Interim Results

RNS Number : 6334A

Nostra Terra Oil & Gas Company PLC

30 September 2015

 

30 September 2015

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Interim results for the six months ended 30 June 2015

Nostra Terra (AIM:NTOG), an oil and gas exploration and production company with a growing portfolio of producing and exploration prospects, is pleased to announce its unaudited results for the six months ended 30 June 2015.

Highlights:

Corporate:

·    Revenue for the period of £393,000 (30 June 2014: £414,000)

·    Gross profit before non-cash items of depreciation and amortization of £268,000

(30 June 2014: £250,000)

·    New Nomad and Broker appointed

·    New Chairman appointed

Operational:

·    Acquisition of 100% Working Interest in Paw Paw Prospect

·    JV with Independent Resources Plc to expand into Egypt (post-period)

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

Nostra Terra Oil and Gas Company plc

Matt Lofgran, CEO

[e-mail]                             Telephone: [phone]

Sanlam Securities UK Limited (Nominated Adviser & Broker)

Lindsay Mair/James Thomas                   Telephone: [phone]

Walbrook PR Ltd (Media Relations)

Gary Middleton/Nick Rome                     Telephone:  [phone]

Chief Executive's report

The industry is going through a very tough time right now with low and volatile oil prices caused by global oversupply, primarily driven by horizontal drilling and fracking in the United States. This has led US focused oil companies to concentrate on capital discipline and balance sheet strength while they wait for stability and higher oil prices before committing to new developments. This has been shown in the drop in US production and drill rigs turning in recent months.

Recent news stories that non-Arab members of OPEC are lobbying hard in an effort to get production cuts and therefore higher oil prices are encouraging, though how effective this will be and how long it will take is uncertain. While we are not aiming to time the bottom of the market, we are in a cyclical business and believe the path of least resistance for oil prices is up. Given this, we believe it's an opportune time to look for further investments.

Our focus remains in producing basins with conventional reservoirs, primarily using modern exploration and production technologies. Our existing production and reserves occur within the Mid-Continent USA, however we are also finding intriguing opportunities outside the USAwhich will provide further diversification going forward. We are targeting existing producing assets with further upside through exploration. These assets can be acquired on advantageous terms and with careful application of leverage. 

Towards the end of 2014 and beginning of 2015, we doubled production putting the Company on a much stronger footing. With revenue of £393,000, we achieved a gross profit for the period before depreciation and amortization costs of £268,000.

We've positioned our White Buffalo Prospect in the Big Horn Basin of Wyoming, acquired towards the end of 2014 just before the sharp downturn, to be drill ready for exploration once the market strengthens. The leases have several more years, which allows us to maintain the inventory to grow in the future, but without the pressure of having to spend money to keep them.  During the first half of the year we signed an operator agreement on another larger prospect in Wyoming with Koch Exploration, a subsidiary of the second largest private company in the USA. While this is an exploration prospect, we were able to secure the opportunity with no acquisition costs. Our plan is to continue to progress it while promoting some interest to others, thus creating a free carry. 

Our debt facilities remain in place providing an alternative to issuing equity.  We've kept the debt at relatively conservative levels and maintain flexibility to continue our growth.

As we look to grow Nostra Terra organically and globally we welcomed a new Chairman, Ewen Ainsworth to the Company. Mr. Ainsworth brings with him a global wealth of experience and contacts to help Nostra Terra. Most notably he was the CFO of Gulf Keystone, a company that started as one of the smaller oil & gas companies on AIM and grew to be one of the largest oil & gas companies on the London Stock Exchange.  We look forward to more of his contributions as we make much larger strides from here. 

Post-period we announced plans to expand into a second focus area, Egypt and the surrounding region.  Our plans are to acquire existing producing assets with further exploration potential.  This approach allows us to acquire assets of lower risk, already generating revenues, where leverage can be applied to the acquisition.  Once assets are acquired we will look to quickly improve efficiencies through tighter cost controls and improved operations. 

