Nostra Terra buys Permian Basin assets, plans to switch away from vertical wells

Nostra Terra says “modern techniques” of horizontal wells, fracking should increase production in old fields

UK-based Nostra Terra has acquired mature Permian Basin assets it hopes will produce much better with horizontal wells instead of the old verticals, the company announced Monday.

Nostra Terra (AIM:NTOG), with a portfolio of assets in the USA and Egypt, says it has purchased the assets in the Permian Basin of New Mexico from Alamo Resources II, LLC.

Nostra Terra has agreed to pay US$3.0 million to acquire a 60 per cent working interest for the Permian Basin assets, with $2.7 million idue by March 31 and an additional $300,000 due one year after the anniversary of closing, payable in cash or shares at the discretion of Nostra Terra.

The assets generated turnover of approximately $1.8 million for the year ended 31 July, with a profit before tax of approximately $250,000, (which included $1.02 million non-recurring expenses).

Nostra Terra’s working interest of 60 per cent would give a pro forma turnover of approximately $1.08 million revenue and profit before tax of approximately $150,000 at current oil prices.

“We’re excited about the acquisition of these assets in the Permian Basin, one of the most prolific basins in the world,” said CEO Matt Lofgran.

“The leases will add significantly to our production, revenues, and reserves. While we will add over 1.6 million barrels of proven reserves, less than 20 per cent of that is currently producing, providing scope for significant improvement.”

Lofgran says the leases are 100 per cent operated and 100 per cent HBP (not at risk of expiring), meaning Nostra Terra will be the in full control of the development pace.

Nostra Terra’s website says the company targets “basins that have proven to be long-lived, liquids-rich production areas. Through the application of modern techniques of drilling and multi-stage fracture completions, we reach into compartmentalized reservoirs and greatly improve the economics of multiple formations. Because much is already known about the rock properties and production profiles, much of the geological risk is mitigated. These methods have created exciting new growth opportunities in well-understood reservoirs.”

“By having the stable production base we’re able to use debt to acquire producing assets where net cash flow can service the debt while still providing free cash flow to the company,” said Lofgran.

“We are actively pursuing additional opportunities to continue our growth, some of which are in advanced negotiations.”

 

Nostra Terra reserves

Total net proven reserves (1P) of 2,747 Mboe (2,655 Mbbl of oil and 553 MMcf gas) as at 1 October 2015, 1,648 Mboe attributable to NTOG
– Net proven and developed producing reserves (‘PDP’) estimated at 424 Mbbl of oil and 347 MMcf gas as at 1 October 2015.
– Net proven developed non-producing reserves (‘PDNP’) estimated at 447 Mbbl of oil and 140 MMcf gas as at 1 October 2015.
– Net proven undeveloped reserves (‘PUDS’) estimated at 1,784 Mbbl of oil and 66 MMcf gas as at 1 October 2015.

Highlights of Nostra Terra acquisition

– Total proved (1P) reserves 2,655 Mbbl of oil and 553 MMcf gas as at 1 October 2015, 1,648 Mboe attributable to NTOG
– Shallow (~2,000′) conventional oil
– Lifting cost approximately $17 per barrel
– 2,880 gross (2,732 net) acres
– NTOG will be the operator
– 55 active vertical producing wells and 12 active injector wells
– Nov 2015 average production of 122 bopd gross (92 bopd net)
– Shallow declines
– Total Net Proven (1P) Reserves of 2.7 million boe (99% oil), 1.65 million attributable to NTOG
– 3 water flood projects in various stages of development surrounded by successful analogs
– 54 PUD vertical locations with EURs ranging from 31 to 43 Mbo/well