Mesquite Asset Expansion

RNS Number : 4114N

Nostra Terra Oil & Gas Company PLC

17 January 2019

 

17 January 2019

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Mesquite Asset Expansion

Nostra Terra (AIM:NTOG), the oil and gas exploration and production company with a portfolio of assets in the USA and Egypt, is pleased to announce it has secured a 12 month option to acquire an additional 600 net acres (800 gross) (the "Additional Acres") to add to its Mesquite Asset in the Permian Basin ("Mesquite"). If the option is exercised, Mesquite will cover 2,184 gross acres (1,984 net to Nostra Terra), in a contiguous land parcel amenable to additional horizontal drilling.

Highlights

·    12 month option to acquire 75% working interest in 800 acres (600 net to Nostra Terra)

o Leases are Held By Production ("HBP")

o 11 active producing vertical wells with minimal production

o 12-month option earned by paying 100% of the cost of recompletion of 1 dormant vertical wells at the Additional Acres ("Recompletion")

o US$320,000 to complete acquisition of the Additional Acres

·    Mesquite Field Development Plan

o First Mesquite engineered economics report nearing completion

o Nostra Terra to receive Field Development Plan ("FDP") before deciding how best to develop Mesquite

Agreement terms

Nostra Terra has entered into a 12-month option agreement to acquire the Additional Acres (the "Agreement"). The Agreement is structured so that Nostra Terra earns into the option by paying 100% of the recompletion costs of 1 of 3 currently dormant vertical oils wells, to bring it back into production. Nostra Terra will receive revenue from the increased production, whether the option is exercised or not.

The leases of the Additional Acres are Held By Production, meaning the leases remain in force so long as they are in continuous oil production. The Additional Acres currently host 11 active producing vertical wells, with minimal but stable production, which covers costs.

Further vertical wells can be drilled at the Additional Acres, however, given the length of the leases, Nostra Terra's preference will be to drill horizontal wells here. To exercise the Agreement, Nostra Terra will pay US$320,000 to acquire the Additional Acres.

Recompletions

Among the available Recompletion targets is a well that was drilled but never completed (a DUC), and two wells that were completed but not in primary pay zones that are proven producers in the area. These three wells each present viable opportunities for producing primary production volumes for the modest cost of the recompletion effort (up to $150,000). Nostra Terra will decide which of the 3 wells is to be drilled in due course.

Mesquite Field Development Plan

As previously announced, the first engineered economics report for Mesquite is nearing completion and will be released shortly. This will include a complete assessment of the commercial potential of the initial 1,384 net acres at Mesquite, which the Company acquired on 22 October 2018.

Nostra Terra will then instruct Trey Resources to produce a second engineered economics report to review the Additional Acres. Once this is complete, Trey Resources will incorporate the two engineered economics reports into the Mesquite FDP.

Nostra Terra's board will await receipt of the final Mesquite FDP before deciding how best to respond to interest shown in the project by potential industry partners.

Matt Lofgran, Chief Executive Officer of Nostra Terra, commented:

"We've moved quickly in securing this option for an additional 600 net acres at Mesquite. As the first operator in the area to pursue horizontal drilling on these leases, Nostra Terra has a crucial first mover advantage in this prolific oil field. This is reflected in the level of unsolicited interest the Company has already received from potential industry partners concerning Mesquite.

We look forward to receiving the first engineered economics report from Trey Resources very soon and will immediately commission them to incorporate the additional acreage to the Field Development Plan."

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

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

Nostra Terra Oil and Gas Company plc Matt Lofgran, CEO	Tel:	[phone]
Strand Hanson Limited (Nominated & Financial Adviser and Joint Broker) Rory Murphy / Ritchie Balmer / Jack Botros	Tel:	[phone]
Smaller Company Capital Limited (Joint Broker) Rupert Williams / Jeremy Woodgate	Tel:	[phone]

About the Mesquite Propsect

The Mesquite Asset is in West Texas and covers 2,184 gross acres (1,984 net acres to Nostra Terra) in the prolific Permian Basin. The Mesquite Asset is proven to produce from multiple, stacked-pay reservoirs. Nostra Terra has identified a minimum 8 targets to drill horizontal wells across the Mesquite leases.

The target formations at the Mesquite Asset are "tight", meaning the oil-bearing rock formations are of low permeability. As such, the target formations have characteristics that make them ideal targets for horizontal drilling and have delivered substantial oil production in other areas of the Permian Basin. Comparable regional horizontal drilling has delivered initial oil production rates of 200-300bopd.

 

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