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Nostra Terra – time to buy the dip while newsflow is quiet? (NTOG)

Last month Nostra Terra Oil and Gas (LSE:NTOG) revealed its net revenue had ballooned to US$235,347 for the month of April. The company is running cashflow positive and has been profitable at the PLC level since February this year. Nostra recently increased its output with the successful drilling of the Twin Well and the G6 well in the Permian Basin but suffered a setback at the following drill where it encountered salt water just above the target reservoir. The share price dipped on the latter news, and perhaps due to a period of limited newsflow the price has come back to the 3.6p area today. Is it time to buy the dip ahead of the next phase of the company’s development?

The stock is currently in an upward trend channel that has formed over the past 18 months and the price has just clipped the channel support line today at around. There’s also a line at 3.4 that supported the price in April. I’m already a buyer at this level based on the fundamental story here, however, from a technical standpoint, a good bounce off these support levels followed by a breakout above diagonal resistance – formed from the previous two highs – would be very bullish for a potential range-break. I will be keeping an eye on the Relative Strength Index (RSI) at close today too. Ideally, I would like to see the RSI finish back above the black line as evidence of price stabilisation.

The company now has a Market Cap of just £5m. With today’s oil price offering 3-to-1 returns to Nostra and the company seeking further expansion, this is appearing increasingly undervalued. Having secured senior loan and BP hedging facilities, Nostra is in a position to steadily increase its operations without the need to come to the market for funding. The level of funding is periodically reviewed, and I believe it’s likely Nostra will see an increase in available funds due to production and oil price ramps.

Stock prices tend to form ranges and Nostra is currently in a 3-5.5p range. We will have to wait and see what the company has in store moving forward, but with continued progress, the stock could be targeting the 5.5-8p zone – this would still only value the company at around £10m.

Author: Stuart Langelaan

Disclosure: The Author owns shares in the company mentioned above.

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