Final Results

RNS Number : 8367C

Nostra Terra Oil & Gas Company PLC

30 June 2016

 

30 June 2016

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Final Results for the year ended 31 December 2015

Highlights during the period

·     Revenue for the period of £594,000 (2014: £1,267,000)

·     Gross profit for the period of £385,000 before depletion, depreciation and amortisation (2014: 997,000)

·     81% increase in net production to 64,063 BOE (29,678 US, 34,385 Egypt) compared to 35,380 in 2014, primarily due to expansion into Egypt

·     Ewen Ainsworth joined the board as Chairman in June 2015

·     Acquired a 25% interest in the East Ghazalat concession in Egypt operated by North Petroleum International Company (NPIC)

·     Approval of Exploration Unit for Paw Paw prospect

·     Obtained a three-year extension of the $25 million lending facility until 31 January 2019

Post period end highlights

·     Disposal of 20% WI in Chisholm Trail assets in the US for a consideration of $2.1m, announced in June 2016. Completion expected mid-August 2016.

·     Cost cutting initiative completed in June 2016, achieving a 40% reduction in overheads

·     Reorganisation of its share capital successfully completed in May 2016

·     Raised £350,000 via a placing of new shares in March 2016

·     Proposal to acquire 60% interest in producing assets in the Permian Basin in New Mexico, announced in February 2016. Discussions continuing.

 For further information please visit www.ntog.co.uk or contact:

Nostra Terra Oil and Gas Company Plc
Matt Lofgran, CEO	[phone]
Strand Hanson Limited
(Nominated & Financial Adviser & Joint Broker)
Rory Murphy / Ritchie Balmer	[phone]
Cornhill Capital Ltd (Joint Broker)
Nick Bealer / Colin Rowbury	[phone]
Walbrook PR
Gary Middleton / Nick Rome	[phone]

Chairman's Report

The oil industry continues to wrestle with the persistently lower oil price environment. The bear market has hurt the entire sector and led to a re-evaluation of strategy by many companies. At Nostra Terra we have taken steps to act early in response to such challenging conditions, seeking to restructure and reposition the business. This has involved making some difficult decisions and we would like to thank our shareholders for their continued support, in particular for voting in favour of the consolidation and capital reorganisation at the recent Extraordinary General Meeting. This was not a proposal we made lightly, but we remain convinced it will be in the long term best interests of the Company.

Our strategic goals have been twofold in repositioning Nostra Terra. First we had to ensure the Company survives this extremely difficult period and second our key aim is to deliver significant value to shareholders over the medium term. We remain confident the Company's renewed strategic focus on the acquisition of distressed assets will yield substantial results.

The success of the previous business model was reliant on modern exploration technology such as

hydraulic fracturing and much higher oil prices, which allowed the Company to recover investment

capital and generate a return. High initial production rates were also an important factor. However, such initial high levels of production declined significantly within a relatively short period, a feature of using hydraulic fracturing in the reservoirs targeted by the Company, which, combined with a rapid decline in the oil price, had an adverse effect on the Company's revenue stream. The declining oil price also made it uneconomic to drill new wells to offset diminishing production. Our new strategy at Nostra Terra is predicated upon the macro-adjustment within the entire industry, caused by the decline in the price of oil. Our focus is to build a business which at $30/bbl is cash neutral and reliant on more conventional oil with lower decline rates in production. At oil prices above $30/bbl Nostra Terra will then have the internally generated funds to invest in either organic growth within its producing oil field(s) or pursue new investment opportunities.

In order to identify suitable opportunities for Nostra Terra we have extended our geographical focus, with the aim of having up to two focus areas outside of the USA. Following a prolonged period of low prices, we have noted a sizeable recent increase in the quantity and calibre of oil & gas assets available for sale at distressed prices. This presents a rare opportunity for Nostra Terra to take advantage of. Now that we have repositioned the business we feel the Company is well placed to deliver its refocussed growth strategy over the coming years.