We appreciate the support from our shareholders and look forward to updating them on the progress of the Company in the coming months and into 2016.

Matt Lofgran

Chief Executive Officer

29 September 2015   

Chief Operating Officer's Report

We have stated that the oil and gas industry of the United States was entering an exciting period of change, characterized by a dramatic shift in the application of assets. We were positioned to expand beyond our current platform of reliable partners and strong lender relationships to acquire some of these assets. The former strategy was to apply horizontal drilling and completion techniques to known producing formations where they had not been previously applied. Although that is still a viable pathway, the acquisition of producing assets that are held by over-levered operators presents an even greater opportunity without exploration risk.

White Buffalo was acquired at the beginning of the downturn. The prospect covers 6,100 net mineral acres of leases in the Big Horn Basin of Wyoming. It represents the Company's first step into a basin, which has been producing oil and gas since early 1900's. According to the US Department of Interior, more than 3.3 billion BOE have been produced from 48 separate formations across 139 oil and gas fields. Importantly, a study by the United States Geological Survey projects that a mean of 1 billion BOE (barrels of oil equivalent) additional resources remain to be discovered from both conventional and unconventional sources. Independent assessment by Haas Engineering, of White Buffalo has projected a mean potential recovery of 13 million barrels of oil to Nostra Terra.

As the decline in oil prices continued, it was determined to postpone further exploration risk until prices have recovered. The Company has idled any further work on the White Buffalo project, awaiting improvement in prices. More than three years remain before the majority of leases begin to expire and most have extension provisions beyond that as well.

During the first half of 2015 we entered into two agreements in South Texas.  This was part of a drill-to-earn on larger prospects. We acquired a small interest in each at a very low cost, providing us optionality for expansion should the results prove up. The initial wells were drilled and put into production. The operator decided to do additional work on each well almost immediately and we are waiting to see the outcome before committing ourselves further.

NTOG located another very attractive opportunity in the Big Horn Basin of Wyoming during the first half of this year. The Paw Paw Prospect consists of 2,280 acres under lease by Koch Exploration Company. The Company will earn interests in the Paw Paw Prospect by drilling wells ("Farmout"). It is expected to earn more than 80% Net Revenue in wells drilled. The unit will support up to 25 development wells and independent assessment from Haas Engineering supports the ultimate recovery of 7.3 million barrels of oil, if successful.

The Farmout did not require costs of leasing and seismic acquisition, usually associated with exploration projects.  We are in the process of creating an Exploration Unit, along with permitting through the Bureau of Land Management and State of Wyoming.  During this time we will also become a bonded operator in Wyoming.

The Company's disciplined approach has established a stable revenue platform across several partnerships in this portfolio. It is the portfolio that enables us to move into much larger prospects as the energy lending relationships provide us with much of the capital required. The Company owns 100% of both While Buffalo and Paw Paw. NTOG will operate the wells and will further reduce exposure through the sale of promoted interests to industry partners. In this manner, we will continue to grow our portfolio.

Alden McCall

Chief Operating Officer

Nostra Terra Oil and Gas Company plc

Consolidated statement of comprehensive income

For the six months ended 30 June 2015

			Note	Six months to 30 June 2015 Unaudited		Six months to 30 June 2014  Unaudited		Year to 31 December  2014 Audited
				£'000s		£'000s		£'000s
Revenue				393		414		1,267
Cost of sales			3	(1,065)		(452)		(1,666)
Gross profit/(loss)				(672)		(38)		(399)
Share based payment				-		-		(19)
Administrative expenses				(378)		(313)		(318)
Operating loss				(1,050)		(351)		(736)
Finance income				-		-		-
Finance expense				(11)		(11)		(107)
Loss before tax				(1,061)		(362)		(843)
Taxation				-		-		-
Loss for the financial period				(1,061)		(362)		(843)
Other comprehensive income
Exchange gain/(loss) on translation of foreign ops.				(19)		(114)		(249)
Total comprehensive income for the period				(1,080)		(476)		(1,092)
Loss per share
Attributed to:
Equity holders of the company
Basic and diluted			4	(0.032p)		(0.017p)		(0.029p)

The Company's operating loss arose from continuing operations.

