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Nostra Terra ramps up development with Permian Basin double drill (NTOG)

Nostra Terra Oil and Gas (LSE:NTOG) has decided to ramp up activity across its acreage in the Permian Basin by drilling two back-to-back wells rather than just the one announced last month. The decision follows stronger-than-expected production from its recently-drilled Twin Well at the Texas-based site.

A contractor will now prepare the back-to-back drilling locations before starting work at the first well in early May and beginning the second well immediately afterwards. Nostra’s existing resources will fund both wells, supported by the highly-attractive $5m Senior Lending Facility it secured with Washington Federal Bank in January.

Nostra will have a 53pc interest in the first well and a 73pc stake in the second. Both will have similar economic profiles to the Twin Well and are on the same lease targeting the same Clear Fork formation. Specifically, they will focus on secondary formations – common producing formations in the area. Nostra’s shares were down 0.2pc, or 0.01p, to 3.5p following the news.

Matt Lofgran, chief executive officer of Nostra, said: ‘The purpose of the Senior Lending Facility with Washington Federal Bank was to accelerate our growth while minimising dilution. Last year we were able to drill one well on our Permian Basin leases. This year we plan to drill three or more. Having already become cash flow positive as a business, any additional production we are able to add to our portfolio has the potential to add significantly to our bottom line.”

Today’s news comes just days after Nostra announced that its Twin Well, which jumped straight into production in February after skipping the test phase, produced an average of 58bopd over the previous 30 days. The figure was ahead of the well’s medium-term targeted production of between 25-40bopd for its first year in operation. The Twin Well’s economics look even more attractive when one considers that Nostra originally anticipated a 2:1 return on investment at an oil price of $40 a barrel.  With West Texas Intermediate Crude Oil currently sitting much higher than this, these returns look set to be amplified. According to Nostra, the Twin Well has a shallow decline curve and an estimated ultimate recovery of 35,000 barrels.

Nostra also announced that it had secured permits to drill two additional wells at its Permian Basin leases. Having become cash flow positive in February, things are looking bright for Nostra as it continues to grow its production base.

Author: Daniel Flynn
Disclosure: The author of this piece owns shares in the company mentioned

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