Further re HPI Agreement

RNS Number : 8978E

Nostra Terra Oil & Gas Company PLC

14 April 2011

 



Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Further re HPI Agreement

Nostra Terra, the AIM oil and gas producer with projects in the USA, is pleased to announce that on 13 April 2011 it entered into a further agreement with Hewitt Petroleum, Inc. (now Richfield Oil & Gas Company) and Hewitt Energy Group, Inc. (together the "HPI Entities") (the "Revised Agreement"), replacing the agreement announced on 5 January 2011 (the "Original Agreement") which lapsed unclosed.

The principal terms of the Revised Agreement, which on closing will lead to termination of the operational relationship between the Company and the HPI Entities, are as follows:

·   Nostra Terra will acquire 100% working interest (WI) in, and assume operatorship of, the producing Bloom property;

·   Nostra Terra's existing 75% WI before payout (50% WI after payout) in the Boxberger property, where operations remain suspended pending the resolution of title issues, will be assigned to the HPI Entities;

·   Nostra Terra will assign to the HPI Entities its interests in all other HPI-operated assets (including Hoffman, the undeveloped adjoining acreage within the Trapp field and the Koelsch property) and the Liberty #1 exploration well;

·   Nostra Terra will receive a USD1.3 million note to be secured by other assets of the HPI Entities (the "HPI Note"). The HPI Note will mature on 31 December 2011 and accrue interest at 10% per annum.  An early settlement discount of 3% per 30 day period prior to the maturity date is available to the HPI Entities;

·   In the expectation that HPI's successor, Richfield Oil & Gas Company ("Richfield") will become publicly traded prior to the expiration of the HPI Note, Nostra Terra will have the right, but not the obligation, to convert the principal amount outstanding under the HPI Note into shares of Richfield at USD0.25 per share; and

·   Richfield has issued Nostra Terra a Warrant, exercisable in whole or in part, to subscribe for up to 6 million shares of Richfield common stock with an aggregate exercise price of USD1.5 million  at a strike price of USD0.25 per share, expiring one year after admission to trading on the Toronto Stock Exchange or the TSX Venture Exchange. The warrant will be transferable, subject to the provisions of the US Securities Act.

The Revised Agreement is subject to a maximum 30 day closing period, however is contemplated to close less than 1 week following execution of this agreement.  The Company will make a further announcement to confirm closure.

Under the Original Agreement, NTOG was to have acquired the HPI interests in Boxberger and the maximum cash receivable was to have been USD1.2 million payable within 180 days of closing.  There was to have been no ability to acquire shares in a publicly traded entity through the exercise of warrants or otherwise.  The NTOG Board believes that these changes to the Original Agreement are beneficial to the Company.

The Company's net monthly production in barrels of oil equivalent (boe) (75% working interest before payout, after royalties of approximately 20% but before operating expenses) from the producing Bloom property for the first quarter of the current year was:

Month	boe
January 2011	317
February 2011	302
March 2011	324

Matt Lofgran, CEO of Nostra Terra, commented: 

"I am very pleased that we have agreed revised terms with HPI, and believe these revisions represent a more positive outcome than before for our shareholders. I look forward to announcing closure and continue to believe there is scope, under our operatorship, to improve the productivity of the Bloom property.

"The two Austin Chalk wells in Texas where the Company has interests (Vintage Hills - 1.0% and Giddings 2.0%) are both performing to our expectations, and drilling of the first horizontal well on the promising Nesbitt prospect (NTOG: 3.0%), also in Texas, is underway.

Nostra Terra will now focus attention on pursuing its long-term growth strategy, the acquisition of larger interests in established reservoirs capable of delivering strong cash flow and increased payout."

Alden McCall, COO of Nostra Terra, added:

"Our emphasis on applying horizontal drilling technology, where appropriate in established reservoirs, will yield greater cash flows and higher rates of return than conventional vertical wells".

14 April 2011

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

Nostra Terra Oil and Gas Company plc

Matt Lofgran, CEO

[e-mail]                                                       Telephone: [phone]

Religare Capital Markets

Peter Trevelyan-Clark/Ben Jeynes                                   Telephone: [phone]

Alexander David Securities Ltd

David Scott / Bill Sharp                                                     Telephone: [phone]

Lothbury Financial Services Limited

Gary Middleton / Michael Padley                                       Telephone: [phone]

Announcements made by the Company are available automatically by email to those who register at www.ntog.co.uk.

 

END

 

 

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