Terax Energy Provides a Corporate Update and Plans for a Stock Consolidation.

DALLAS -- Terax Energy Inc. (OTCBB:TERX) announces plans to reduce its outstanding and authorized share capital on a 20 to 1 ratio. Terax currently has 60,591,529 common shares outstanding. After the reverse split, Terax will have 3,029,577 common shares outstanding and 15,000,000 shares authorized. The purpose of the consolidation is to improve Terax's ability to attract additional equity or debt capital. Lawrence Finn, President, and Chief Executive Officer says, "It has been very difficult to attract additional equity or debt at the Company's current low stock price". The reverse split will be effective January 29, 2007 and Terax's new quoted symbol will be TEXG.

Terax continues to work on various alternatives to resolve its current financial problems. These alternatives include the sale of new equity or debt securities, joint ventures with other operating companies, the sale of some or all of its assets or a merger with another company. In addition to its unsecured obligations, Terax's $2.5 million secured note became due on December 31, 2006. For a more detailed description of the Terax financial situation we suggest that interested parties refer to Terax's most recent filings with the Securities and Exchange Commission.

In October 2006, Terax listed its acreage holdings in Comanche County for sale with PLS, Inc., and in December 2006, Terax's Erath County assets were listed for sale.

The Company has oil and gas leases of 16,200 gross acres in Comanche County and 11,300 gross acres in Erath County. Terax has drilled six and completed four horizontal wells in Erath County. The Company also installed approximately eight miles of eight-inch and four miles of six-inch and four-inch steel gathering lines for the four completed wells. The gathering lines were connected to the Louis Dreyfus Pipeline and two compression facilities were installed to deliver natural gas to the sales point.

In August 2006, Terax was forced to shut in its best well the Mitchell 3H well due to a large amount of water production. As a result of shutting in the 3H well, the Mitchell 4H well was shut in a short time later. In September 2006, Terax shut in its Mitchell 1H and 2H wells due to its financial difficulties. The Company does not plan to restart production of its wells until its financial situation is resolved. Prior to being shut in, the four completed wells were producing approximately 900 MCF per day, had casing head pressures of 800 to 300 pounds per inch, and flowing tubing pressures of 300 to 70 pounds per square inch.

About Terax Energy

Terax Energy Inc. (OTCBB:TERX) is an independent gas exploration, development and production company, headquartered in Dallas. The sole focus for Terax is the optimal exploitation and development of approximately 27,500 gross acres in two mostly contiguous blocks, consisting of prospective Barnett Shale development acreage located in Erath and Comanche Counties, Texas. For more information, visit www.teraxenergy.com.

Information Regarding Forward-Looking Statements:

Except for historical information contained herein, the statements in this Press Release are forward-looking statements that are made pursuant to the safe harbor provisions in the Private Securities Legislation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Terax's actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things: volatility of natural resource prices; product demand; market competition and risks inherent in Terax's operations. These and other risks are described in Terax's Annual Report or Form 10-K and other filings with the Securities and Exchange Commission.