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Nostra Terra raises £1.15m to support Mesquite development (NTOG)

Nostra Terra Oil and Gas (LSEf:NTOG) dipped 10pc to 2.3p on Wednesday morning after launching a £1.15m placing to advance its Mesquite asset in the Permian Basin. The raise, which took place at 2.4p a share, was conducted with new institutional and other investors by Nostra’s new joint broker Shard Capital.

Nostra said the proceeds will allow it to strengthen its position at Mesquite, which it acquired in October last year. The company expects this to support it in identifying and securing a farm-in partner to deliver its field development plan for the asset.

The placing comes after the business opened a data room containing an analysis of the asset last month. It also follows Nostra’s claims in November that it had already received four unsolicited approaches about Mesquite from industry partners.

Mesquite covers 2,184 gross acres and contains tight formations. These are typically oil bearing and of low permeability, making them ideal targets for horizontal drilling. Such structures have delivered large amounts of oil production in other areas of the Permian Basin, with comparable horizontal drilling producing at rates of 200-300bopd.

The first iteration of Nostra’s field development plan for Mesquite, which was carried out by Trey Resources, was released last month. It gave the asset a $21.6m NPV10 valuation and a 34pc internal rate of return (IRR) at $53/bbl oil once fully developed. Meanwhile, the area has an estimated NPV10 of $28.6 and an IRR of 46pc at $60/bbl oil. Both NPV10s dwarf the business’s current £3.47m market cap.

Lateral wells at 160-acre spacing across the prospect are estimated to contain 300,000bbls of recoverable oil each. The wells are expected to have a 20-year lifespan, delivering 100,000bbls of production in their first three years of operation.

Nostra’s chief executive Matt Lofgran said that significantly strengthening the company’s balance sheet and welcoming institutional investment at this time would help to retain more interest in Mesquite moving forward.

‘The board believes the Permian Basin remains one of the most attractive oil provinces globally, attracting billions of dollars in investment each year,’ he added. ‘In the Mesquite target area Nostra Terra still has first-mover advantage, so it is important for a company of our size to move as quickly as it can in securing its position. We are on course to deliver substantial value to shareholders over the coming years.’

Earlier this month, Nostra revealed that its acquisition of Mesquite had led to a more than threefold increase in its reserves. The business reported proved and probable oil reserves of 2,429,660 barrels across its portfolio, which also includes the Pine Mills field in East Texas. This represented a 276pc jump on the 646,280 barrels reported 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, 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 1,665,630bbls, thanks entirely to the purchase of Mesquite.

The firm updated its reserves report with a view to submitting it to Washington Federal Bank. Nostra secured a $5m senior lending facility with Washington in January 2018 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 to find out more about the benefits and processes of horizontal drilling. Click here to listen to the interview. and Dynamic Investor Relations Ltd are not responsible for the content or accuracy of this article.  News and research are not recommendations to deal, and investments may fall in value so that you could lose some or all of your investment. Past performance is not an indicator of future performance.

  • Daniel Flynn does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the piece.
  • Daniel Flynn has not been paid to produce this piece by the company or companies mentioned above.
  • Dynamic Investor Relations Ltd, the owner of, has not been paid for the production of this piece by the company or companies mentioned above.

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