Update on Pine Mills Farmout

RNS Number : 8888P
Nostra Terra Oil & Gas Company PLC
15 June 2020
 

15 June 2020

 

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

 

Update on Pine Mills Farmout

 

Nostra Terra (AIM: NTOG), the oil & gas exploration and production company with a portfolio of development and production assets in Texas, USA, is pleased to provide an update regarding the farmout of a portion of Pine Mills as announced by the Company on 22 April 2020.

 

Highlights

· Company has elected to increase its Working Interest ("WI") in the farmout area to 32.5%, of which 25% is carried at no cost to Nostra Terra

· Board has reviewed the technical data of the farmout area provided by the farminee and finds it attractive

· Continued positive engagement with Washington Federal Bank over a potential increase in facility size

· Scope for further increase in production in remaining acreage, as well as potential for farm-out of additional undrilled acreage

 

Background

On 22 April 2020, the Company announced a farmout transaction with Cypress Minerals LLC ("Cypress") at Pine Mills for 80 acres ("farmout area"), currently undeveloped, of Nostra Terra's 2,400 acres. Nostra Terra will receive a 25% carried WI on the first well drilled by Cypress on the farmout area. In addition, pursuant to the farmout agreement, Nostra Terra retained the option to participate for an additional 10% WI at cost (no promote) in the farmout area.

 

Cypress has identified a low-risk drilling location for the well based on existing well control and a 1998 vintage 3D seismic survey, which they have licensed, reprocessed, and interpreted. The target formation is the Upper Cretaceous Woodbine Sand, which is one of the main producing horizons in the area.

 

Option / Increase in Working Interest

The Board has assessed the geological and geophysical work on the farmout area, which was presented by Cypress. The Directors are of the view that the well has a good risk-reward balance and, accordingly, Nostra Terra has exercised its option to take up an additional 10% WI (the maximum amount under the farmout agreement), of the 75% WI held by Cypress, in the well (i.e. an increase of 7.5% WI). Drilling and completion cost for the initial well is circa $800,000 ($80,000 net to Nostra Terra). Nostra Terra's WI in the well and the farmout area has now increased to 32.5% WI, with 25% WI being carried with no cost to NTOG.

 

In a further demonstration of its ongoing positive relationship, Washington Federal Bank has provided a release of lien over the acreage so the farmout is not encumbered. Once the well is drilled and producing, Nostra Terra will have the ability (at its sole discretion) to add its WI in the well to the collateral securing the existing Senior Facility in order to have access potentially to additional funds for further drilling and/or acquisitions.

 

There is potential to drill up to five new wells within the farmout area. A successful well could further significantly increase both production rates and reserves. In addition, Nostra Terra still owns 100% WI in the rest of Pine Mills field (2,320 acres), encompassing existing producing wells and infrastructure. There remains scope for further increases in production in this area as well as potential for farm-out of additional undrilled acreage.

 

Title work, well design, and permitting have all commenced, with drilling planned to take place shortly thereafter. Further updates will be made on progress of the proposed new well in due course.

 

Matt Lofgran , Nostra Terra 's Chief Executive Officer, said:

"Given the Board's extensive background in geology and geophysics I am pleased that the review of the asset, in particular the 3D seismic data, was very favourable. We're happy to see the quick progress Cypress is making and look forward to seeing the well drilled and the potential increase in revenue."

 

 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014

 

For further information, contact:

 

Nostra Terra Oil and Gas Company plc

Matt Lofgran, CEO

 

Email:

+1 480 993 8933

Strand Hanson Limited

(Nominated & Financial Adviser and Joint Broker)

Rory Murphy / Ritchie Balmer / Jack Botros

 

Tel:

+44 (0) 20 7409 3494

Novum Securities Limited (Joint Broker)

Jon Belliss

 

Lionsgate Communications (Public Relations)

Jonathan Charles

Tel:

 

 

Tel:

+44 (0) 207 399 9425

 

 

+44 (0) 7791 892509

 

 

 

 

 

 


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