Final Results

RNS Number : 7512H
Nostra Terra Oil & Gas Company PLC
22 May 2014
 



22 May 2014

 

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

 

Final Results for the year ended 31 December 2013

 

Highlights

 

•         142% increase in revenue to £851,000 (2012: £352,000)

 

•         Gross profit of £526,000 before depletion, depreciation and amortisation (2012: £192,000)

 

•         Acquired 5% interest in High Plains exploration play then increased interest to 20%

 

•         Raised £750,000 via placing

 

•         Successfully concluded legal action against Richfield Oil & Gas, in a judgement exceeding US$1.6 million

 

Post balance sheet highlights

 

•         US$25 million credit facility with Texas Capital Bank

 

•         Credit facility borrowing base more than doubled ahead of schedule

 

•         Final payment received in respect of Richfield legal action

 

•         Daily production expected to reach 150 boepd by Q3

 

Matt Lofgran, Chief Executive Officer of Nostra Terra, commented:

 

"Our commitment to adding production and therefore cash generation continued at a pace in 2013 as we became more involved in the Chisholm Trail prospect through the year. Good results from the outset at Chisholm Trail continued with every well brought into production surpassing our initial expectations. While our other producing wells continue to generate revenue, the Chisholm Trail prospect has led to considerable growth in revenue and allowed us to begin reinvesting free cash flow in our expansion going forward."

 

"Securing the $25m credit facility with Texas Capital Bank will help us to pursue further substantial growth beyond that seen from Chisholm Trail to date."

 

 

 

The Company confirms that its annual general meeting ("AGM") will be held at 11:00am on 18 June 2014 at The Library, Travellers Club, 106 Pall Mall, London SW1Y 5EP. Notice of the AGM is being posted to shareholders today, together with a copy of the full report and accounts. A copy of the report and accounts will also be available to download later today from Nostra Terra's website at www.ntog.co.uk 

 

 

For further information, visit www.ntog.co.uk or contact:

 

Nostra Terra Oil and Gas Company plc

Matt Lofgran, CEO

mlofgran@ntog.co.uk

Telephone: +1 480 993 8933



Northland Capital Partners Limited

(Nominated Adviser)

Matthew Johnson / Lauren Kettle

Telephone: +44 (0) 20 7382 1100



Hume Capital Securities plc

(Broker)

Jon Belliss / Abigail Wayne

Telephone: +44 (0) 20 3693 1470



Lothbury Financial Services Limited

Gary Middleton / Michael Padley

Telephone: +44 (0) 20 3440 7620

 



 

Chairman's Statement

 

I am pleased to present the annual report and accounts of Nostra Terra Oil and Gas Company plc for the year ended 31 December 2013. This was a busy and positive year. Significantly, Nostra Terra passed the operational breakeven point, before central costs, depletion, depreciation and amortisation, for the first time in the company's history. We also maintained our strategy of carefully considered growth and significantly increased both production and revenue. 

 

Exploration and production

In the year we made several sensibly judged investments in existing and new fields. More details can be found in the Chief Executive's review on page 4. We continued to build a diverse and balanced portfolio and extended our geographical footprint in line with our stated strategy of finding new hydrocarbon reserves in 'old fields'. Our portfolio is being structured to provide a spread of strong and reliable long-term revenues, and in 2013 we added to its depth.

 

Financial highlights

 

I am delighted to report that in 2013 our revenues grew to £851,000 from £352,000 in 2012 - an increase of 142%. During the period we completed a single placing, raising £750,000 at a small discount of just 10%, a fantastic result given the extremely difficult conditions in the UK corporate market at the time. Furthermore, our protracted litigation with Richfield finally reached a successful conclusion, giving us cash to invest without further dilution to shareholders. More recently we also secured a US$25 million credit facility with the highly regarded Texas Capital Bank. This extends our ability to quicken the pace of growth and also gives us the strength and agility to take advantage of the right opportunities when they present themselves.

