SINGAPORE, SINGAPORE--(Marketwired - Jan. 25, 2016) - Terra Nova Energy Ltd. ("Terra Nova" or the "Company") (TSX VENTURE:TGC)(OTCQX:TNVMF) is pleased to provide its year-end letter to shareholders from Chairman and CEO, Henry Aldorf:
As we begin 2016 I would like to reflect on the past year and our future plans given the significant changes in our industry over the last 18 months.
To begin I would like to address our recent well, Baikal-1. On December 9, 2015 we disclosed that we had drilled through the Mid-Birkhead channel system as was predicted by our seismic interpretation, and that the well was on time and under budget. Disappointingly, no hydrocarbons were encountered. It was however a 'technical' success as the channels interpreted from the seismic data, were intersected by the wellbore, however they were not hydrocarbon charged.
Many successful wells have been drilled in the adjacent region, suggesting that one unsuccessful well in PEL 444 should not condemn the prospectivity of the entire1168 sqkm PEL 444 block. The well results from Baikal #1 will now be incorporated into quantitative reservoir studies to further improve our exploration model and further reduce uncertainty related to reservoir fluids prediction.
Significant milestones were achieved in 2015 and it's important to reviewthe year in this context.
- We proved the existence of the Mid-Birkhead channel system with the Baikal-1 well following an extensive geological and geophysical ("G&G") assessment.
- Baikal-1 was an obligation well for PEL 444. As a result of the Baikal-1 obligation well, the PEL 444 concession is in good standing for another five years with only one commitment well required by year 5 (the end of 2020), PEL 112 is also in good standing for another three years with only one well commitment by year 3 (the end of 2018).
- We terminated an ineffective commercial agreement with Holloman Energy Corporation ("HENC"), which was entered into during a peak in the oil and gas market. If we had not cancelled this agreement, we would have borne the full cost and 100% of the exploration risk of the Baikal-1 obligation well and substantially compromised our cash position. As a result of cancelling the agreement, we reduced our expenditure significantly, funding only 20% of the recent well.
- With shareholder support the incumbent management team defeated a dissident shareholder challenge for management of the Company at our Annual General Meeting. We believe the dissident challenge was triggered at least in part by our termination of the commercial agreement with HENC.
- We sold a 5.166% interest in both PEL 444 and PEL 112 for $3 million at very favourable terms considering the industry environment which reduced our risk and secured the capital for the future.; and
- We preserved our cash and took measures to further reduce our costs going forward so that we are now in a good position to fund future campaigns and capitalize on opportunities.
The Oil Market
Crude prices are plunging to fresh multi-year lows as rising volatility in the Chinese stock market and further slowdown in the Chinese economy triggered concerns regarding demand, which suggests prices will continue to be depressed amid a growing global surplus. Additionally the lifting of sanctions on Iran and its entry once again into the global oil market, will increase the time required to get supply and demand back into equilibrium. However, the approximately $400 billion in capex reductions, cancellation of projects and the reduction in US shale oil production will eventually have an important effect on supply in the years to come.
It is clear that the energy companies that survive this crisis will be the ones who cut costs, preserve their cash, and have balance sheets with low debt ratios, allowing them to continue operating, albeit at a much reduced rate until oil and gas prices rebound.
Our Future: 2016 and beyond
In PEL 444 we will continue the extensive geological and geophysical assessment and this work will include our latest and new regional data with intent to reduce risk where possible so that we can best maximize value to shareholders.
In PEL 112 we will continue our geological and geophysical modelling and interpretation to derisk and rank the potential targets we have identified.
In summary, we are well funded, have no debt, continue to effectively manage our costs and are well positioned for the future. We will take all learnings from the Baikal-1 well and apply these going forward. As a shareholder I remain optimistic about our future and the opportunities it holds. Although low oil prices are currently frustrating world markets, this challenge may provide additional opportunities, both in Australia and overseas, for well-funded, well managed companies like Terra Nova Energy Ltd.
About Terra Nova Energy Ltd.
Terra Nova Energy Ltd. is an oil and gas company with a 20.66% working interest in two onshore petroleum exploration licenses ("PELs"), being PEL 112 and PEL 444, located on the western flank of the Cooper Eromanga Basin in the State of South Australia, Australia. Its common shares trade on the TSX Venture Exchange under the symbol "TGC" and its ordinary shares trade in the U.S. on the OTCQX marketplace under the symbol "TNVMF."
This news release contains forward-looking information relating to Terra Nova's intentions to conduct the drilling programs and other statements that are not historical facts. Such forward-looking information is subject to important risks and uncertainties that could cause actual results to differ materially from what is currently expected, for example: risks related to oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, competition from other producers, inability to retain drilling rigs and other services, reliance on key personnel, and insurance risks. Findings by other oil and gas issuers does not necessarily indicate that Terra Nova will be successful in making such findings in the Western Flank. In making such forward-looking statements, Terra Nova has relied upon certain assumptions relating to geological settings, commodity prices, the stability of markets and currencies and the availability of capital to Terra Nova in order to continue with the seismic and drilling programs. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While Terra Nova may elect to, Terra Nova is under no obligation and does not undertake to update this information at any particular time, except as required by applicable securities law.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.