Q4 Production Update
AIM: NTOG 4 February 2015
Nostra Terra Oil and Gas Company plc
("Nostra Terra" or the "Company")
Quarterly Production and Operations Update
102% Increase in Production over Previous Quarter
Nostra Terra (AIM:NTOG), the oil and gas exploration and production company with a growing portfolio of assets in the USA, is pleased to provide an operational and production update for the fourth quarter of 2014.
Highlights
· December net production averaged 169 boepd (net of royalties), 102% increase from September net production
· Quarterly production increase of 68% over previous quarter
· Quarterly revenue increase of 20% over previous quarter
· CT-17 (Wilson 3-8-5H) gross Initial Rate of 440 boepd, (Nostra Terra 2.92% WI)
· CT-14 (Gant 22) gross Initial Rate of 286 boepd, (Nostra Terra 20% WI)
· CT-16 (Bollenbach 1-33H) gross Initial Rate of 555 boepd, (Nostra Terra 20% WI)
· CT-18 (Anderson 21-18-6 3H) gross Initial Rate of 100 boepd, (Nostra Terra 1.87% WI)
· Additional productive formations being evaluated in Chisholm Trail Prospect
· Progress continues at the White Buffalo Prospect in Wyoming
Monthly Production (Net)
|
Month |
Total Net* Production (BOE) |
Revenue (US$) |
|
October |
2,665 |
223,823 |
|
November |
4,468 |
254,407 |
|
December |
5,243 |
229,748 |
*Net to Nostra Terra's working interests, after royalties
(NRIs range from 78% to 81%)
Q4 2014 Operations Update
The Company is pleased to report that average daily production for December 2014 was 169 boepd net to Nostra Terra, an increase of 102% from September 2014. Exploration and production activity continued on several prospects in the portfolio during the period, including the White Buffalo Prospect in Wyoming, USA, where Nostra Terra owns a 100% working interest.
Chisholm Trail Prospect (Oklahoma)
At the beginning of the fourth quarter the CT-3 well (Gant 27) reached payout, 18 months from the start of production.
During the quarter four new wells in the prospect came into production.
In October we announced that the CT-17 well (Willson 3-8-5H) averaged 440 barrels of oil equivalent per day (boepd) for 10 days, outperforming the operator's expectations. The well is another producer in the prolific Hunton formation. Nostra Terra owns a 2.92% Working Interest ("WI") in the well, which is operated by Stephens Production Company.
The CT-14 well (Gant 1-22H) was completed but was producing more formation water relative to the volume of hydrocarbons than average wells in the play. A rework was completed and the well averaged 440 barrels of oil equivalent per day (boepd) for 10 days from the Hunton formation, a 54% increase on the figure we announced on 18 November 2014. Nostra Terra has a 20.0% WI in this well that is operated by Ward Petroleum.
The CT-16 well (Bollenbach 1-33H) averaged 555 barrels of oil equivalent per day (boepd) for 10 days, maintaining the prospect's record of consistently outperforming the operator's expectations. The well is another producer in the prolific Hunton formation. Nostra Terra owns a 19% WI in the well, which is operated by Stephens Production Company.
The CT-18 well (Chesapeake Anderson 21-18-6 3H) is a new horizontal test well in the Oswego formation. It began producing in mid-December where it reached a peak rate of 217 bopd and 146 mcfd (241 boepd). Production was not consistent as the well underwent additional work by its operator Chesapeake Energy. During the middle of January it was put on continuous production and average production during the past 10 days has been 100 boepd. Nostra Terra has a 1.87% WI in the well, a relatively small investment in order to gather production information for a third formation in the prospect area.
The Chisholm Trail prospect has been successfully drilled in the Hunton and Mississippian formations and other wells in the area are seeing strong production from the Oswego formation. Additional wells targeting the Oswego formation are planned in the future by other operators. This helps establish a third horizontal play within the prospect, creating a "multiplier effect" generating potential drilling targets from the same acreage.
High Plains Prospect (Texas)
The site for the first exploration well is permitted and prepared, however the operator has decided to wait for stronger oil prices prior to drilling. Further updates will be made once drilling is rescheduled.
The prospect covers 66 square miles and work continues to integrate the detailed subsurface mapping and 3D seismic data that will enable the operator to prioritise further areas for drilling. Nostra Terra has a 20% WI in the prospect, which is operated by Brown and Borelli.