 

Summary

 

Nostra Terra made considerable progress throughout 2013, thanks in large part to the exemplary efforts of our executive directors, Matt Lofgran and Alden McCall, who I thank. I also want to acknowledge Nostra Terra's shareholders for their enduring loyalty to our company.

 

Sir Adrian Blennerhassett

Chairman

 

 

Chief Executive's Review

 

Nostra Terra is a UK-based oil and gas producer with interests in Texas, Oklahoma, Colorado and Kansas. We aim to increase shareholder value by using advanced technology to find new hydrocarbon reserves in already established fields. Our strategy is to put a diverse portfolio of interests in place in low-risk geographies that will consistently grow production and revenues. To this end, 2013 saw the company make steady progress. We extended our portfolio; we significantly increased the volume of production; and we finally settled a long-running legal action. The year placed Nostra Terra in a very strong cash position and has set us up for further more accelerated growth in 2014.

 

Extending our portfolio

 

In 2012 we acquired a 20% interest in the Chisholm Trail Prospect in Oklahoma, assessing it as low-risk and moderate-return. This is exactly what it has turned out to be. Our investments here were consistently successful in 2013, yielding excellent results and justifying our decision to concentrate resources on Chisholm Trail.

 

Revenues from the first four wells helped us pass the landmark of operational breakeven, before central costs, in January 2013. In particular well CT4 more than doubled our expectations. We decided to exploit the Chisholm Trail opportunity further by partnering in additional wells and in mid-year we acquired additional acreage, giving us access to 21 new potential drilling locations.

 

Subsequently we've made investments in a further 11 wells to date, bringing the total up to 15 wells. The three new wells that are producing already - CT7, CT8 and CT9 - have increased our total daily production by 57%.

 

Chisholm Trail continues to allow room for growth and we expect it to yield further significant increases to our net production. It already supplies an extremely valuable revenue stream that supports our ability to pursue other opportunities. Moreover the strength of activity and results have de-risked the Hunton Limestone formation where the Chisholm Trail Prospect is located, and this helped us attract new investment (see Financials below).

 

In March 2013, we identified an opportunity in Texas with similar potential to Chisholm Trail, and purchased a 5% working interest ("WI") in the High Plains Prospect. This Prospect covers 66 square miles, and is operated by Brown and Borelli, a highly experienced and respected firm.

 

We subsequently increased our interest to 20% following re-entry of a previously drilled well in the prospect. Work is now ongoing to integrate detailed subsurface mapping and 3D seismic data that will prioritize the prospect areas for drilling. We have assessed High Plains as being more risky than Chisholm Trail, but with the potential for higher rewards. In fact the dependable revenue streams from Chisholm Trail mean we are more comfortably positioned to enter into higher-risk opportunities to strengthen our portfolio. Meanwhile, the geophysical results indicate that High Plains might provide the opportunity to build a healthy pipeline of drilling locations for some years to come.

 

Net production in 2013

 

With the expansion of our portfolio, net production to Nostra Terra has risen as detailed in the following table.

 

Prospect

State

NTOG operated

Working interest

Net production (BOE)

2013

2012

Bloom

Kansas

Yes

100%

1,645

3,192

Vintage Hills

Texas

No

1%

-

8

Nesbitt

Texas

No

3%

73

106

Verde

Colorado

No

16%

1,426

2,088

Warrior

Oklahoma

No

10%

199

331

Bale Creek

Oklahoma

No

30%

929

331

Chisholm Trail

Oklahoma

No

varies

13,401

212

High Pains

Texas

No

20%

-

-







Total




17,673

6,268

 

Financials

 

As the chairman said, in 2013 Nostra Terra's revenue grew considerably to £851,000 in 2013, against £352,000 in 2012, due to greatly increased production volumes. This represents an increase of 142%. Gross profit (before depletion, depreciation and amortisation) increased to £526,000, against £192,000 in 2012. 

 

In respect of capital, Nostra Terra raised £750,000 before expenses by way of a placing of 187,500,000 new ordinary shares of 0.1p each with existing and new investors.

