Despite releasing a stellar set of results on Monday, Nostra Terra Oil & Gas (LSE:NTOG) has seen it shares stagnant around the 4p level– is it worth taking advantage as the firm’s aggressive expansion continues?
On Monday, Nostra reported that its revenues increased by 300pc over 2017 to £1.1m, while production jumped 94pc to 30,703 barrels of oil equivalent (BOE), and proven reserves leapt 144pc to 646,280 BOE. The business reported a total loss over the year of c.£1m, a marked improvement on its £2.9m loss in 2016.
The results served as a concrete reminder of the turnaround progress Nostra Terra has made under chief executive Matt Lofgran across its Pine Mills and Permian Basin assets in Texas.
Lofgran employs a Held-By-Production strategy, which means output at leases stops them from expiring, even if they are only generating a handful of barrels each day. This method has allowed the company to buy production acreage at a low cost and subsequently develop them when conditions are right and sufficient funding is in place. Last year, this strategy saw the firm successfully drill and bring into production a Twin Well in the Permian Basin and attract the attention of major player BP Energy, with whom it has secured a hedging facility.
Nostra’s turnaround has continued even more rapidly in 2018, with the business hitting record monthly revenues of $161,000 and record production of 126bopd at Pine Mills in February. In May, the business also drilled two back-to-back wells in the Permian Basin targeting 25-40bopd production, one of which is now being completed for production.
All this progress has seen the company become cash flow positive at the Plc level for several months in a row. Last month, it reported that total revenues across its US assets from January to April 2018 hit more than $750,000, with the firm taking in a record $235,000 in April alone. Total gross production across the company’s assets in April came in at 5,743bbls oil, split between 3,890bbls oil at Pine Mills and 1,853bbls in the Permian Basin.
Nostra is also well-funded to continue expanding thanks to a $5m senior lending facility secured with Washington Federal Bank in January. It also has a healthy cash balance, bolstered by warrant exercises worth £738,000.
As Lofgran put it in this week’s results: ‘Moving forward we will certainly seek to build on this success, through further drilling across our existing portfolio of assets. However, now that we are in a much more secure position financially, with a stronger balance sheet, we can also afford to explore a more ambitious acquisition plan. If successful this change in approach could significantly increase Nostra Terra’s growth trajectory. ‘My vision has always been to build a much larger company, built on solid fundamentals. The first phase of this plan is now complete, and I am excited about the next phase ahead.’
If Lofgran delivers on his word – which he has done so far – then Nostra’s shares have a good chance of continuing the broad upward trajectory they have been on since the middle of last year. With that in mind, the stocks’s current 3.9p share price and £6.7m Market Cap could look attractive.
Author: Daniel Flynn
Disclosure: The author of this piece does not own shares in the company mentioned.