The foundation of our new growth strategy is based on the recently announced cost cutting initiative, which we completed. During mid-2015 Nostra Terra started to cut back spending in anticipation of further pressure on the oil price during the course of 2016. So far this decision has been vindicated and the Company now benefits from an overall reduction of 40% in overheads at a time when the industry remains subdued. A core component of the cost-cutting initiative has been for the Board to take a voluntary 25% pay cut. In light of ongoing weakness in the oil & gas market, which has caused significant declines in share prices across the sector, the Board strongly felt that this was an appropriate step to take. With Nostra Terra now better positioned to withstand current market conditions, albeit with a lot of work still to be done, the Board remains fully committed to securing new projects for the Company, and to create shareholder value over the medium term. As Nostra Terra delivers its new growth strategy the Company plans to bolster its team with the addition of suitably experienced and astute technical personnel. This will only become necessary as we introduce additional producing assets to the business.

I would like to thank the Company's shareholders for their continued support and the next time I write to you I hope to report meaningful progress on the Company's strategy and on the appointment of new non-executive and/or executive management personnel.

Ewen Ainsworth

Chairman

29 June 2016

Chief Executive Officer's Report

As Ewen has stated in his Chairman's Report, we are experiencing the worst market in our sector for at least thirty years. Over the last 12 months our share price has suffered as Brent declined from $56.81 at the start of the year, dropping to $27 and closed at $37.50 by the end of the year. In the face of extreme adverse conditions, we have worked tirelessly on behalf of Nostra, making a number of tough choices for the long-term good of the company. This has not been easy, but I am pleased to report we are starting to reap the benefits.

Overall this has been an extremely busy year for Nostra. As it became clear the industry would have to adapt to a significantly lower oil price environment, we recognized how vital it was to reposition the business. We initiated a cost cutting initiative in mid-2015, achieving an overall reduction of 40% in overheads, as recently announced. We also sought to restructure our board and management team to reflect Nostra's needs going forward.

On a personal note, I'm very happy to have welcomed Ewen as our new Chairman to the team. Since his appointment, Ewen's input into reformulating Nostra's strategy has been crucial and I am certain he will play an extremely important role in the Company in the years to come.

Rather than simply attempt to weather the storm, we decided to take advantage of a new oil price cycle. This involved adopting a new strategic focus, seeking to acquire producing or lower risk assets at distressed prices, which Nostra could take full operational control of. We expanded our global view, looking to enter into new geographical areas outside of the United States, and sought opportunities that presented large upside potential for relatively small initial consideration.

We started our new strategy through identifying an opportunity in Southern Texas with intriguing potential. We acquired a minor interest in two different prospects for a minimal amount of consideration. These had large acreage positions with scope to increase our working interest should results prove up. Ultimately we decided not to proceed with the prospect, but this marked the beginning of Nostra's new approach.

Having acquired the White Buffalo prospect in the Big Horn Basin of Wyoming in late 2014, in 2015 we signed an agreement with Koch Exploration, a subsidiary of Koch Industries, to operate the Paw Paw prospect located in the same basin. The structure of the agreement allowed Nostra Terra the ability to control a prospect with a large potential reserve. While no consideration was paid for this we have worked to create an Exploration Unit over the prospective leases along with permitting for the initial well. We were able to extend the agreements into 2016 where Nostra Terra will seek partners to participate in the prospect.

During the second half of 2015 we expanded into Egypt by acquiring a 25% interest in the East Ghazalat concession in the Western Desert of Egypt. The seller agreed to finance a large portion of the acquisition leaving Nostra with a $500,000 equity investment to close the acquisition of this producing asset. Nostra and its other minority partner are currently in dispute with the operator over costs but are working with the operator to reduce operating costs in order to improve the economics on existing wells. There's scope for further upside in development and exploration wells including the discoveries in the North Dabaa.

On the financial side of the business conditions have been tough. We doubled production into the turn of 2015 and increased it by 81% by the end of the year. Revenue decreased to £594,000 primarily due to the drop of oil prices and natural production declines in wells, achieving a gross

profit for the period before depletion, depreciation and amortization costs of £385,000. Our expectation had been this would put the company on a much firmer financial footing, but the sharp decline in the price of oil undid much of the good work we had completed previously. Despite this, at the end of 2015 Nostra was granted a 3-year extension to its $25 million Credit Facility with Texas Capital Bank with drawdown subject to production. This was particularly encouraging, given the number of companies whose business models failed over the period through being unable to secure refinancing terms on lending facilities.