 

I am very pleased to report that the legal action against Richfield Oil and Gas Company was finally resolved in Nostra Terra's favour and the monies owing to us were paid. In all we received over US$1.6 million. Richfield has also voluntarily dismissed all counterclaims against Nostra Terra.

 

After the balance sheet date we also secured a US$25 million credit facility with Texas Capital Bank, which includes provisions to increase the borrowing base as additional wells are brought on production. We agreed an initial borrowing base of US$500,000 which has increased to $1.1 million following a stabilisation of production rates, as announced on 7 May 2014. This strong credit line will give us the ability to quicken the pace of growth through non-dilutive funds.

 

An exciting future

 

We achieved a great deal in 2013. We made careful decisions to expand our interests in the lucrative Chisholm Trail Prospect and diversify into High Plains, broadening our production base. We increased revenue, with our focus now on free cash flow so that we can support more rapid growth in 2014 and beyond.

 

In the background we have also been building up our operational capabilities to prepare Nostra Terra for a transition towards operating more of our own prospects. We have an exciting future as we look to take much larger steps in growing production and reserves. A very solid foundation has been built from which to accelerate growth.

 

It only remains for me to thank all Nostra Terra's shareholders for their continuing loyal support. I look forward to giving you regular good news about our company in the months ahead.

 

Matt Lofgran

Chief Executive Officer

 



 

Consolidated income statement for the year ended 31 December 2013

 


Notes

2013

2012



£000

£000





Revenue


         851

        352





Cost of sales




Production costs


(195)

(158)

Exploration and appraisal


(130)

(2)

Depletion, depreciation and amortisation


(976)

(102)





Total cost of sales


       (1,301)

         (262)





GROSS (LOSS) / PROFIT


(450)

90

Share based payment


(4)

       (115)

Administrative expenses


       (1,052)

         (876)





OPERATING LOSS

4

(1,506)

(901)





Finance income

3

62

          89

Finance expense

3

(110)

(28)





LOSS BEFORE TAX


     (1,554)

       (840)





Tax (expense) recovery

5

-

-





LOSS FOR THE YEAR


(1,554)

(840)

Attributable to:




Owners of the company


(1,554)

(840)





Earnings per share expressed in pence per share:




Continued operations




Basic and diluted (pence)

6

(0.059)

(0.039)







 

Consolidated statement of comprehensive income for the year ended 31 December 2013

 


2013

2012


£000

£000

Loss for the year

(1,554)

(840)




Other comprehensive income:



Currency translation differences

102

(40)




Total comprehensive income for the year

(1,452)

(880)




Total comprehensive income attributable to:



Owners of the company

(1,452)

(880)




 

Consolidated statement of changes in equity for the year ended 31 December 2013

 


Share capital

Share premium

Share options reserve

Translation reserves

Retained losses

Total


£000

£000

£000

£000

£000

£000








As at 1 January 2012

1,950

8,401

-

12

(6,905)

3,458

Shares issued

 

515

 

   773

 

-

 

-

 

-

 

1,288

Share issue costs

-

  (70)

-

-

-

  (70)

Foreign exchange translation

-

-

-

(40)

-

(40)

Loss after tax for the year

-

-

-

-

(840)

(840)

Share based payments

-

-

115

-

-

115








As at 31 December 2012

2,465

9,104

       115

         (28)

(7,745)

3,911








Shares issued

 

311

 

942

 

-

 

-

 

-

 

    1,253

Share issue costs

-

(55)

-

-

-

(55)

Foreign exchange translation

-

-

-

 102

-

 102

Loss after tax for the year

-

-

-

-

       (1,554)

       (1,554)

Share based payments

-

-

4

-

-

4








As at 31 December 2013

2,776

9,991

119

74

(9,299)

3,661








 



 

Consolidated statement of financial position as at 31 December 2013

 


