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Nostra Terra opens Dallas office ahead of Permian Basin ramp-up in 2019 (NTOG)

Nostra Terra Oil & Gas (LSE:NTOG) fell 1.6pc to 2.4p on Friday after opening a new office in Dallas to support its new horizontal drilling prospect in the Permian Basin. The firm said it has set up the new permanent operations office ahead of an expected surge in its Texas-based Permian Basin activity next year.

Since 2017, Nostra Terra has grown its portfolio of producing oil assets in Texas. It has previously outsourced many operational and business development functions. This let it manage costs as it expanded.

However, the firm took a significant step forward in the area in October. It purchased a 1,384 net acre prospect called Mesquite that 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. As such, it 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.

In today’s update, Nostra said the Dallas office would support better management of its producing oil assets. Meanwhile, it will also allow the company to assess new acquisition opportunities in the region.

The update comes days after Nostra revealed progress in its field development plan for Mesquite. This is being carried out by established Permian Basin operator Trey Resources. 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.

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 expect Trey to deliver the work in the New Year.

On today’s update, Matt Lofgran, chief executive officer at Nostra Terra, said: ‘As we enter 2019, Nostra Terra is well positioned to execute the next phase of its growth strategy. We expect to receive the engineered economics report of the Mesquite Field Development Plan by mid-January.

‘Assuming this is in line with our expectations, it is important that we prepare the Company to move quickly to take advantage of this. There is a great deal of regional competitive interest in opening new plays in the Permian Basin, so now is the right time to increase our in-house capabilities.’

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.

Author: Daniel Flynn

Disclosure: The author does not own shares in the company mentioned in this article

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