-looking statements include, but are not limited to, references to oil and natural gas production levels; capital expenditure programs; the quantity of oil and natural gas reserves; projections of commodity prices and costs; supply and demand for oil and natural gas; expectations regarding Terra Energy Corp.’s (the “Corporation”) ability to raise capital and to continually add reserves through acquisition, exploration and development; and treatment under governmental regulatory regimes and tax laws. The Corporation’s actual results could differ materially form those anticipated in these forward-looking statements as a result of risk factors. Such risk factors include, but are not limited to: volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; geological, technical, drilling and processing problems; fluctuations in foreign exchange or interest rates and stock market volatility; and; other factors, many of which are beyond the control of the Corporation. Readers are cautioned that the foregoing list of important factors affecting forward-looking statements is not exhaustive. Furthermore, the forward-looking statements are made as of the date of this presentation, and the Corporation does not undertake any obligation to update publicly or to revise any of the included forward looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this presentation are expressly qualified by this cautionary statement.
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Corporate Profile
Full-cycle exploration and production company
As at March 31, 2009
Q-1 2009 average production = 5,885 boe/day (~90% gas) GLJ reserves effective December 31, 2008 – 18.8 MMBOE (P+P) Significant upside potential – multi zone area with >200 drilling locations More than 370,000 net undeveloped acres (includes Tecton acquisition) Substantial infrastructure in place Strong balance sheet ($70 MM credit facility)
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Management Team
Over 170 years of diversified experience with expertise in all key disciplines
Cas H. Morel Bud K. Love Tim A. Beatty President & CEO VP, Finance & CFO VP, Capital Projects B.Sc., LLB, MBA Startech Energy P.Eng., PanCanadian 25+ years 20+ years 20+ years
Tim A. Blair
John M. Behr Graham Collins Gord Oliver John Hrycyk James Chong
VP, Land
VP, Exploration Mgr, Production Operations Mgr, Exploitation Mgr, Facilities Design Controller
Acclaim Energy
Dominion, Rio Alto P.Eng., Rigel Energy P.Eng., Stellarton P.Eng., Apache Sound Energy Trust, Altagas
20+ years
20+ years 25+ years 20+ years 14+ years 7+ years
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Board of Directors
Independent members with extensive industry background and governance expertise
Ted S. Anderson*
Ralph G. Evans Colin P. MacDonald Cas H. Morel Robert D. Penner* Tony Sabelli*
Founder, Pioneer Land & Environmental Services Ltd.
Petroleum engineer; former board member of ERCB (AEUB) Partner, Borden Ladner Gervais, LLP President & CEO, Terra Energy Corp. Former senior tax partner, KPMG (Lead Director) Petroleum engineer and businessman
*Members of Audit Committee
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Reserves Summary and Current Trading Metrics
Reserves Oil (Mbbl)
Proved Developed Producing
Total Proved Total Proved + Probable
NPV Before Income Tax Total (Mboe)
8,617
12,468 18,826
Gas (MMcf)
39,127
57,148 86,992
NGL (Mbbl)
1,634
2,290 3,361
10% ($ M)
157,035
208,000 277,945
462
654 966
$
Proved Reserves $/Boe
P+P Reserves $/Boe
BOE/ Day Production $
Market Capitalization
Net Debt Enterprise Value
115,920,000
23,025,960 138,945,960
9.30
1.85 11.14
6.16
1.22 7.38
19,701
3,913 23,614
1 2 3 4 5 6 7
Reserves prepared by GLJ effective December 31, 2008, and adhere to NI 51-101 guidelines. Reserves are Company interest and before deduction of royalties. Equivalents calculated on a 6:1 basis. Figures may not add due to rounding. GLJ Forecast Pricing - $7.20 per MMbtu for 2009, May 29, 2009 - $1.60/sh x 72,450,000 shares = 115,920,000 Net Debt as at March 31, 2009
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Net Asset Value Summary
(as at December 31, 2008)
Discount Rate Reserves Case Calculation of Basic Net Asset Value per Share Reserves Value(1) Undeveloped Land(2)
10% Proved
10% P+P
C$ mm C$ mm
$190 $29
$257 $29
Net Debt (3)