There were no recognised gains or losses other than those recognised in the income statement above.

Nostra Terra Oil and Gas Company plc

Consolidated statement of financial position as at 30 June 2015

				As at 30 June 2015 Unaudited		As at 30 June 2014 Unaudited		As at 31 December 2014 Audited
		Note		£'000s		£'000s		£'000s
Assets
Non-current assets
Other intangibles				3,545		3,689		4,283
Property, plant, and equipment				483		571		521
				4,028		4,260		4,804
Current assets
Trade and other receivables				163		223		491
Deposits and prepayments				53		258		-
Cash and cash equivalents				526		122		861
				742		603		1,352
Current liabilities
Trade and other payables				229		708		293
Borrowings				-		325		1,010
				229		1,033		1,303
Net current assets				513		(430)		49
Non-current liabilities
Other loans			7	1,380		645		612
Net assets				3,161		3,185		4,241
Equity
Capital and reserves
Share capital		8		3,360		2,776		3,360
Share premium account				11,060		9,991		11,060
Translation reserve				(194)		(40)		(175)
Share option reserve				139		119		138
Accumulated deficit				(11,204)		(9,661)		(10,142)
Total equity				3,161		3,185		4,241

Nostra Terra Oil and Gas Company plc

Consolidated cash flow statement

For the six months ended 30 June 2015

		Six months to 30 June 2015 Unaudited		Six months to 30 June 2014 Unaudited		Year to 31 December  2014 Audited
	Note	£'000		£'000		£'000
Cash flows from operating activities
Cash generated/(consumed) by operations	5	79		247		222
Interest paid		-		-		(163)
Net cash outflow from operating activities		79		247		59
Cash flows from investing activities
Sale/(purchases) of plant and Equipment		(18)		(143)		(245)
Purchase of intangibles - new oil properties		(174)		(979)		(2,527)
Proceeds from sale of assets		-		-		295
Net cash from investing activities		(192)		(1,122)		(2,477)
Cash flows from financing activities
Proceeds on issue of shares		-		-		1,653
Repayment of borrowings		(381)				(966)
New borrowing (net)		159		626		2,221
Net cash from financing activities		(222)		626		2,908
Increase/(decrease) in cash and cash equivalents		(335)		(249)		490
Cash and cash equivalents at the beginning of the period		861		371		371
Cash and cash equivalents at the end of the period		526		122		861

Nostra Terra Oil and Gas Company plc

Consolidated statement of changes in equity

For the six months ended 30 June 2015

		As at 30 June 2015	As at 30 June 2014	As at 31 December 2014
		£'000	£'000	£'000
As at beginning of period		4,241	3,661	3,661
Other comprehensive income		(19)	(114)	(249)
Deficit for the period		(1,061)	(362)	(843)
Share based payments		-	-	19
Issue of share capital net of expenses		-	-	1,653
As at end of period		3,161	3,185	4,241

Nostra Terra Oil and Gas Company plc

Notes to the interim report

For the six months ended 30 June 2015

1.   General Information

      Nostra Terra Oil and Gas Company plc is a public limited company incorporated in England with a company number 05338258 and quoted on the AIM market of the London Stock Exchange Plc.

2.   Basis of Preparation

This interim report, which incorporates the financial information of the Company, has been prepared using the historical cost convention, on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, using accounting policies which are consistent with those set out in the financial statement for the year ended 31 December 2014. This interim financial information for the six months ended 30 June 2015 was approved by the Board on 29 September 2015.

The unaudited results for the year ended 30 June 2015 do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The comparative figures for the 12 months ended 31 December 2014 are extracted from the statutory financial statements which have been filed with the Registrar of Companies and which contain an unqualified audit report, did not draw attention to any matters by way of an emphasis of matter paragraph and contained no statement under Section 498 (2) or (3) of the Companies Act 2006.

