Terrace to Acquire Oil & Gas Property in Texas

The directors of Terrace Resources Inc. (TSX VENTURE:TZR.P) ("Terrace" or the
"Company") are pleased to announce that the Company has entered into a letter of
intent dated January 31, 2011 (the "LOI") to acquire an 87.5% working interest
and 65.1875% net revenue interest (the "Acquisition") in certain oil gas leases
referred to as the "Los Patos Gas Unit" (the "Unit") from Eagle Energy and
Development Company ("Eagle"), a private company incorporated in Texas which is
at arm's length to Terrace. 


The Acquisition will constitute Terrace's Qualifying Transaction under the
policies of the TSX Venture Exchange (the "Exchange").


Los Patos Gas Unit 

The Unit is a 320 acre proration unit located in Wharton County, Texas. The Unit
is situated in a prolific overpressured Yegua system which is interpreted as an
elongated barrier bar system running parallel to the Texas Gulf Coast. 


To date, 26 wells have been completed in the system running to the southwest
from the prolific Rio Loco Field, producing slightly over 53 BCFG, or an average
of slightly over 2 BCF per well. Individual well recoveries have ranged as high
as 7.6 BCFG. In the immediate vicinity of the prospect, 17 wells have produced
23 BCFG or approximately 1.4 BCFG per well.


Eagle previously drilled a well in the Unit, known as "Patos Gas Unit #1", which
suffered extensive damage when initially completed. A subsequent engineering
study was undertaken that determined there is a reasonable probability the well
may be successfully re-entered and fracture stimulated to produce gas in the
Yegua formation.


Material terms of the Acquisition

Under the terms of the LOI:



--  Terrace will incorporate a wholly owned USA domiciled subsidiary
    ("Subco"), which will be granted an 87.5% Working Interest ("WI") and a
    65.1875% Net Revenue Interest ("NRI") in the Unit, subject to paying
    certain costs as set out below. 

--  Subco will pay 100% of all costs associated with the re-entry and
    fracture stimulation of Patos Gas Unit #1 (the "Workover Well") in
    exchange for 100% of the resulting net cash flow (74.5% NRI) until the
    date that Subco has received aggregate cash flow equal to Subco's
    capital costs (the "Payout Date"), which are estimated to be a maximum
    of US$250,000. 

--  After the Payout Date, Subco's WI and NRI in the Workover Well will be
    reduced to 87.5% and 65.1875%, respectively. 

--  Subco will be named operator of the Unit. 

--  Subco will commence work on the Workover Well within 60 days of the date
    on which all of the conditions precedent set out below have been
    satisfied or waived by Terrace. 

--  In the event the fracture stimulation of the Workover Well does not
    result in a commercially productive well, Subco will be responsible for
    all costs associated with plugging and abandoning the Workover Well and
    restoring the surface site in accordance with the requirements of the
    Texas Railroad Commission and the lease provisions. 



Upon completion of the Workover Well, the Company may, but is not required, to
drill additional wells in which it will have an 87.5% WI at an aggregate
estimated cost of US$1.5 million per well.


Conditions precedent

The completion of the Acquisition is conditional upon, among other things, the
following: 




--  the receipt of a satisfactory report in Form 51-101 in a form acceptable
    to Terrace and the Exchange; 

--  the execution of a formal Farmout Agreement satisfactory to both parties
    on or before February 28, 2011 or such later date as may be agreed upon
    by the parties; 

--  the receipt of a financial budget and technical plan, acceptable to
    Terrace, to re-enter and fracture stimulate the Workover Well; and 

--  the receipt of final acceptance from the Exchange to the Acquisition and
    the private placement described below on or before April 30, 2011 or
    such later date as may be agreed upon in writing by the parties. 



It is expected that the Exchange will not require the Company to seek
shareholder approval for the Acquisition given that it is an arm's length
transaction. 


Proposed private placement 

The Company also announces a non-brokered private placement of up to 10,000,000
units at a price of $0.09 per unit for total maximum proceeds of $900,000. Each
unit will comprise one common share and one share purchase warrant entitling the
holder to purchase an additional common share at a price of $0.18 for a period
of three years from the date of issue. 


The private placement will be conditional upon and will close concurrently with
the completion of the Acquisition.


The proceeds of the private placement will be used together with the Company's
existing working capital to fund the development of the Unit and for general
working capital purposes.


A finders' fee or commission may be paid by the Company in connection with the
financing.


Post-Closing status

On the closing of the Acquisition, Terrace will be classified as a Tier 2 Oil &
Gas issuer by the Exchange and will have, if the maximum private placement is
completed, approximately 40,881,000 common shares and 10,000,000 warrants
outstanding. 


A yet to be determined number of stock options will be granted, in accordance
with the policies of the Exchange, to directors, officers and consultants
concurrently with Closing. 


In addition, the Company will have, if the maximum private placement is
completed, approximately $3.6 million in cash on hand before it incurs the
workover costs contemplated by the LOI. 


Directors, Officers and other Insiders

On completion of the Acquisition, 



--  David Boehm will resign as a director of the Company and William
    McCartney will resign as the chief executive officer and chief financial
    officer of the Company. 

--  Eric Boehnke will be appointed as the chief executive officer and a
    director of the Company. Eric is the president and a director of Big Sky
    Management Ltd., a private company principally involved with providing
    corporate finance and administrative management services to private and
    public companies since 1997. Mr. Boehnke has been a director of several
    public companies and has been financing, both public and private, oil
    and gas opportunities for the past 8 years. 

--  William D. Gibbs will be appointed a director of the Company. He is a
    degreed engineer with over 35 years of domestic and international
    experience in petroleum engineering, operations management and executive
    leadership in the upstream oil and gas exploration and production
    industry. Mr. Gibbs has held senior executive management positions with
    a number of private and public energy companies. 

--  Jennie Choboter will be appointed the chief financial officer of the
    Company. Ms. Choboter is a Chartered Accountant with over 25 years of
    international experience in financial management, mergers and
    acquisitions, and corporate governance. Ms. Choboter has held a number
    of senior financial management positions in a variety of industries,
    including natural resources, insurance, pulp and paper, and technology. 



On completion of the Acquisition, the directors of the Company will be Eric
Boehnke, William D. Gibbs, Bill McCartney and Murray Oliver. The senior officers
of the Company will be Eric Boehnke, chief executive officer, and Jennie
Choboter, chief financial officer. 


Terrace has not engaged the services of a sponsor and intends to seek a waiver
of the sponsorship requirement from the Exchange.


Completion of the transaction is subject to a number of conditions, including
but not limited to, Exchange acceptance and, if applicable pursuant to Exchange
Requirements, majority of the minority shareholder approval. Where applicable,
the transaction cannot close until the required shareholder approval is
obtained. There can be no assurance that the transaction will be completed as
proposed or at all. 


Investors are cautioned that, except as disclosed in the management information
circular or filing statement to be prepared in connection with the transaction,
any information released or received with respect to the transaction may not be
accurate or complete and should not be relied upon. Trading in the securities of
a capital pool company should be considered highly speculative. 


The TSX Venture Exchange Inc. has in no way passed upon the merits of the
proposed transaction and has neither approved nor disapproved the contents of
this press release.


APPROVED BY THE BOARD OF DIRECTORS

Bill McCartney, Director
The Western Investment C... (TSXV:WI)
Graphique Historique de l'Action
De Mai 2024 à Juin 2024