Moving into 20016 we continue to generate revenue from our existing assets, in particular Chisholm Trail, Bale Creek, and Verde. Multiple wells exist on each prospect thus creating a portfolio where the Company isn't risked on a single well or operator. As some of these fields develop further we will look to reinvest capital in fields at an earlier stage in the cycle where further upside exists.

I would like to finish by offering a personal message of thanks to our shareholders. This has been an extremely difficult period for the company. As the largest private holder of shares in Nostra I've suffered the effects of the falling share price alongside shareholders. However, we do live to fight another day. My fellow directors and I have made a number of extremely difficult decisions for the long term good of the company and I am confident we will turn the business around as conditions improve in the market. Our new strategy is both ambitious and built on a solid foundation and I look forward to providing more positive updates as we deliver on our objectives.

Matt Lofgran

Chief Executive Officer

29 June 2016

Consolidated income statement

For the year ended 31 December 2015

			2015	2014
			£000	£000
Revenue			594	1,267
Cost of sales
Production costs			(209)	(268)
Exploration and appraisal				(2)
Depletion, depreciation and amortisation			(1,700)	(1,396)
Total cost of sales			(1,909)	(1,666)
			───────	───────
GROSS (LOSS)/PROFIT			(1,315)	(399)
Share based payment			(27)	(19)
Administrative expenses Share of results of joint venture			(689)             (157)	(318)              -
			───────	───────
OPERATING LOSS			(2,188)	(736)
Finance expense			(122)	(107)
			───────	───────
LOSS BEFORE TAX			(2,310)	(843)
Tax (Expense)recovery			-	-
			───────	───────
LOSS FOR THEYEAR			(2,310)	(843)
			═══════	═══════
Attributable to:
Owners of the company			(2,310)	(843)
			═══════	═══════
Earnings per share expressed
In pence per share:
Continued operations
Basic and diluted (pence)			(0.069)	(0.029)
			═══════	═══════

Consolidated statement of comprehensive income

For the year ended 31 December 2014

	2015	2014
	£000	£000
Loss for the year	(2,310)	(843)
Other comprehensive income:
Currency translation differences	111	(249)
	───────	───────
Total comprehensive income for the year	(2,199)	(1,092)
	───────	───────
Total comprehensive income attributable to:
Owners of the company	(2,199)	(1,092)
	═══════	═══════

Consolidated statement of changes in equity

For the year ended 31 December 2015

	Share Capital	Share Premium	Share Options Reserve	Translation Reserves	Retained losses	Total
	£000	£000	£000	£000	£000	£000
As at 1 January 2014	2,776	9,991	119	74	(9,299)	3,661
Shares issued	584	1,166	-	-	-	1,750
Share issue costs	-	(97)	-	-	-	(97)
Foreign exchange translation	-	-	-	(249)	-	(249)
Loss after tax for the year	-	-	-	-	(843)	(843)
Share based payments	-	-	19	-	-	19
	───────	───────	───────	───────	───────	───────
As at 31 December 2014	3,360	11,060	138	(175)	(10,142)	4,241
	───────	───────	───────	───────	───────	───────
Shares issued	-	-	-	-	-	-
Share issue costs	-	-	-	-	-	-
Foreign exchange translation	-	-	-	111	-	111
Loss after tax for the year	-	-	-	-	(2,310)	(2,310)
Share based payments	-	-	27	-	-	27
	───────	───────	───────	───────	───────	───────
As at 31 December 2015	3,360	11,060	165	(64)	(12,452)	2,069
	═══════	═══════	═══════	═══════	═══════	═══════

