Terrace Energy Corp. reported on initial production results from its first multi-well pad drilling program on its STS Olmos Development Project in McMullen and LaSalle Counties, Texas. The company and its partner recently completed three horizontal wells with an average lateral length of approximately 5,500 feet in the Olmos Sandstone Formation.

The STS #3-6H and the STS #2-6H, were each completed with 22 stages, and the STS #1-6H was completed with 15 stages, of hydraulic fracture stimulation using a "zipper frac" technique. The wells were connected to permanent production equipment prior to flow back operations and production was initiated on December 31, 2014 with all production going directly to sales. The wells showed oil within the first few hours of testing and have produced over 12,000 barrels of oil to date.

The wells are currently producing at moderate oil rates on tight chokes in order to allow the fractures to heal carefully, optimize long term flow rates and manage logistical issues resulting from inclement weather and poor road conditions. Current production rates after seven days of testing and only ~3% load recovered are as: STS #1-6H 483 BOPD, 543 MCFD (600 BOEPD) - STS #2-6H 589 BOPD, 858 MCFD (732 BOEPD) - STS #3-6H 643 BOPD, 765 MCFD (770 BOEPD). The company will continue to monitor the flowback operations over the next few weeks and make further determinations on optimum choke sizes going forward as load recovery continues and gas-oil ratios stabilize.

The company intends to follow up this report with 30 day IP rates when appropriate. Progress also continues, as planned, on the overall development of the project. As previously reported, all three wells on the second multi-well pad, the STE Section 5 pad in LaSalle County have been successfully drilled and cased in the Olmos Formation with lateral lengths averaging 5,400 feet.

These wells are scheduled to be completed using the same zipper frac technique used on the initial Section 6 pad. Completion equipment has been contracted and is expected in the field in late January. Drilling operations are currently underway on the third pad, the STS section 605 pad, in McMullen County.

Surface pipe has been set on all three wells situated on this pad to a depth of approximately 5,160 feet. The rig is currently drilling ahead on the STS#3-605H. The company plans to maintain a single rig program for 2015 and continue to drill three-well pads in order to optimize the cycle from first capital to first production.

The company's capital commitments for all activities required on the STS Olmos Development Project are fully funded under its previously announced $75 million development drilling facility. The company, through its wholly owned subsidiary Terrace STS, LLC, holds a 27% working interest in the project.