2013

2012


£000

£000




ASSETS



NON-CURRENT ASSETS



Goodwill

-

-

Other intangibles

2,938

3,393

Property, plant and equipment



-    Oil and gas assets

489

468





3,427

3,861




CURRENT ASSETS



Trade and other receivables

253

1,089

Prepayments and accrued income

        290

65

Cash and cash equivalents

371

309





914

1,463




LIABILITIES



CURRENT LIABILITIES



Trade and other payables

336

815

Financial liabilities - borrowings

344

598





680

1,413




NET CURRENT ASSETS

       234

50




NET ASSETS

3,661

3,911




EQUITY AND RESERVES



Called up share capital

2,776

2,465

Share premium

9,991

9,104

Translation reserves

74

(28)

Share option reserves

119

115

Retained losses

(9,299)

(7,745)





3,661

3,911




 



 

Consolidated statement of cash flows for the year ended 31 December 2013

 


2013

2012


£000

£000




Cash flows from operating activities






Cash generated/(consumed) by operations

61

68




Cash generated/(consumed) by operations

61

68




Cash flows from investing activities






Purchase of intangibles - new oil and gas properties

(578)

(2,215)

Purchase of plant and equipment

(116)

(308)

Interest received

-

89




Net cash from investing activities

(694)

(2,434)




Cash flows from financing activities



Issue of new shares

695

1,218

New borrowing (net)

-

-




Net cash from financing activities

695

1,218




Increase/(decrease) in cash and cash equivalents

62

(1,148)




Cash and cash equivalents at beginning of year

309

1,457




Cash and cash equivalents at end of year

371

309




Represented by:



Cash at bank

371

309




 

Note to the consolidated statement of cash flows for the year ended 31 December 2013

 

Reconciliation of loss before tax to cash generated from operations

 


2013

2012


£000

£000




Loss before tax for the year

       (1,554)

(840)

Depreciation of property, plant and equipment

84

62

Amortisation of intangibles

          806

41

Well impairments

105

-

Foreign exchange loss/(gains) non-cash items

   86

(40)

Finance income

-

(89)

Share based payments

-

115




Operating cash flows before movements in working capital

(321)

(751)




Decrease/(increase) in receivables

611

(170)

Increase/(decrease) in payables

       (229)

989




Cash (consumed) by continuing operations

        61

68




 



 

Notes to the financial statements for the year ended 31 December 2013

 

1. GENERAL INFORMATION

 

Nostra Terra Oil and Gas Company plc is a company incorporated in England and Wales and quoted on the AIM market of the London Stock Exchange. The address of the registered office is disclosed on the company information page of the annual report. The principal activity of the group is described in the directors' report in the annual report.

 

2. BASIS OF PREPARATION

 

These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.

 

The financial information set out in this announcement does not constitute statutory accounts as defined in the Companies Act 2006, but has been extracted from the relevant audited financial statements. The financial statements for the year ended 31 December 2012 have been delivered to the Registrar of Companies and those financial statements for the year ended 31 December 2013 are expected to be delivered to the Registrar of Companies shortly.

 

Depletion, amortisation and impairment of oil and gas assets

 

All expenditure carried within each field is amortised from the commencement of production on a unit of production basis, which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus the production in the period, on a field-by-field basis. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future field development costs to access the related commercial reserves. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively.

 

Where there has been a change in economic conditions that indicates a possible impairment in an oil and gas asset, the recoverability of the net book value relating to that field is assessed by comparison with the estimated discounted future cash flows based on management's expectations of future oil and gas prices and future costs. Any impairment identified is charged to the income statement as additional depletion and amortisation. Where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the income statement, net of any depreciation that would have been charged since the impairment.

