Permian Basin Acquisition

RNS Number : 7243E

Nostra Terra Oil & Gas Company PLC

22 October 2018

 

22 October 2018

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Permian Basin Acquisition

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 the acquisition of the Mesquite Prospect in the Permian Basin (the "Acquisition"). The Mesquite Prospect comprises of 1,384 net acres in West Texas, with the potential to drill an estimated 8 horizontal wells.

Highlights

·    1,384 net acres

o Representing a 308% increase in the Company's total Permian Basin (net) acreage position

o 100% Working Interest

o Nostra Terra to operate

·    Potential to drill an estimated 8 horizontal wells

o Target initial production 200-300 barrels of oil per day ("bopd") per horizontal well based on analogous regional drilling

·    Additional vertical well potential

·    Nostra Terra to enagage a specialist firm to create a comprehensive Field Development Plan

·    Additional acquisition targets identified in the prospect area

About the Mesquite Prospect & horizontal drilling

The Mesquite Prospect is in West Texas, in the prolific Permian Basin and is proven to produce from multiple, stacked-pay reservoirs. The Acquisition covers 1,384 net acres and is contiguous, opening the potential for Nostra Terra to drill an estimated 8 horizontal wells on the leases. Completion of the Acquisition increases Nostra Terra's net Permian Basin acreage by 308%.

Nostra Terra has agreed to acquire the Mesquite Prospect from Tall City Exploration III. Tall City is an oil and gas exploration and production company, which has been highly successful in identifying new prospects in the Permian Basin that can be drilled horizontally, and then drilling initial discovery and development wells to prove up reserves.  Tall City has a proven track record in monetizing its prospects and creating significant returns for shareholders.

The area of the Permian Basin where the Mesquite Prospect is located has long-established producing wells that were drilled vertically on 40 acre spacing. In recent years operators have successfully drilled wells with tighter 20 acre spacing. On this basis, the Mesquite Prospect has the potential to host a minimum 35 potential vertical well locations, by drilling at 40 acre spacing, or a maximum 70 vertical well locations, based on drilling with 20 acre spacing.

However, Nostra Terra believes the Mesquite Prospect has much greater development potential if drilled horizontally.

Horizontal drilling involves drilling an oil well at an angle to the vertical, so that the horizontal well runs parallel to any oil-bearing formation. According to the US Energy Information Administration, horizontal drilling has been responsible for driving the vast majority of the production gains witnessed in the Permian Basin in recent years.

The target formations at the Mesquite Prospect 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.

Acquisition Terms

Under the terms of the Acquisition, Tall City will keep a 1/8^th carried working interest in the first horizontal well, which Nostra drills at the Mesquite Prospect. In addition to this Nostra Terra will pay Tall City US$150,000 in cash consideration. 

Field Development Plan

Nostra Terra intends to engage a specialist firm, with specific experience in horizontal drilling in the Permian Basin, to create a Field Development Plan for the Mesquite Prospect.

A further announcement will be made on appointment of the engineering firm.

Further acquisition targets

Now that Nostra Terra has secured the Mesquite Prospect, the Company intends to increase its Permian acreage further. The Company has identified a number of additional acquisition targets, potentially suitable for horizontal drilling, and will provide further updates as appropriate.

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

"We first identified the Mesquite Prospect in early 2017 as a desirable acquisition target for Nostra Terra. However only recent developments have enabled us to secure this opportunity.

We are incredibly excited to have made such a substantial acquisition, quadrupling our Permian footprint and, much more importantly, now having the opportunity to drill horizontally. Horizontal drilling has been the primary driver in delivering the substantial gains in production and reserves seen across the Permian Basin in recent years. For a company of our size this is a huge opportunity, which we are now well positioned to take advantage of.

Having successfully grown our cash flow on steady gains in production, it is now time for Nostra Terra to take its next leap forward."

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]

 

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