Copies of this interim statement are available from the Company at its registered office at Finsgate, 5-7 Cranwood Street, London EC1V 9EE. The interim statement will also be available on the Company's website www.ntog.co.uk.in accordance with Rule 26 of the AIM Rules for Companies.)

3.  Cost of Sales

Cost of sales includes £940,000 non-cash items (not affecting actual cash flow), in respect of depreciation, depletion and amortization costs.

			Year to
	Six months	Six months	31 December
	to 30 June 2015	to 30 June 2014	2014
	Unaudited	Unaudited	Audited
	£'000s	£'000s	£'000s
Revenue	393	414	1267
Cost of sales - cash items	125	164	270
Profit before non cash items	268	250	997
Depreciation, depletion	940	288	1396
and amortisation
Gross loss	-672	-38	-399

4.    Loss per share

	Six months to 30 June 2015 Unaudited		Six months  to 30 June 2014 Unaudited		Year to 31 December  2014 Audited
Loss per ordinary shareholders
Basic and diluted	(0.032p)		(0.017p)		(0.029p)

      The loss per ordinary share is based on the Company's loss for the period of £1,061,000 (30 June 2014 - £476,000; 31 December 2014 - £843,000) and basic weighted average number of shares in issue of 3,359,578,276 (30 June 2014 - 2,776,211,610; 31 December 2014 - 2,922,053,277).

      Given the Company's loss for the period, the diluted loss per share is the same as the basic loss per share.

Nostra Terra Oil and Gas Company plc

Notes to the interim report

For the six months ended 30 June 2015

5.   Reconciliation of operating loss to net cash outflow from operating activities.

		Six months to 30 June 2015 Unaudited		Six months to 30 June 2014 Unaudited		Year to 31 December  2014 Audited
		£'000s		£'000s		£'000s
Loss for the period		(1,061)		(362)		(736)
Adjustments for:
Depreciation of property, plant, and equipment		51		50		127
Amortization of intangibles		889		239		577
Well impairments		-		-		-
Loss on disposal of assets		-		-		691
(Increase)/decrease in receivables		221		62		52
(Decrease)/increase in deferred charges		(165)		-		-
Share based payment		-		-		19
(Decrease)/increase in related party		142		-		-
(Decrease)/increase in payables		(62)		372		13
(Increase) in deposits and prepayments		48		-		-
Foreign exchange Translation-movement in provision		16		(114)		(521)
Net cash from operating activities		79		247		222

6    Segmental analysis

In the opinion of the directors, the Group has one class of business, being the exploitation of hydrocarbon resources.

The Group's primary reporting format is determined by geographical segment according to the location of the hydrocarbon assets.

As the group only operates in a single business and geographical segment, no segmental information for business segment or geographical segment is required.

7.   Loan notes issued by Nostra Terra (Overseas) Limited

      The long-term creditors represent unsecured and interest-free loan notes issued by Nostra Terra (Overseas) Limited ("NTOL") on 25 May 2007 with no contingency based on the cash flow from NTOL's Ukrainian assets.

Nostra Terra Oil and Gas Company plc

Notes to the interim report

For the six months ended 30 June 2015

7.    Loan notes issued by Nostra Terra (Overseas) Limited (Continued)

Additionally, in 2015 the group entered into a revolving line of credit agreement that provides for borrowings of up to $25 million USD, depending on certain borrowing base requirements. The line of credit matures in January 2016. Borrowings under the line of credit bear interest at either 1% plus the U.S. Prime Rate published by the Wall Street Journal or 4.25%, whichever is greater. All borrowings are collateralize by 80% of the value of the oil and gas properties utilized in determining the borrowing base, plus certain liens and guaranties of Churchill Operating. The borrowings under the line of credit are subject to certain financial covenants and restrictions on indebtedness, business combinations, and other related items.

8.   Share Capital

      The issued share capital as at 30 June 2015 and 31 December 2014 was 3,359,578,276 ordinary shares of 1p each, respectively and 30 June 2014 was 2,776,211,610 ordinary shares of 1p each.

 

END

 

 

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