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Nostra Terra appoints Trey Resources to create plan for new Permian Basin prospect (NTOG)

Nostra Terra Oil & Gas (LSE:NTOG) dipped 4.7pc to 3.4p this morning after appointing Trey Resources to create a field development plan for its recently acquired Mesquite prospect in Texas’ Permian Basin.

The plan will include a complete petrophysics work up and full log analysis to assess Mesquite’s reserves potential. Trey will also propose well and completion designs, and complete a volumetric analysis to identify optimal targets for lateral wells.

Nostra announced that it had purchased the 1,384 net acre Mesquite prospect for an initial cash consideration of $150,000 earlier this week. It said the prospect hosts ‘tight’ oil-bearing rock formations with low permeability, making them ideal targets for horizontal drilling. Indeed, the structures have delivered substantial oil production via this approach in other areas of the Permian Basin. All-in-all, Nostra expects to be able to drill eight horizontal wells at Mesquite, targeting initial production of 200-300bopd from each, based on analogous regional drilling.

Trey is an operator of Permian Basin assets and has specific experience in horizontal drilling across the region. Its CEO David Thomas was part of the management team in place when Concho Resources executed its initial public offering on the New York Stock Exchange in 2007. Nostra has agreed to pay the business one-third of its fees in Nostra shares, the price of which will be based on its 10-day VWAP prior to issue. Matt Lofgran, chief executive of Nostra Terra, said:

‘We are very happy to appoint Trey Resources to complete the field development plan for Mesquite. Trey brings with it a wealth of experience in horizontal drilling across the Permian Basin, which will directly benefit Nostra Terra in finalizing a robust drilling plan. Our goal is to grow the company’s net daily oil production by a multiple of current levels by the end of 2019. The acquisition of Mesquite was a first step in realizing this ambition, the appointment of Trey is another, and we hope to be able to announce further progress in the coming weeks.’

Nostra first established a footprint in the Permian in November 2016. Then, in late 2017, the firm drilled its first Twin Well in the area before bringing it into production in January this year. It then successfully brought another well, called G6, into production four months later. In August, the company said these wells were producing at an average of 63bopd and that it was permitting another three wells.

Earlier this month, Lofgran told us that Nostra hopes to step up its operations in the Permian to take advantage of the great potential that has attracted major international firms into the region. Indeed, total Permian production is expected to grow to 5.4MMbopd by 2023, driven by nearly 41,000 new wells and $308bn in upstream spending. Lofgran told us Nostra will benefit from its existing local presence and size as it looks to expand:

‘For a company of our size, securing additional assets in this region presents a significant, substantial opportunity. We have an established operational team in the area and a reliable network of industry professionals in Texas with whom we work daily in sourcing and evaluating new opportunities. These people bring with them key insights into the local market. When combined with the BP facility and the Washington Federal Facility, we have in place the necessary components to execute the next phase of our Permian Basin expansion strategy.’

Author: Daniel Flynn

Disclosure: The author does not hold a position in any of the companies mentioned above

 

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