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Nostra Terra announces huge reserves leap as it continues to fire up Permian Basin operations (NTOG)

Shares in Nostra Terra Oil & Gas (LSE:NTOG) were trading up 4.2pc to 2.5p on Thursday morning after the business revealed a more than threefold increase in its reserves.

Nostra reported proved and probable oil reserves of 2,429,660 barrels across its Pine Mills field in East Texas and its Permian Basin assets in West Texas. This represents a 276pc jump on the 646,280 barrels reported by the company last year.

According to Nostra, this year’s reserves translate into total proved and probable future net income of $58.65m. The assets are also believed to have an NPV(9) of $23.93m.

Digging deeper, Nostra’s net proved reserves rose to 764,030 barrels, which the firm put down to drilling and development in the Permian Basin over H1 2018. Meanwhile, its probable reserves jumped to 1,665,630 thanks entirely to its acquisition of the Mesquite prospect in the Permian Basin last October.

Nostra expects to be able to drill eight horizontal wells at the 1,384 net acre Mesquite prospect. It will target initial production of 200-300bopd from each horizontal well at the site, based on analogous regional drilling.

The business has hired Trey Resources to complete a field development plan for Mesquite. This first iteration of this work completed last month and gave the site an estimated $21.6m NPV10 valuation (the value to Nostra after any drilling costs) at current strip pricing. This dwarfs Nostra’s current £3.5m Market Cap. The field development plan also includes a proposed horizontal well design for a 5,000ft (1,524m) lateral, on 160-acre spacing per well.

In Thursday’s update, Nostra said it is currently in discussions with potential farm-in partners concerning the development of Mesquite.

The firm added that it updated its reserves report with a view to submitting it to Washington Federal Bank. Nostra secured a $5m senior lending facility with Washington last January on favourable terms. The current borrowing base of the facility is $1.95m. However, this is reviewed periodically to account for progress made by Nostra across its portfolio.

We recently caught up with Nostra Terra CEO Matt Lofgran in a podcast interview to find out more about the benefits and processes of horizontal drilling. Click here to listen to the discussion.

Author: Daniel Flynn

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

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