Standalone Net Asset Value (Before Dilution) Basic Shares Outstanding Basic Net Asset Value per Share Fully Diluted Net Asset Value per Share
C$ mm
C$ mm mm C$/share C$/share
$(14)
$205 74.9 $2.74 $2.74
$(14)
$272 74.9 $3.63 $3.63
1 Reserve value based on GLJ Report effective December 31, 2008. 2 Value of undeveloped land based on Seaton-Jordan & Associates Ltd. estimate as at December 31, 2009. 3 As at December 31, 2008
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Historical Overview
1996-2003 2004 Predecessor company private - Grew from 0 to 1,000 boe/d Acquisition of Dominion Exploration asset Completed December 2004 ($31million) Combined with existing lands, formed nucleus of Ft. St. John core operating area
2005
Year of exploration success - 100% exploration drilling success (11 gross/ 9.8 net) - Over 10 new pools discovered
Focus on infrastructure and delineation of new pools - Completed pipeline segments – Septimus, Boudreau - Advanced plans for South Peace gathering system - Delineation and development drilling – Boudreau, Tower
2006
2007
From “behind pipe gas” to increased production - Completed Tower-Septimus segment of South Peace River Gathering System (April 2007) - Completed East Boudreau pipeline; production increased by approx 500 boed (September 2007) - Completed and commissioned Tower compression and dehydration facility; incremental increase in production of approximately 500 boed (December 2007)
Complete transition to Full-cycle exploration and production - sale of 110 secs of Montney P&NG mineral rights for net proceeds of $65.2 million eliminating debt - doubled Tower compression facility and gathering system increasing production to 5700 boed Year of transformation 8
2008
2009
Production Growth – Total Company
Average daily production (boed) - Historical
2009 M&A Growth Organic Growth 2008 Exit 5,700
2009 Q1 AVG
Using 6:1 Conversion Rate
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Production Growth – Per Share
Average daily Production (boed) per MM Shares
80
70
Q1 Average
60
BOED/MM Share
50 40 30 20 10 0 2004 2005 2006 2007 2008 2009
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Using 6:1 Conversion Rate
Market Performance – (18 Months)
Terra Price Performance
(Jan 1, 2008 – Present)
Relative Performance
(Jan 1, 2008 – Present)
$2.50
2.5
250
$2.00 Share Price ($)
2.0 Volume Traded (millions)
Relative Performance
200
$1.50
1.5
150
$1.00
1.0
100
$0.50
0.5
50
$0.00 1-Jan-08 1-May-08 1-Sep-08 1-Jan-09 1-May-09
0.0
0 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09
Terra
Ed. Par
AECO
Peer Group Average
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Canadian Oil & Gas Sector Performance – (18 Months)
Relative Price Performance
(Jan 1, 2008 – Present)
225
Relative Performance (Jan 1, 2008 = 100)
200 175 150 125 100 75 50 25 Jan-08 Terra
Mar-08
May-08 S&P/TSX O&G Producers Index
Jul-08
Sep-08
Nov-08
Jan-09 Juniors > 10 mboe/d
Mar-09
May-09 Juniors < 10 mboe/d
SC Royalty Trust Index (Price)
Most Canadian oil and gas producers have performed poorly over the past 18 months; Terra has outperformed virtually all segments of the market over this period. Despite the company’s relative outperformance, it is currently trading below its peers based on Entity value/boed
Relative Median Valuations
Number Senior Producers Royalty Trusts Juniors >10,000 boe/d Juniors < 10,000 boe/d Terra 4 19 12 47 Price / 52 Week High 60% 48% 32% 33% 64% Market Cap ($MM) $26,315 $1,184 $473 $43 $126 Entity Value ($MM) $33,648 $2,081 $771 $86 $134 Net Debt/ CF LQA 1.5 x 2.6 x 2.2 x 3.0 x 0.4 x RLI P+P LQA 19.1 10.9 11.2 10.8 10.0 % Gas Prod. LQA 44% 54% 71% 74% 76% LQ Prod. (BOE/D) 504,251 31,028 17,087 2,094 5,132 EV / DACF LQA 6.4 x 6.2 x 6.3 x 6.1 x 2.8 x BOE/D LQA $63,256 $51,255 $41,143 $28,639 $17,102 Adjusted Entity Value / Proven BOE ($/BOE) $12.69 $17.49 $16.04 $12.32 $7.06 P+P BOE ($/BOE) $8.07 $12.59 $9.39 $7.59 $4.68
($/BOE/D)
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2009 Strategic Goals
Transformation: Junior to Intermediate
Reach 10,000 BOED using a combination of organic growth and acquisitions
Move commodity mix closer towards 50/50 gas to oil balance
Maintain a strong balance sheet
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Capital Plan for 2009
$37 MM CAPEX- budget is flexible and adaptable based on
M&A opportunities and move to “oil” weighted opportunities
$13 MM
Infrastructure
19%, Seismic, Land etc.
