Nostra Terra Oil & Gas (LSE:NTOG) rose 1.3pc to 2.3pc this morning after revealing further progress at its horizontal drilling prospect in the Permian Basin. A volumetric analysis of Mesquite’s primary target formation estimated 60 feet of net pay thickness and 2.5 million barrels of oil in place.
The work was completed by Trey Resources as part of a wider field development plan that began in October. Trey analysed more than 600 logs of historical vertical wells at Mesquite and the nearby area. Nostra says this approach has previously found many successful horizontal Permian Basin targets.
Trey has now moved onto the second phase of the field development plan. It will produce a report detailing the engineered economics for Mesquite. This will include a potential production-type curve and well completion and costs estimates. Nostra expects Trey to deliver the report in the New Year.
Mesquite is completely owned by Nostra and covers 1,384 net acres. It is proven to produce from multiple, stacked-pay reservoirs. The target formations at the Mesquite prospect are ‘tight’, offering low permeability. Nostra says this makes them ideal for horizontal drilling, a technique that has delivered substantial oil production elsewhere in the region.
Nostra believes Mesquite could host eight horizontal wells, drilled along laterals of around one mile. It has said these could deliver initial production rates of between 200 and 300 barrels of oil a day. This estimate is based on analogous regional drilling.
Matt Lofgran, Nostra’s chief executive, said he is ‘very encouraged’ by today’s results. He added: ‘We look forward to commercializing these volumes in the near future. The field has historically been a prolific oil producer from vertical wells. With the experience and data from the team we see this as an exciting opportunity to drill horizontal wells in order to see a substantial increase in production and cashflow.’
As we wrote last month, interest in Nostra has already begun to pick following its acquisition of Mesquite in October. The acquisition quadrupled its acreage in the Permian Basin. Nostra has already received four unsolicited expressions of interest from potential industry partners. These agreements would see a partner carry the firm for initial drilling costs. However, the business will not take discussions further until it has completed its field development plan.
Production at Nostra’s existing Twin and G6 wells in the Permian Basin is averaging 53 bopd. The company has said the wells are exhibiting very modest decline rates in line with Permian Basin wells.