On Thursday, Nostra Terra Oil and Gas (AIM:NTOG) announced drilling is commencing on a twin well at their newly acquired asset in the Permian Basin. The drilling and logging is expected to take around 6-8 days, with completion of the well anticipated to follow shortly afterwards. We present some pictures taken on-site in the past few days.
Two for one Return On Investment
The well is planned to test the Clearfork and San Andres formations, both of which are producing formations in the area. The Clearfork has three different members (a distinct part of a formation) that produce on the lease and in neighbouring leases.
In fact, as reported by Nostra Terra in an RNS on 31st October, a neighbouring operator previously producing 350 barrels of oil in under three days from a field development well that was later discovered to have crossed the boundary of the Lease.
The planned drilling operation of the Twin Well will target the same bottom-hole location as the discovery well drilled by the neighbouring operator. If successful, the well is expected to be connected to existing infrastructure and the estimated Return on Investment is 2:1 at $40/barrel oil.
Funding and $25m Hedging Facility
Nostra Terra is currently in discussions with Banks in order to secure a $5m to $25m Senior Lending Facility at what appears to be a relatively low annual interest rate in the range of 4.5% to 5.5%. As announced in September, Nostra Terra has already secured a $25,000,000 hedging facility with BP Energy which can be used in conjunction with the senior debt facility.
This is a big step forward in the company realising its Permian Basin strategy, which aims to steadily build production at low-risk sites already held by production (HBP) in order to increase cash flow generation.
Nostra Terra is making ground both financially and operationally, and with a current market cap of less than £3m, the company increasingly appears undervalued.
Author: Stuart Langelaan
The author of this piece owns shares in the company written about above