White Buffalo Prospect (Wyoming)
Work continues on our largest asset to-date, 6,000 acres of leases in the prolific Big Horn Basin of Wyoming. At this time we are taking steps to enhance the value of the asset so that when the economics are stronger we'll be able to advance quickly to drilling.
LandSat imagery studies are underway to identify deep-seated fault trends, often associated with fracturing and secondary porosity. In addition, existing seismic studies have been identified for purchase, new 2D lines are being planned down the intended well paths of future horizontal wells, coring programs are being evaluated and log suites are being prepared.
The first well will be drilled vertically to gather critical information about the target formation and possible secondary targets. Older seismic lines will be integrated with the newly acquired lines pointing to fracture information in order to further isolate areas of secondary porosity, induced by fracturing. After drilling is complete, extensive, sophisticated log suites will be run and evaluated. Once this work is concluded, the well will be completed to serve as a water disposal well for future use.
Based on the information gathered, subsequent wells will be drilled vertically to the target formation(s) and then turned to the horizontal for a distance of 4,500 feet. Multiple locations have already been identified and the drilling schedule will be prioritized accordingly.
Outlook
Nostra Terra has had a record quarter. The Company more than doubled its rate of production from the end of Q3 2014 to end of Q4 2014. From beginning to end of the fourth quarter, crude oil prices have dropped by nearly 50%. Despite falling crude prices, the Company achieved a significant increase in revenues for the period.
Management expects the currently producing properties to be economic even in the current oil price environment. However, most operators that the Company works with have decided to postpone further drilling until oil prices strengthen, to provide a greater return on capital.
Nostra Terra is still cash flow positive from existing producing wells, including those added in the last month. Management is careful when and where free cash flow is invested and will continue to be disciplined in maintaining its low corporate overhead.
During this period of low oil prices we are advancing our work at the White Buffalo Prospect, where we have a 100% WI, so that the Company will be in a stronger position to move forward quickly once firmer oil prices are established.
Nostra Terra will also seek to take advantage of this current environment to find further opportunities for growth in conventional reservoirs throughout Mid-Continent USA.
Matt Lofgran, Chief Executive Officer of Nostra Terra, commented:
"We had a great quarter, more than doubling our production and delivering to shareholders as projected. Although during the period we saw oil prices halve, Nostra Terra still realized an increase in revenue of 20% over the previous quarter.
"While we do have an exploration component to our portfolio, our recent focus has been to secure and maintain steady production, allowing the Company to actively search for growth opportunities without the need for external capital. We are pleased to be at that point today. Our existing production comes from both vertical and horizontal wells and our operating costs are relatively low. We are currently cash flow positive with free cash flow adding to our existing cash in the bank.
"We anticipate oil price volatility going forward, however the consensus in the industry is that crude oil prices will be higher at the end of the year than they are now. Management will continue to be careful with funds while remaining vigilant in the search for potential growth opportunities, which may arise in these interesting times.
Alden McCall, Chief Operating Officer of Nostra Terra, added:
"At White Buffalo we are planning our data acquisition strategy in order to drill the fewest wells necessary to achieve the maximum value. Hard engineering and reservoir data acquired from just a few wells will then be used to project the most likely outcome of future wells, across all 6,000 acres. By executing such a strategy, NTOG will provide itself with numerous options when considering future development and potential joint ventures."
The technical information within this announcement has been reviewed by Alden McCall, the Company's Chief Operating Officer, a Certified Petroleum Geologist and a member of the American Association of Petroleum Geologists and the Society of Petroleum Engineers.
Glossary
`boe' means barrels of oil equivalent: a unit of energy based on the approximate energy released by burning one barrel (42 US gallons or 158.9873 litres) of crude oil.
`boepd' means barrels of oil equivalent per day
'mcfd' means Thousand Cubic Feet per Day
'NRI' means Net Revenue Interests
'WI' means Working Interest
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 Ltd
(Nominated Adviser)
Matthew Johnson / David Hignell Telephone: +44 (0)20 7382 1100
Hume Capital Securities plc
(Broker)
Jon Belliss / Abigail Wayne Telephone: +44 (0)20 3693 1470
Lothbury Financial Services Ltd
Gary Middleton / Michael Padley Telephone: +44 (0)20 3440 7620
This information is provided by RNS
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