 

3. FINANCE INCOME/EXPENSE

 


2013

2012


£000

£000




On bank balance

-

-

On other receivables

62

89

Finance expense

(110)

(28)





(48)

61




 

4. OPERATING LOSS FOR THE YEAR

 

The operating loss for the year is stated after charging/(crediting):

 


2013

2012


£000

£000




Auditors' remuneration (Company £16,500 - 2012: £18,300)

17

17

Depreciation of property, plant and equipment

84

62

Amortisation of intangibles

806

41

Well impairment

86

-

Foreign exchange differences

208

127

Disposal of exploration and evaluation assets

105

-




The analysis of administrative expenses in the consolidated income statement by nature of expense:

 


2013

2012


£000

£000




Directors' remuneration

283

195

Social security costs

15

14

Directors' fees

32

36

Travelling and entertaining

92

99

Legal and professional fees

274

305

Auditor's remuneration

17

17

Foreign exchange differences

208

127

Other expenses

199

83





1,036

876




 

5. INCOME TAX EXPENSE

 

The tax charge on the loss for the year was as follows:

 


2013

2012


£000

£000




Current tax:



Corporation tax

-

-

Overseas corporation tax/(recovery)

-

-




Total

-

-




 

 


2013

2012


£000

£000




Loss before tax

(1,554)

(840)




Loss on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 24% (2012: 24%)

(374)

(202)

Effects of:



Non-deductible expenses

309

43

Other tax adjustments

64

159

Foreign tax

-

-





373

202




Current tax charge

-

-




 

At 31 December 2013 the group had excess management expenses to carry forward of £1,127,730 (2012: £1,096,090) and trading losses of £1,564,940 (2012: £1,330,990). The deferred tax asset at 24% (2012: 24%) on these tax losses of £646,240 (2012: £582,499) has not been recognised due to the uncertainty of recovery.

 

6. EARNINGS PER SHARE

 

The calculation of earnings per ordinary share is based on earnings after tax and the weighted average number of ordinary shares in issue during the year. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The group had two classes of dilutive potential ordinary shares, being those share options granted to employees and suppliers where the exercise price is less than the average market price of the group's ordinary shares during the year, and warrants granted to directors and one former adviser.

 

Details of the adjusted earnings per share are set out below:

 


2013

2012

EPS - loss

£000

£000




Loss attributable to ordinary shareholders (£000)

(1,554)

(840)

Weighted average number of shares

2,647,751,184

2,158,226,692

Continued operations:



Basic and diluted EPS - loss (pence)

(0.0059)

(0.056)




 

The diluted loss per share is the same as the basic loss per share as the loss for the year has an antidilutive effect.

 


2013

2012


£000

£000




Gross profit before depreciation, depletion and amortisation

526

192

EPS on gross profit before depletion, depreciation and amortisation

0.020

0.009





2013

2012


£000

£000

Reconciliation from gross loss to gross profit before depletion, depreciation and amortisation



Gross (loss)/profit

(450)

90

Add back:



Depletion, depreciation and amortisation

976

102




Gross profit before depreciation, depletion and amortisation

526

192




 

7. RELATED PARTY TRANSACTIONS

 

Group

 

As disclosed last year £502,750 of shares were advanced to the group by Matt Lofgran to be held in escrow by Yorkville (YA Global) on behalf of New Horizons One LLC. On 4 October 2013 this was settled by the transfer of 83,956,296 shares to Matt Lofgran by YA Global.

 

Company

 

During the year, the company advanced loans to its subsidiaries. The details of the transactions and the amount owed by the subsidiaries at the year-end were:

 


2013

2012


Balance

Loan advance / repayment

Balance

Loan advance / repayment


£000

£000

£000

£000






New Horizon Energy 1 LLC

5,515

(91)

5,606

1,955

Goldhawk Oil & Gas, LLC

815

(46)

861

-

Churchill Operating, LLC

-

-

-

-

Nostra Terra (Overseas) Limited

7

-

7

-






Totals

6,361

136

6,474

1,955






 

The intercompany loans are unsecured and interest-free.

 

8. EVENTS AFTER THE REPORTING PERIOD

 

On 3 February 2014 Nostra Terra entered into a US$25 million credit facility ("Facility') with Texas Capital Bank ("Bank"). The new Facility contains both a three year Revolving Credit Facility and a Standby Letter of Credit Facility with an initial nominal limit of US$25 million. Interest is charged on monies drawn down at the current rate of 4.25% (determined by the higher of either: the sum of the Wall Street Journal Rate plus 1% or 4.25%). The current borrowing base is US$1.1 million.


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