 Consolidated Statement of Financial Position

31 December 2015

			2015	2014
			£000	£000
ASSETS
NON-CURRENT ASSETS
Goodwill			-	-
Other intangibles			3,127	4,283
Property, plant and equipment  - oil and gas assets Investment in joint venture			464 190	521 -
			───────	───────
			3,781	4,804
CURRENT ASSETS
Trade and other receivables Other debtors			171 5	491 -
Cash and cash equivalents			144	861
			───────	───────
			320	1,352
LIAIBLITIES
CURRENT LIABILITIES
Trade and other payables			373	293
Financial liabilities - borrowings			1,308	1,010
			───────	───────
			1,681	1,303
			───────	───────
NET CURRENT ASSETS			(1,361)	49
NON CURRENT LIABILITIES
Financial liabilities - borrowings			351	612
			───────	───────
NET ASSETS			2,069	4,241
			═══════	═══════
EQUITY AND RESERVES
Called up share capital			3,360	3,360
Share premium			11,060	11,060
Translation reserves			(64)	(175)
Share option reserve			165	138
Retained losses			(12,452)	(10,142)
			───────	───────
			2,069	4,241
			═══════	═══════

Company statement of financial position

31 December 2015

			2015	2014
			£000	£000
ASSETS
NON-CURRENT ASSETS
Fixed asset investments Investment in joint venture			2,836 190	4,124 -
			───────	───────
			3,026	4,124
			───────	───────
CURRENT ASSETS
Trade and other receivables			14	19
Cash and cash equivalents			69	552
			───────	───────
			83	571
			───────	───────
LIAIBLITIES
CURRENT LIABILITIES
Trade and other payables			102	65
			───────	───────
			102	65
			───────	───────
NET CURRENT LIABILITIES			(24)	506
			───────	───────
NET ASSETS			3,007	4,630
			═══════	═══════
EQUITY AND RESERVES
Called up share capital			3,360	3,360
Share premium			11,060	11,060
Share option reserve			165	138
Retained losses			(11,578)	(9,928)
			───────	───────
			3,007	4,630
			═══════	═══════

Consolidated statement of cash flows

for the year ended 31 December 2015

			2015	2014
			£000	£000
Cash flows from operating activities
Cash generated/(consumed) by operations			57	222
Interest paid			(115)	(163)
Interest received			-	-
			───────	───────
Cash generated/(consumed) by operations			(58)	59
Cash flows from investing activities
Purchase of intangibles - new oil and gas properties			(276)	(2,527)
Purchase of plant and equipment			(25)	(245)
Proceeds from sale of assets			-	295
Interest received			347	-
			───────	───────
Net cash from investing activities			(648)	(2,477)
			───────	───────
Cash flows from financing activities
Issue of new shares			-	1,653
New borrowing			1,156	2,221
Repayment of borrowings			(1,162)	(966)
			───────	───────
Net cash from financing activities Effect of exchange rate changes on cash and cash equivalents			(6) (5)	2,908 -
Increase/(decrease) in cash and cash equivalents			(717)	490
Cash and cash equivalents at beginning of year			861	371
			───────	───────
Cash and cash equivalents at end of year			144	861
			═══════	═══════
Represented by:
Cash at bank			144	861
			═══════	═══════

1.   RECONCILIATION OF LOSS BEFORE TAX TO CASH GENERATED FROM OPERATIONS

		2015	2014
		£000	£000
Loss before tax for the year		(2,188)	(736)
Depreciation of property, plant and equipment		103	127
Amortisation of intangibles		1,026	577
Well impairments		571	-
Loss on disposal of assets		-	691
Foreign exchange loss/(gains) non-cash items		-	(521)
Operating cash flows before movements in working capital		(304)	57
Increase/(decrease) in finance charge provision		(15)	56
Decrease/(increase) in receivables		310	52
Increase/(decrease) in payables (Increase)/decrease in deposits and prepayments		34 32	(43) -
		───────	───────
Cash generated (Consumed) by continuing operations		57	222
		═══════	═══════

			2015	2014
			£000	£000
Cash generated (consumed) by operations			(161)	733
			───────	───────
Net cash from operating activities			(161)	733
Cash flows from investing activities
Interest received			-	-
			───────	───────
Net cash from investing activities			-	-
			───────	───────
Cash flows from financing activities
Inter group loan (advances)			(322)	(1,864)
Issue of new shares			-	1,653
			───────	───────
Net cash from financing activities			(322)	(211)
			───────	───────
Increase/(decrease) in cash and cash equivalents			(483)	522
Cash and cash equivalents at beginning of year			552	30
			───────	───────
Cash and cash equivalents at end of year			69	552
			───────	───────
Represented by:
Cash at bank			69	552
			═══════	═══════

