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Determined Nostra Terra means business as Twin Tell jumps straight into production NTOG

Nostra Terra Oil & Gas (LSE:NTOG) showed AIM how much it means business yesterday, reporting that its Twin Well in the Permian Basin has skipped the testing phase and gone straight into production after successful completion. The news comes during an exciting time for the reinvigorated resources firm, which recently saw it secure final approval for a $5m lending facility from Washington Federal Bank as well as a hedging facility with oil giant BP. With drilling at the well beginning just three months ago, Nostra’s ability to reach production so quickly demonstrates the effectiveness of its Held-By-Production (HBP) strategy in combination with access to proper working capital.

HBP means existing production at leases stops them from expiring, even if only a handful barrels a day. This gives the owner the ability to secure acreage at a low cost before ramping up production in a more bullish oil price environment.

Nostra will soon update the market with production rates at the Twin Well, but this marks only the first step in its much larger drilling programme planned across the Permian Basin, Texas, which had one of the best local oil & gas markets in the world.

With Nostra sitting on 24 drill-ready locations at the Permian Basin, explosive growth could soon be on the cards. If this happens, its current 4.5p price could look a steal, especially as it gives the firm a present market value of just £5.3m.

Indeed, the business has already accelerated its plans for developing its Permian assets. since securing the Washington lending facility. Nostra is now seeking permits for three wells in the area instead of the one announced last December.

As chief executive Matt Lofgran put it himself: ‘Drilling and completion [on the twin well] has gone according to plan and we now look forward to updating the market with production rates and progress in planning our next drills.’

Despite the obvious potential news flow Nostra could deliver, the market seems a bit hesitant. At the time of writing, shares were up just 2.5pc to 4.5p.

However, growing oil production and cash flow is clearly allowing Nostra to build a decent foundation among investors over the longer term, with shares nearly doubling from 2.3p since the Twin Well began drilling in November.

As we mentioned last month, Nostra has recently covered considerable ground. It is not often that an AIM resources firm with a sub £30 market cap secures a $5m lending facility from a $15bn bank like Washington Federal at an interest rate of just 4.75pc. Under Lofgran, Nostra has worked hard to source producing and near producing oil assets, which are profitable below $30 per barrel. With WTI currently trading in a range above $60, conditions look primed for Nostra to capitalize on this highly favourable price environment.

Disclosure

Author: Daniel Flynn

The author of this piece does not own shares in the company mentioned.

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