Pine Mills Operations Update

RNS Number : 8321U

Nostra Terra Oil & Gas Company PLC

23 January 2017

 

23 January 2017

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Pine Mills 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 announce an operations for the Pine Mills oil field for the first two months since the Company took over as operator.

Highlights:

In the first two months of company operations at Pine Mills, Nostra Terra has focused primarily on cutting costs and streamlining operations. Highlights include:

·    Nostra Terra is the first operator of Pine Mills in the last 3 years (during the low oil price environment) to operate the oil field profitably

·    Lifting costs in December were US$18.46 per bbl versus $18.93 per bbl in November

·    $99,500 (gross) payment received for oil sold in December 2016

·    Restructured operations to improve Net Operating Margin on an ongoing basis.

o New Operating Margin increased to 42.5% in December, up from 39.4% in November

·    Increased gross Pine Mills monthly production (in which Nostra Terra has an 80% WI) from 97bopd in November to 100bopd in December

·    Sold rig and miscellaneous equipment, significantly reduced overhead expense, freeing up additional capital to be used to reinvest in Pine Mills or other fields

·    Successful workover in Permian Basin

o Increased working interest prior to operation, now ranging from 57% up to 68% on all four leases

o Increased production

Pine Mills Operations Update

On assuming the operatorship of Pine Mills, Nostra Terra first goal was to improve operational efficiency at the oil field. This has resulted in the initiation of a cost cutting programme and the sale of non-essential site equipment.

Through careful management of operations and cost control Nostra Terra has become the first operator in the past three years (during the low price oil market) to manage the Pine Mills field and overheads profitably, albeit over a short timeframe. Nostra Terra expects that the continued track record should also lead to an improvement in value on the reserve report.

Immediately upon acquisition Nostra Terra performed a re-entry into an existing wellbore. The operation was successful as the previously abandoned equipment was retrieved and the wellbore is now prepared to realize its economic potential.

Further operations are planned to upgrade various equipment at the batteries, which is expected to increase production.

Last week Nostra Terra received a payment of $99,500 (gross) for December's oil production.  The rapid receipt of payments for oil production reflects one of the benefits of being an operator.

The following table summarises the results from Pine Mills following Nostra Terra's initial work programme (all figures are gross):

Operational area	November 2016	December 2016
Production	97bopd	100bopd
Oil sold	97bopd	89bopd*
Net Revenue	US$90,802	US$99,481
Lease Operating Cost	US$54,972	US$57,272
Operating Margin	US$35,830	US$42,208
Net Operating Margin	39.4%	42.5%
Lifting Cost per bbl	US$18.93	US$18.46

*Please note the timing of production and pick up can lead to monthly discrepancies between amount of oil produced and amount of oil sold.

Nostra Terra expects to report further operational efficiencies at Pine Mills in due course.

Successful Permian Basin Workover and Increased Production

On 3 November 2016 the Company announced an acquisition and planned workover of certain leases in the Permian Basin, Texas.  Nostra Terra is pleased to report that this workover was a success. Nostra Terra acquired interests in four wells on the leases, with two active and two inactive.  Prior to the initial workover Nostra Terra increased it's working interest ranging from 57.2% to 68% in the leases. One of the inactive wells in Mitchell County has been returned to production and oil is being sold. The well was put into production last week, hence it is too soon to announce stabilized production figures, however the initial days of production are encouraging and have exceeded management's expectations.

The workover on this first inactive well added perforations in the wellbore in a previously non-producing zone and has initiated production from that zone. This has helped Nostra Terra determine that potential for further production upside exists both through workovers and new wells, which the Company can drill at its discretion.

Nostra Terra has identified similar local opportunities and anticipates acquiring additional leases in the area, using existing cash resources.

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

"I am happy to report we have hit the ground running at Pine Mills and have surpassed my personal expectations for what we could achieve in the first two months. We expect still to make further operational improvements at Pine Mills to increase our overall profit. This will improve the Company's cash position and enable us to keep making progress using existing cash resources.

We're also happy with the results of the workover in the Permian Basin, a second focus area for us in Texas. This supports our plans in the region, both on these leases and other leases we have identified as acquisition targets. Our goal is to increase our production steadily in the Permian Basin and increase Nostra's exposure to this attractive oil province.

As we move into 2017 our focus now switches to improving overall production at the oil field and our goal is very much to achieve 150 bopd. We look forward to providing further updates in the near future."

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		[phone]
Strand Hanson Limited (Nominated & Financial Adviser and Joint Broker)			[phone]
Rory Murphy / Ritchie Balmer
Vicarage Capital Limited (Joint Broker)			[phone]
Rupert Williams / Jeremy Woodgate

 

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