Update re Kansas activities
Nostra Terra Oil and Gas Company plc
("Nostra Terra" or the "Company")
Reorganisation of Kansas activities
Agreement with Hewitt Petroleum, Inc.
5 January 2011
As announced in its Half Yearly Report issued on 30 September 2010, Nostra Terra Oil and Gas Company plc (AIM: NTOG) has been conducting a comprehensive review of redevelopment operations on its properties in Kansas, where production to date has been below expectations.
The review covered all aspects of the current redevelopment programme including engineering practices and operational efficiency, and involved detailed discussions with the operator of the Company's Kansas properties, Hewitt Petroleum, Inc. and various related entities (the "HPI Entities"), and advice from third parties. As a result of these discussions, the Company and the HPI Entities have determined it is best to end their relationship and have entered into a settlement agreement that accomplishes that end.
Three properties within the Central Kansas Uplift ("CKU") are currently being redeveloped: Hoffman, in which Nostra Terra has a 25% working interest ("WI") and which has two producing wells; Boxberger and Bloom, in both of which Nostra Terra has a 75% WI before payout (50% after payout) which have two and three producing wells respectively. The Company's net* monthly production in barrels of oil equivalent (boe) from these properties for September, October and November was as follows:
|
|
Boxberger** |
Bloom |
Hoffman |
Total |
|
September |
201 |
372 |
9 |
582 |
|
October |
0 |
328 |
10 |
338 |
|
November |
0 |
319 |
0 |
319 |
|
Total |
201 |
1,019 |
19 |
1,239 |
*Net to Nostra Terra's working interests, after royalties of approximately 20% but before operating expenses.
**The production on Boxberger was temporarily suspended in October and is currently in the process of being restored. Curative title work is in process for a portion of the Boxberger leases.
As a result of the review, on 4 January 2011 the Company and the HPI Entities entered into an agreement (the "Agreement"), under which:
· Nostra Terra will acquire the interests of the HPI Entities in the Boxberger and Bloom properties giving Nostra Terra a 100% WI in both properties;
· Nostra Terra, under its newly-formed operating company, will operate both the Boxberger and Bloom properties;
· Nostra Terra will assign to the HPI Entities its remaining interests in all other HPI-operated assets (Hoffman, the undeveloped adjoining acreage within the Trapp field and the Koelsch property, and its interest in the Liberty #1 exploration well); and
· Nostra Terra will receive US$1.2 million in cash from the HPI Entities, including US$200,000 in respect of the sale of Nostra Terra's interest in the Liberty #1 exploration well, within 180 days of the agreement closing. This amount shall be payable as to (1) US$50,000 on closing, (2) US$200,000 within 90 days of closing, (3) US$200,000 within 120 days of closing and (4) the balance of US$750,000 within 180 days of closing. The deferred elements are to be secured by the granting of security interests over various assets of the HPI Entities;
The Agreement is subject to a closing period of 30 days from 4 January 2011, extendable by an additional 30 days at the discretion of Nostra Terra, allowing it to perform due diligence on the HPI Assets.
Matt Lofgran, CEO of Nostra Terra, said:
"This has been a very thorough and painstaking review, and I believe the agreement we have reached with HPI is the best possible outcome for our shareholders. Assuming operatorship of the Boxberger and Bloom properties will provide us with greater control over the pace, cost and technical aspects of field activities. We continue to believe there is scope to improve the performance of these two properties. In the coming months we plan to carry out additional work designed to improve the productivity of the existing wells and this work will be scoped during the closing period.
"More importantly in terms of our long-term growth, the outcome of this review will enable us to further upgrade our asset portfolio by building on our initial success in the Texas Austin Chalk and acquiring interests in similar established reservoirs capable of delivering rapid payback and strong cash flow using horizontal drilling technology."
Alden McCall, Chief Operating Officer of Nostra Terra, added:
"We have been steadily preparing to be in a position to drill and operate our own wells, and while we may make further non-operated investments in future if the right opportunities arise, we will gradually shift towards conducting our own operations. We see the end of our relationship with HPI as a natural step in that process."
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
Religare Capital Markets
Peter Trevelyan-Clark/Ben Jeynes Telephone: +44 (0)20 7444 0800
Alexander David Securities Ltd
David Scott/Bill Sharp/Nick Bealer Telephone: +44 (0)20 7448 9820
Announcements made by the Company are available automatically by email to those who register at www.ntog.co.uk.
This information is provided by RNS
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