		2015	2014
		£000	£000
Loss before tax for the year		(1,650)	(1,058)
Impairment of cost of investments Share of results of joint venture		1,277 (157)	1,289 -
Foreign exchange loss/(gain) non-cash items		300	19
Share based payment		27	478
		───────	───────
Operating cash flows before movements in working capital		(203)	728
(Increase)/decrease in receivables		5	(13)
Increase/(decrease) in payables		37	18
		───────	───────
Cash generated/(consumed) by continuing operations		(161)	733
		═══════	═══════

1.   SEGMENTAL ANALYSIS

	US mid- Continent	Head Office	Total
	2015	2015	2015
	£000	£000	£000
Segment results - 2014
Revenue	594	-	594
Operating loss before depreciation,
Amortisation share-based payment
Charges and restricting costs:	(181)	(123)	(304)
Depreciation of tangibles	(103)	-	(103)
Amortisation of intangibles	(1,026)	-	(1,026)
Well impairment	(571)	-	(571)
Share based payment	-	(27)	(27)
	───────	───────	───────
Operating loss	(1,881)	(307)	(2,188)
Realised exchange (loss)/gain	-	-	-
Tax	(122)	-	(122)
	───────	───────	───────
Gains (loss) before taxation	(2,033)	(307)	(2,310)
	═══════	═══════	═══════
Segment assets
Property, plant and equipment	464	-	464
Intangible assets	3,127	-	3,127
Cash and cash equivalents	75	69	144
Other assets	352	14	523
	───────	───────	───────
	4,018	83	4,101
	═══════	═══════	═══════

Employees and Directors		2015 £000	2014 £000
Directors' fees Director's remuneration Social security costs M B Lofgran		32 226 13 271 129	24 228 15 267 126

2.  OPERATING LOSS FOR THE YEAR

The operating loss for the year is stated after charging/crediting):

		2015	2014
		£000	£000
Auditors' remuneration (company £21,000) - 2013: £21,000)		21	21
Depreciation of property, plant and equipment		103	127
Amortisation of intangibles		1,026	577
Foreign exchange differences		-	480
Loss on disposal of exploration and evaluation and oil and gas assets		-	691
		═══════	═══════
The analysis of administrative expenses in the consolidated income statement by nature of expense:
		2015	2014
		£000	£000
Directors' remuneration		226	228
Social security costs		13	15
Directors' fees		32	24
Travelling and entertaining		55	74
Accountancy fees		55	149
Legal and professional fees		214	180
Auditors' remuneration		21	21
Foreign exchange differences		(6)	(480)
Other expenses		78	107
		───────	───────
		689	318
		═══════	═══════

EARNING PER SHARE

	EPS - loss					2015	2014
	Loss attributable to ordinary shareholders (£000)					(2,310)	(843)
	Weighted average number of shares					3,359,587,276	2,922,053,277
						───────────	───────────
	Continued operations:
	Basic and diluted EPS - loss (pence_					(0.069)	(0.029)
	Total					-	-
						═════════	═════════
	The diluted loss per share is the same as the basic loss per share as the loss for the year has an antidilutive effect.
						2015	2014
	Gross profit before depreciation, depletion and  amortisation					385	997
	EPS on gross profit before depletion, depreciation and amortisation (pence)					0.011	0.034
						2015	2014
						£000	£000
	Reconciliation from gross loss to gross profit before depletion, depreciation and amortisation
	Gross (loss)/profit					(1,315)	(399)
	Add back:
	Depletion, depreciation and amortisation					1,700	1,396
						───────	───────
	Gross profit before depreciation, depletion and amortisation					385	526
						═══════	═══════

3.   Availability of Annual Report and Notice of AGM

The Company's AGM was held today at 11:00am at Jeffrey's Henry LLP, 5-7 Cranwood Street, London EC1V 9EE, at which resolution 1 (laying of the accounts before the meeting) was adjourned. Notice of the adjourned Annual General Meeting to approve the 2015 Annual Report and Accounts is being posted to Shareholders today, together with a copy of the full report and accounts. A copy of the 2015 Annual Report and Accounts and Notice of the AGM is available to download later today from Nostra Terra's website at www.ntog.co.uk.

 

END

 

 

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