Terra Energy Snaps Up Peace River Arch Assets

Peace River Arch
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Terra Energy has successfully completed the previously announced acquisition of certain assets for total consideration of approximately $76.6 million. The effective date of the Transaction for the purposes of allocating production and revenues was April 1, 2009.

The acquisition consists of high quality, long-life properties primarily located in the Peace River Arch regions of northeast British Columbia and northwest Alberta, including approximately 2,200 barrels of oil equivalent ("boe") per day of production, 77,600 gross (46,000 net) acres of undeveloped land and several "oil targeted" development prospects (the "Arch Assets"). Fields associated with the Arch Assets include Stoddart, Eagle, Boundary, Bonanza, Cecil and Worsley, among others. This Transaction serves to further consolidate Terra Energy's existing position in its core area of Fort St. John in British Columbia while significantly expanding the Company's footprint into the more oil-prone regions of the Peace River Arch in Alberta.

Further to the news release of the Company dated July 7, 2009, proceeds of $20.3 million from the issuance of 14,000,000 subscription receipts of the Company (the "Financing"), have been released from escrow in connection with the Transaction. Terra Energy has issued 14,000,000 common shares and 7,000,000 common share purchase warrants in exchange for the subscription receipts. Each whole common share purchase warrant is exercisable into one common share ("Warrant Share") of the Company at a price of $1.90 and expires on July 7, 2011. Each common share, warrant and Warrant Share is subject to a hold period expiring November 8, 2009.

Furthermore, Terra Energy has recently finalized an expansion of its credit facility to $90 million with its existing syndicate of lenders (the "Facility"). The Facility is a revolving facility and includes a one-year term out provision which allows the facility to be classified as long-term debt.

The Transaction was funded utilizing the proceeds from the Financing and by drawing down on the Company's newly expanded Facility.

With the completion of the Transaction, Terra Energy moves closer to achieving its stated 2009 corporate objectives of: 1) reaching Intermediate status with more than 10,000 boe per day of production through a combination of organic growth and M&A activity; 2) improving the Company's production mix by increasing the oil to gas weighting closer to a 50/50 balance; and 3) maintaining a strong balance sheet.

The Transaction introduces meaningful oil production into the Company's existing production mix. Current production from the Arch Assets is approximately 2,200 boe per day weighted more than 35 percent to oil. The Arch Assets are approximately 70 percent operated, and represent an average working interest of approximately 77 percent on operated properties.

The Arch Assets also add more than 8.5 million of Proved plus Probable reserves (6.2 million Total Proved) and extend the Company's Reserve Life Index to over nine years. The acquired reserves are approximately 40 percent weighted to oil and of particularly high quality, with greater than 98 percent of Total Proved reserves comprised of Proved Developed Producing reserves. Based on a acquisition price of $76.6 million, the Company acquired Proved plus Probable reserves at a cost of approximately $9.00 per boe (attributing zero value to the undeveloped lands acquired). These acquisition metrics are quite favourable as they are even less than the Company's 2008 Finding and Development Costs of $10.07 per boe.

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