35%, Infrastructure
$17 MM
Drilling and Completions
$ 7 MM $37 MM
Land, Seismic and other
46% Drilling and Completions
* This capital plan and budget is based upon average natural gas pricing of $5.89 per GJ (Aeco Gas). This capital plan is also subject to change as a result of asset or corporate acquisitions.
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TECTON ACQUISITION & METRICS
Land Acquisition Summary Gross Acre Hectare Section 89,910 37,922 140 Net 46,011 19,407 72 $/Unit (net) 173.87 412.23 111,662.15
-Montney and Belloy rights throughout -Many sections have all P&NG rights -Close proximity to existing Terra infrastructure
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Fort St. John Core Area
BRITISH COLUMBIA
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Greater Peace River Arch
Valhalla
LaGlace
Grande Prairie
Wembley
Elmworth
Simonette
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2009 Exploration & Development
Sunrise Doig Phosphates & Shoreface Sandstone
15-26-79-17w6
Now producing at over 2500 BOED Doig Phosphate Sand vertical wells are now on production Horizontals to come will allow for exploitation of Doig Shales Extensive, mappable sand bodies for future development Halfway and Belloy plays being developed Doig Phosphate Sand Trends
Doig Shoreface Trends
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2009 Exploration & Development
Monias & Wilder Taylor Flat & Belloy Discoveries
A2-34-82-20w6
perf
16-24-82-21w6
perf
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2009 Exploration & Development
Grande Prairie Charlie Lake Oil Pool Net Pay (m)
porosity
Dolomitic sandstone reservoir
Terra August, 2005 discovery well at 06-07-71-6w6 Production test 546 bbl oil, 1.3 mmcf gas, 70 bbl water
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2009 Exploration & Development
Tecton - Monias Taylor Flat Extension
Mappable porous sandy carbonate shoal 14-9 is now on production at a restricted rate Older wells show play extending onto Tecton land Good Montney area
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2009 Exploration & Development
Tecton – Red Creek Artex Recompletion 11-07-86-21w6
Z
00/08-13-86-22W6
perforation
00/11-07-86-21W6 recompletion candidate
WR Packer
Z’
perforation
ARTEX
HALFWAY
R22 R21W6
24
19
20
21
22
G
G L
G G
00/08-13-86-22W6 Artex Cum Production 0.235Bcf
T86
G
F
13 18 17
K F
16 15
F F
Z
C C
A
A G F C
12
T86
G
7
11-07-086-21W6 – Artex Recompletion Z ’
F
8 9 10
G
F V V A IC A G V G
1 6 5 4 3
G
K I
G V V
22
R21W6
Projection: Stereographic Center: N56.44778 W121.29210 Created in AccuMap™, a product of IHS
R22
File: FSJ - Overview.MAP Datum: NAD27
2009 Exploration & Development
Tecton - Eagle Montney Submarine Canyon Play
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2009 Exploration & Development
Tecton – Back to the Montney…
In March 2008 Terra sold over 100 sections of Montney rights for over $65M The Tecton sale gives Terra over 140 sections (70 net) of Montney rights for $8M
Montney resource play is proving successful in many nearby areas
The Tecton deal also has 36 sections of shallower rights and many deeper rights Terra has also acquired over 11 sections of Montney rights in recent months
Montney Production and Pressure
