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Building Value

Building Value. CAPP Symposium.

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Building Value

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  1. Building Value CAPP Symposium

  2. ADVISORY: Certain information regarding Terra Energy Corp. including management’s assessment of future plans and operations, may constitute forward-looking statements under applicable securities laws and necessarily involve risks associated with oil and gas exploration, production, marketing and transportation such as loss of market, volatility of prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.

  3. Corporate History • Today, Terra Energy is a full cycle exploration and production company focused on North-East B.C. and Peace River Arch region of AB • Operations initiated in 1996 as a private company • Became a public company on January 30, 2004 • Highlight of 2004 was acquisition of Dominion Exploration assets • Completed in December 2004 ($31mm) • Combined with existing lands, formed nucleus of Ft St. John Core Area • Highlight of 2005 was our Summer Drilling Program • 100% exploration drilling success (11 gross / 9.8 net) • Over 10 new pools discovered • Focus for 2006 will be developing infrastructure

  4. Corporate Profile

  5. Production Profile • Assuming 400 boe/d of asset rationalization and completion of major infrastructure plans, Terra Energy is forecasting a target exit production rate of 4,600 – 6,000 boe/d Exit Target Range Exit Target Q1 Onstream Production Capability “Behind Pipe” Production Capability

  6. Business Strategy • Our objective is to “build value” and to be the “most attractive investment” amongst peers • Based on metrics (F&D < $10.00) • More than simply metrics, creating a strategic asset (concentration of land holdings and operations, operatorship, ownership of facilities, high working interest) • “Most attractive investment” also synonymous with most desirable “take-out” candidate • Growth through value creation / through the drill bit • 100% exploration drilling success in 2005 Summer Drilling Program • 87% total drilling success (all wells) • Create core areas to “Focus” capital investment and control our own infrastructure

  7. Investment Highlights • Compelling valuation • Current Market Capitalization - $139.3 MM ($1.95 / Share) - $43,530 per flowing BOE • Enterprise Value - $183.1 MM - $57,203 per flowing BOE • Debt is approx. 1.0x forward cash flow • 2005 Year end NAV Per Share - $3.10 (basic) / $2.82 (diluted) • Quality reserves profile • High-quality reserves, RLI approx. 8.9 years • We have become a “resource” play, 14.2 MMBOE of proved + probable reserves (85% / 15% gas / oil mix)

  8. Investment Highlights (con’t) • Company wide, Terra Energy operates over 90% of its production • Core area of Fort St. John contains >80% of production / 86% reserves • Multi-zone exploitation with large land base (115,000 total acres (gross), 185 total sections (gross)) • Ownership / control of facilities creates competitive advantage and lower operating costs • Year round access on most properties allows for counter-cyclical calendar and lower F&D costs • 2006 CAPEX budget of $66.1mm • 90% of budget targeting high impact Fort St. John core area • Targeting up to 25 wells, which can be scaled back in light of changing market conditions • Major infrastructure projects planned in 2006 • Experienced management team

  9. 2007 Cashflow Forecast Based on Target 2006 Exit Rate

  10. Management Team • Over 200 years of diversified energy experience • Technical expertise and proficiency in all key disciplines • Management team • Cas H. Morel, President & CEO B.Sc., LLB, MBA 20+ years • Bud K. Love, VP Finance & CFO Startech 20+ years • Tim A. Beatty, VP Drilling and Comp. PanCan 20+ years • T. A. (Tim) Blair, VP Land Acclaim Energy 20+ years • John Behr, VP Exploration Domin, Rio Alto 20+ years • Michael Oforsagd, Chief Geologist Dome, Amoco 30+ years • Graham Collins, Manager Prod. Ops. Rigel 25+ years • Gord Oliver, Manager Exploitation Stellarton 20+ years • John Hrycyk, Manager Facilities Design Apache 13+ years • Rosa Lyngberg, Controller PWC 12+ years • John Pantazopoulos, Manager Bus. Devel CIBC 6+ years

  11. Board of Directors • Our Board is comprised mainly of independent members with extensive industry background and governance expertise • Ted S. Anderson – Founder, Pioneer Land & Environmental Services Ltd. • Ralph G. Evans – Petroleum engineer and former board member of the ERCB (AEUB) • Anthony R. Harvey – Businessman, extensive public company experience Fluor- Daniels • Colin P. MacDonald – Partner, Borden Ladner Gervais LLP • Cas H. Morel – President and CEO, Terra Energy Corp. • Robert D. Penner – Former senior tax partner, KPMG

  12. 2006 CAPEX Summary • Terra Energy has an aggressive 2006 CAPEX plan which can be scaled down in light of changing market conditions • $66.1mm CAPEX budget (does not include acquisitions) • 2006 CAPEX budget • One drilling rig for entire year • One / two additional rigs July – Nov • Improved Rig availability • Lower drilling costs • Safer / more efficient • BC royalty relief • $16.6mm for infrastructure to tie-in behind pipe reserves and new discoveries $16.6mm $34.0mm $15.5mm

  13. 2006 CAPEX • Terra Energy is proceeding with several key infrastructure projects • Boudreau East– 18km pipeline connecting 2005 new pool discovery scheduled Oct (500 boe/d) • Three projects proceeding in Tower providing both short term and long term production solution • Intermediate tie-in scheduled July (150 boe/d) • East / West gaterhing line to flow gas to Terra Energy Wilder facility scheduled Nov (500 boe/d) • Peace River Crossing enables full production solution as all behind pipe reserves are brought onstream scheduled Dec. (350 – 1,500 boe/d) • Terra Energy will fund its capital expenditures through a combination of cash flow, credit facility (recently increased to allow for this purpose), proceeds from potential “non-core” asset rationalizations and proceeds from the exercise of outstanding warrants / options

  14. Final Notes • Compelling value • Strategic asset base in Fort St. John • Priority on building infrastructure in 2006 • Reserves growth expected to continue • Netbacks, operating costs and related metrics all expected to continue to improve in 2006

  15. Building Value CAPP Symposium

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