Operations Update

RNS Number : 3721M

Nostra Terra Oil & Gas Company PLC

20 January 2016

 

AIM:NTOG                                                                                                        20 January 2016

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company") 

Operations Update

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 provide an operational and production update for Egypt, for the fourth quarter of 2015. (Due to the number of operators we deal with in the USA, production and revenue figures for that region were not finalised at the time of this release and will be incorporated in later updates.)

Highlights

·      Completion of East Ghazalat acquisition providing NTOG with its initial revenue generating asset in Egypt

·      Fourth quarter net production of 15,400 barrels of oil

·      Fourth quarter attributable revenues of US$242,499 

·      Discussions in progress with East Ghazalat's operator North Petroleum to improve this asset's financial and operating performance

·      Finalising arrangements to invoice and receive revenue payments directly from the Egyptian General Petroleum Company to improve cash flow

·      3 year extension agreed on US$25m credit facility

Monthly Production (Net)

Egypt

Month	Total Net Production (BOE)*	Attributable Revenue** (USD)
July	6,787	$144,726
August	6,292	$108,911
September	5,906	$104,820
October	4,629	$82,446
November	5,171	$83,374
December	5,600	$76,679

*Net production represents 25 per cent. of total field production. Output in October and November was adversely affected by an interruption in production at one of the field's producing wells. Independent Resources Group plc ("IRG") and Nostra Terra through their joint venture company Independent Resources (Egypt) Limited moved quickly to liaise with North Petroleum, the operator of the East Ghazalat concession, to rectify the disruption to output and restore the well to its previous productivity.

**Revenue in Egypt is the accrued combination of cost recovery and profit oil attributed to NTOG. The average realised price for Q4 was $40.59 per barrel

Q4 2015 Operations Update

East Ghazalat (Western Desert, Egypt)

In October 2015 Nostra Terra entered into a joint venture ("JV") agreement with Independent Resources Group plc, an AIM listed exploration and production company with a focus on the Mediterranean basin, which has a similar strategic intention to that of Nostra Terra to invest in producing or near-production assets with upside potential.

In October 2015 the JV acquired a 50 per cent interest in the East Ghazalat concession in Egypt ("East Ghazalat") for US$3.5 million, operated by North Petroleum ("the Operator"), a wholly-owned subsidiary of China ZhenHua Oil Co, Ltd, a Chinese state-owned oil company. The effective date of this acquisition was 1 July 2015 and accordingly NTOG has reported its production and revenues derived from East Ghazalat from that date.

Historic collection periods for revenues prior to the JV's acquisition have been around 4 months, hence the JV has not yet received its third and fourth quarter revenue payments. The JV is finalising arrangements with the Egyptian General Petroleum Company ("EGPC") in respect of both these outstanding and future revenue receivables. The JV will energetically pursue timely payment of  receivables.

The JV has identified five key objectives for East Ghazalat. These comprise:

-     a reduction in operating costs;

-     increasing production through implementing operational improvements;

-     drilling of new lower risk oil wells;

-     improving the asset's cash flow through accelerated invoicing for production and quicker receipt of outstanding invoices; and

-     developing the North Dabaa gas discovery

The JV is in discussions with the Operator on all of these initiatives. Whilst the JV has identified and proposed measures which will improve the operating performance and cashflow generation of the asset, it does not operate East Ghazalat and the necessary changes to achieve these objectives require the consent and cooperation of the Operator and the EGPC.  Equally the Operator requires the consent of the JV in order to approve budgets and operating plans for East Ghazalat. Accordingly, there is a clear economic alignment between all parties to reach an agreement to achieve these improvements. Nostra Terra looks forward to providing updates on progress during the course of the year.

Credit Facility

During the quarter Texas Capital Bank granted Nostra Terra an extension on the lending facility. The Facility contains both a three year Revolving Credit Facility and a Standby Letter of Credit Facility with an initial nominal limit of US$25 million. Interest is charged on monies drawn down at the current rate of 4.25% (determined by the higher of either: the sum of the Wall Street Journal Rate plus 1% or 4.25%).

Outlook

In the current environment with lower oil prices Nostra Terra is seeing an increasing number of attractive opportunities. The Board feels that now is an ideal time to acquire producing assets, such that they can be acquired with debt.

Nostra Terra is in various stages on deals, including contract negotiations on certain producing assets within the USA.

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

"Our focus is on the acquisition of producing assets with further, low risk upside potential.  Many of the companies struggling today either have assets with higher operating costs, have applied leverage at much higher oil prices, or sometimes both cases.  With low oil prices we see this as an opportune time to acquire assets using debt. This strategy allows us to grow our production and reserves now, which should have a significant positive impact on cash flow when oil prices strengthen.

We have two different groups covering each focus area of the Company. They are actively evaluating new opportunities, performing due diligence, and in contract negotiations.  We look forward to updating on the progress of these in future announcements."

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 and broker)

Lindsay Mair / James Thomas                                         Telephone: [phone]

Walbrook PR

Gary Middleton                                                               Telephone: [phone]

Nick Rome

 

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