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Peer Group Analysis
Q1 Production Recent Share Price 31-Mar-09 Number of Market Net Debt Shares Capitalization M $MM $MM 76,702 57,385 25,900 52,960 93,547 81,676 209,342 72,453 79,067 46,030 36,952 49,495 39,297 46,553 87,300 18,591 62,218 78,497 66,125 112,543 41,306 71,084 75,318 166,020 72,765 53.7 39.6 43.8 121.8 53.3 175.6 263.8 110.1 85.4 206.2 135.2 642.9 174.5 628.5 76.8 282.5 90.2 64.4 476.1 689.9 660.9 406.6 378.8 187.6 252 54.8 49.3 38.1 55.2 63.0 0 0 23.0 113.2 100.3 124.0 158.4 17.0 97.9 131.0 99.3 152.9 213.9 143.0 253.5 177.6 252.3 284.0 296.7 121 Market Cap BOED
+
Company
Symbol
Debt BOED
=
Enterprise Value BOED
2008 F&D Cost
Operating Expense per BOED
Buffalo Resources Corp Prospex Resources Ltd. Rock Energy Inc Orleans Energy Ltd Berens Energy Ltd West Energy Ltd Black Pearl Resources Inc Terra Energy Corp Delphi Energy Corp Breaker Energy Ltd Vero Energy Inc Freehold Royalty Trust Angle Energy Inc Storm Exploration Inc Anderson Energy Ltd Zargon Energy Trust Enterra Energy Trust True Energy Trusts Paramount Resources Birchcliff Energy Ltd Celtic Exploration Ltd Crew Energy Inc Galleon Energy Inc Iteration Energy Ltd Average
BFR-V PSX-T RE-T OEX-T BEN-T WTL-T PXX-T TT-T DEE-T WAV-T VRO-T FRU.UN-T NGL-T SEO-T AXL-T ZAR.UN-T ENT.UN-T TUI.UN-T POU-T BIR-T CLT-T CR-T GO-T ITX-T
2,890 3,807 3,818 4,181 4,550 5,214 5,510 5,884 6,762 6,883 7,352 7,522 7,645 8,441 8,505 9,213 9,968 9,981 11,912 12,513 13,219 15,022 17,965 18,165 8,622
$0.70 $0.69 $1.69 $2.30 $0.57 $2.15 $1.26 $1.60 $1.08 $4.48 $3.66 $12.99 $4.44 $13.50 $0.88 $15.22 $1.45 $0.82 $7.20 $6.13 $16.00 $5.72 $5.03 $1.13 4.61
18,581 10,402 11,472 29,132 11,714 33,679 47,877 18,712 12,629 29,958 18,390 85,469 22,825 74,458 9,030 30,663 9,049 6,452 39,968 55,135 49,996 27,067 21,085 10,328 28,503
18,962 12,950 9,979 13,203 13,846 0 0 3,909 16,741 14,572 16,866 21,058 2,224 11,598 15,403 10,778 15,339 21,431 12,005 20,259 13,435 16,795 15,809 16,334 13,062
37,543 23,352 21,451 42,334 25,560 33,679 47,877 22,621 29,370 44,530 35,256 106,528 25,049 86,056 24,433 41,441 24,388 27,883 51,973 75,394 63,431 43,862 36,894 26,661 41,565
$12.78 $21.09 $25.13 unavailable $14.47 $18.94 unavailable $10.07 $20.70 $20.25 unavailable $32.15 unavailable $10.71 $18.83 $21.35 $12.44 unavailable $205.43 $14.06 $19.43 unavailable unavailable unavailable 29.86
$16.35 $8.20 $12.33 $13.29 $8.55 $9.61 $23.13 $9.57 $12.59 $14.10 $10.11 $4.27 $4.82 $7.72 $10.81 $13.56 $13.15 $17.27 $23.59 $12.46 $10.70 $12.33 $12.15 $16.11 12.37
Terra Energy Corp
TT-T
5,884
$1.60
72,453
110.1
23.0
18,712
3,909
22,621
$10.07
$9.57
Source:Public disclosure
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Corporate Profile
Exchange Symbol Outstanding Shares (as at March 31, 2009) Banks TSX TT
72,453,233 (Basic)
TD Canada Trust Canadian Imperial Bank of Commerce Borden Ladner Gervais, LLP Deloitte & Touche, LLP Computershare Trust Company of Canada GLJ Petroleum Consultants Ltd. 970, 333 Seventh Avenue SW Calgary, Alberta T2P 2Z1 Main: 403-699-7777 Fax: 403-264-7189 email: info@terraenergy.ca www.terraenergy.ca
Legal Firm Auditors Transfer Agent Reserve Engineers Contact Information
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