Terrace Energy Announces Third Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 31, 2012) - Terrace Energy Corp. (TSX VENTURE:TZR) (the "Company" or "Terrace") is pleased to announce its financial and operating results for the third quarter ended October 31, 2012.

The Company's interim financial statements and management discussion and analysis for the three and nine months ended October 31, 2012 is available for viewing at www.sedar.com and on the Company's website at www.terraceenergy.net.

Third Quarter Achievements

--  The Company completed and placed into production, on or about October
    17, 2012, two new prospective wells (SP5 #1 and SP5 #2) on its STS Olmos
    project. The Company's share of oil and gas sales from these wells for
    the 14 days ended October 31, 2012 was approximately US$225,000. The
    successful completion of these wells confirmed that the Olmos formation
    extends over 5 miles from the initial discovery well (STS 1-667). The
    Company has a 33% working interest and 25% net revenue interest in the
    two new wells.

--  The Company successfully developed a pipeline of new prospective oil and
    gas projects. The Company's technical team completed initial due
    diligence on several of such projects during the quarter and, subsequent
    to October 31, 2012, the Company successfully negotiated and was granted
    an option to acquire an 82% working interest and a 65.6% net revenue
    interest in the development of mineral leases that cover approximately
    15,000 net acres in Finney County, Kansas. Such leases include the right
    to explore and exploit the coveted Mississippi Lime Formation. (see the
    Company's press release dated December 21, 2012 for full details). 

Third Quarter Highlights

--  Total revenues from oil and gas sales for the quarter and for the nine
    months were approximately $332,000 and $1,090,000 respectively. 
    
--  The net loss for the quarter was approximately $212,000, after the
    deduction of non-cash expenses in the aggregate amount of $245,000. 
    
--  The net loss for the nine months was approximately $240,000, after the
    deduction of non-cash expenses of $390,000. 
    
--  The Company's aggregate share of production from all three of its wells
    for the nine months ended October 31, 2012 was approximately 10,492
    barrels of oil and liquids at an average price of USD $96.59 per barrel
    and 9.7 million cubic feet of natural gas at an average price USD $2.64
    per million cubic feet. STS 1-667 operated for 265 days during the
    period and SP5 #1 and SP5 #2 operated for approximately 14 days. 

Other Matters

Two prospective wells on the Company's Cutlass project were drilled to targeted vertical depths and a horizontal leg was completed on one of the wells during the second quarter. The Company is pleased with the technical information gathered to-date. The project operator has developed a fracture stimulation plan for one of the wells, which has now been scheduled for the first quarter of 2013.

Eric Boehnke, the Company's Chief Executive Officer commented: "We are very pleased with the success of the STS Olmos project to-date and with our team's ability to generate new very prospective projects for future development. We are looking forward to placing the near completed well on the Cutlass project into production as soon as practical and further developing the potential of the field."

Financial Summary

The Company generated oil and gas revenues of $332,000 and a loss of $212,000 ($0.00 per share) and revenues of $1,090,000 and a loss of $240,000 ($0.00 per share) for the three and nine months ended October 31, 2012 respectively.

As at October 31, 2012:

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Cash                                                         $     1,511,632
Exploration and evaluation assets                            $     6,355,442
Property and equipment                                       $     7,138,716
Total assets                                                 $    15,697,145
Total Liabilities                                            $       291,610
Total Equity                                                 $    15,405,535
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Outlook

It is expected that production volumes from the Company's first well (STS 1-667) will remain stabilized over the next several quarters. The Company's second and third wells (SP5 #1 and SP5 #2) will continue to generate flush production during the fourth quarter before experiencing a normalized decline in production volumes. The Company is finalizing its 2013 development schedule for the STS project with its operating partner. The Company expects to complete and bring into production one well on its Cutlass project during the first quarter of 2013. The Company's additional development plans, which are presently being considered, are dependent upon its ability to generate profitable cash flow from operations and secure additional capital as required, neither of which is assured.

About Terrace Energy

Terrace Energy is an oil & gas development stage company that is focused on unconventional oil extraction in onshore areas of the United States. It currently has non-operating investments in two principal properties situated in Texas with targets in the "Olmos" and "Eagle Ford" formations and an option to acquire and develop, as operator, targets in the "Mississippi Lime" formation.

ON BEHALF OF THE BOARD OF DIRECTORS

Eric Boehnke, Chief Executive Officer

Forward-Looking Information:

This press release includes "forward-looking information", including the revenue to be received from the Company's wells and the time when the Company receives that revenue, the production rate of that well, the timing of exploration drilling and the potential for the Company's projects to support additional drilling locations. Users of forward-looking information are cautioned that actual results may vary from the forward-looking information disclosed in this press release. The material risk factors that could cause actual results to differ materially from the forward-looking information contained in this press release include, lack of availability of goods and services, regulatory changes and all of the other risks and uncertainties normally associated with the exploration for and development and production of oil and gas. The forward-looking information contained in this press release represents management's best judgment of future events based on information currently available. The material assumptions used to develop the forward-looking information include: that necessary goods and services will be available on reasonable terms, that regulatory requirements will not change in any material respect and that other aspects of the Company's operations will not be affected by unforeseen events. The Company does not assume the obligation to update any forward-looking information, except as required by applicable law.

FOR FURTHER INFORMATION PLEASE CONTACT:
Terrace Energy Corp.
Eric Boehnke
Chief Executive Officer
604-687-0888
Terrace@terraceenergy.net
www.terraceenergy.net