Pine Mills Reserves Report & Strategy Update

RNS Number : 8324S

Nostra Terra Oil & Gas Company PLC

28 December 2016

 

28 December 2016

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Pine Mills Reserves Report & Strategy 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 the results of its internal Reserves Report for the Pine Mills oil field together with a strategy update.

Highlights:

·    428 Mbbl (gross) Proven Developed reserves (265 Mbbl net oil to Nostra Terra, after royalties)

·    NPV10 valuation of US$2.655m assigned to Nostra Terra's 80% Working Interest in Pine Mills, using 7 December 2016 WTI pricing

o NPV10 based only on Proven Developed Producing (PDP) and Proven Developed Non-Producing (PDNP) estimates

·    Calculations yet to be made on Proven Undeveloped, Probable and Possible reserves, leaving further exploration and development upside potential at Pine Mills

·    NPV10 calculation to be used to facilitate hedging of future production

Pine Mills Reserves Report

Nostra Terra's in-house engineer completed the Company's Reserves Report to assist with the development its 80% Working Interest in the Pine Mills oil field.

Nostra Terra adopted a conservative approach in producing the Reserves Report, by focusing solely on Proven Developed Producing Reserves (PDP) and Proven Developed Non-Producing Reserves (PDNP). The Company has not yet included Proven Undeveloped (PUDS), Probable and Possible oil reserves in its calculations. This prudent approach will also assist with Nostra Terra's planned hedging of future oil production.  Both PDP and PDNP are considered to be Proven Reserves (1P) under the Petroleum Resources Management System.

The Reserves Report is dated 01 December 2016 and does not cover Nostra Terra's other assets in the US or Egypt. Further scope for upside not yet factored into the report includes improvements in operational overheads (already taking place), increasing production rates, and rising commodity prices. Despite the oil price having risen since the date of the report, the Company has used the then oil pricing, reflecting the prudence in Nostra Terra's approach in valuing its 80% stake in Pine Mills.

In summary the Pine Mills internal Reserves Reports concludes:

Type of Reserve	Gross Recoverable Oil Pine Mills	Net Recoverable Oil (net to Nostra*)	NPV10 (net to Nostra)
PDP & PDNP	428 Mbbl	265 Mbbl	US$2.655m

*After 23% royalty

Nostra Terra intends to have this internal Reserves Report independently audited as soon as possible in 2017.

Further potential upside at Pine Mills

Beyond the US$2.665m NPV10 valuation, Nostra Terra's has also identified further potential development upside at Pine Mills. The Company believes this can be achieved through reactivation of existing drilled wells, development drilling of proven locations and exploration drilling.

Nostra Terra has in place a schedule for reactivation of existing drilled wells to take place in 2017. If the market for oil remains robust and builds on recent gains, Nostra Terra expects to be able to carry out a more extensive drilling campaign to improve overall production and increase reserves.

Strategy update

As previously announced, Nostra Terra's current strategic focus is on securing cash generative, conventional oil producing assets, which primarily include operations. This was the key rationale behind the disposal of the Company's interest in the Chisholm Trail Prospect for US$2.1million (which was subsequently increased to US$2.7 million) and the acquisition of the 80% Working Interest in Pine Mills.

Although Nostra Terra expects to broaden its acquisition criteria in 2017 to include projects with more exploration potential, in the interim the focus is on securing assets which can make an immediate contribution to the bottom line. Having achieved an overall reduction in overheads of 40% in early 2016, Nostra Terra is now well positioned to benefit from this approach as the Company moves towards becoming cash flow positive.

As part of the renewed strategic focus the Board has reviewed Nostra Terra's existing portfolio of projects and decided to relinquish the Paw Paw prospect and divest the White Buffalo prospect, where any funds raised from the divestiture will be invested into core areas. In the current oil price environment the board believes there are better potential exploration and development opportunities elsewhere and that deploying additional company funds to either project would not be in the best interests of Nostra Terra.

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

"In the second half of 2016 Nostra Terra successfully sold its stake in the Chisholm Trail Prospect at a profit. The asset was producing approximately 50 barrels of oil equivalent per day net to the Company, ultimately selling for US$2.7million. In purchasing Pine Mills for less than half this sum, we've managed to increase overall net production and reserves within the company, have achieved operator status, and significantly strengthened our balance sheet. This has been excellent business and I would like to thank all our shareholders, old and new, for their continued support.

Many believe we're now at the bottom of an oil price cycle. The Board agrees with this and feels it is an opportune time to acquire producing assets and grow reserves. Incremental increases in oil prices can have a multiple effect in increasing free cashflow, given the relatively fixed nature of operating expenses. This basic idea is at the heart of our turnaround story. Having secured Pine Mills and initiated our development plan for the oil field, we enter 2017 with a renewed sense of vigour as we are growing production, cashflow, and reserves".

Christian Snyder, a Petroleum Engineer at Nostra Terra with over 20 years relevant experience in the oil industry, has reviewed this announcement for the purposes of the current Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in June 2009. Mr. Snyder is a member of the Society of Petroleum Engineers.

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

Glossary

Mbbl: Thousand barrels

Proved Reserves: those quantities of petroleum, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations. If deterministic methods are used, the term reasonable certainty is intended to express a high degree of confidence that the quantities 11 will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities actually recovered will equal or exceed the estimate.

NPV10: the Net Present Value calculated at a discount rate of 10 per cent.

 

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