First Horizontal Well at Mesquite
29 April 2019
Nostra Terra Oil and Gas Company plc
("Nostra Terra" or the "Company")
First Horizontal Well at Mesquite
Nostra Terra (AIM:NTOG), the oil and gas exploration and production company with a portfolio of assets in the USA and Egypt, is pleased to announce plans to drill the Company's first horizontal well at its Mesquite Asset in the Permian Basin, Texas ("Mesquite").
Proposed new lease agreement & plans to drill
Nostra Terra is pleased to announce that it is in advanced discussions with regards to a new 160-acre lease opportunity (the "New Lease") in the Mesquite Target Area (the "Target Area"). The Target Area currently covers over 30,000 acres, of which the Company has secured 2,184 gross acres (1,984 net acres to Nostra Terra).
The New Lease, presents Nostra Terra with an immediate opportunity to drill a half-mile horizontal well to prove up and increase the Company's overall Proven (1P) and Probable (2P) oil reserves at Mesquite. The New Lease is standalone, near, but not adjacent to, the existing acreage. Accordingly, the Company expects to be able to bring in partners on the New Lease whilst still maintaining a 100% interest in the existing Mesquite Asset
Nostra Terra intends to fund drilling of the proposed horizontal well using existing cash resources and through selling off a percentage working interest in the New Lease to certain oil and gas investors. Nostra Terra has already received expressions of interest from potential industry partners concerning the New Lease.
Next steps
Following completion of the placing announced on 27 February 2019, Nostra Terra engaged a landman to begin title work and to secure new leases for the Company in the Target Area.
The Company had previously identified the potential of the New Lease and has subsequently entered into discussions with the current mineral owners. These discussions are nearing conclusion and once complete Nostra Terra will apply for a permit to drill the first horizontal well.
Following permitting, Nostra Terra plans to secure a rig and prepare the pad, followed by drilling and completion operations. Subject to execution of the lease agreement, these activities are expected to take place in the coming weeks and months.
Matt Lofgran, Chief Executive Officer of Nostra Terra, commented:
"This new lease presents an excellent strategic opportunity for Nostra Terra. We see such large potential in the area and plan to increase our footprint, including retaining a larger interest in the Mesquite Asset. We will be able to drill our first horizontal well at Mesquite, with the aim of proving reserves for additional horizontal drilling. We intend do this while retaining full ownership of the acreage we have already secured.
Much more importantly, we will also preserve our first mover advantage in the wider Mesquite target area. The first horizontal well could deliver substantial cash flow to the Company whilst significantly strengthening our position in any future farm out discussions for Mesquite."
Competent Person Disclosure
John Stafford, a Director at Nostra Terra with over 35 years' relevant experience in the oil industry, has reviewed this announcement for the purposes of the current Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in June 2009. Mr. Stafford is a Fellow of the Geological Society and a member of the Petroleum Exploration Society of Great Britain.
For further information, visit www.ntog.co.uk or contact:
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Nostra Terra Oil and Gas Company plc Matt Lofgran, CEO
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Tel: |
+1 480 993 8933 |
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Strand Hanson Limited (Nominated & Financial Adviser and Joint Broker) Rory Murphy / Ritchie Balmer / Jack Botros
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Tel: |
+44 (0) 20 7409 3494 |
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Shard Capital Stockbrokers (Joint Broker) Damon Heath / Erik Woolgar
Smaller Company Capital Limited (Joint Broker) Rupert Williams / Jeremy Woodgate |
Tel:
Tel: |
+44 (0) 207 186 9952
+44 (0) 203 651 2910 |
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About Nostra Terra
Nostra Terra's US portfolio includes its 100% working interest in the Pine Mills oil field, East Texas, and its various working interests in assets in the Permian Basin, West Texas, including Mesquite. Net Revenue Interest to Nostra Terra in each lease ranges from 75-80% after entitlements to mineral owners.
As of 14 February 2019, Nostra Terra's net 2P (Proved and Probable) oil reserves across its US assets was 2,429,660 barrels of oil, including Net Proved reserves of 764,030 barrels of oil.
In Egypt, Nostra Terra owns a 50% working interest in the East Ghazalat Concession ("the Concession"), via its wholly owned subsidiary Independent Resources Egypt Limited ("IRE"). Nostra Terra's attributable 2P Reserves from the Concession are 1,008,922 barrels of oil (according to the 2015 Competent Persons Report produced by DeGoyler and MacNaughton Canada). Nostra Terra is currently in international arbitration with the Concession's operator, North Petroleum.
About Mesquite
The Mesquite asset covers 2,184 gross acres (1,984 net acres to Nostra Terra) in the Eastern Shelf of the prolific Permian Basin. The target formations at Mesquite are "tight", meaning the oil-bearing rock formations are conventional horizons of low permeability. As such, the target formations have characteristics that make them ideal targets for horizontal drilling and have delivered substantial oil production in other areas of the Permian Basin using these techniques.
In the Engineered Economics Report for Mesquite, prepared by Trey Resources ("Trey") and announced on 21 January 2019, the Company reported that the first 1,384 net acres at Mesquite contain 2,400,000 barrels of recoverable oil (Estimated Ultimate Recovery, "EUR"). The NPV 10 valuation assigned to these barrels, at US$60 oil, is US$28,600,000.
Trey's Per Well Economic model is based on drilling 5,000ft (1,524m) lateral (horizontal) wells on 160-acre spacing. Each 5,000ft lateral is expected to have a 20-year well life and to produce 100,000 barrels of oil in its first three years. The estimated Internal Rate of Return for each well is 46% at US$60 oil.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
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