Pine Mills - Significant Increase in Reserves

RNS Number : 7189Y

Nostra Terra Oil & Gas Company PLC

07 December 2017

 

7 December 2017

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Pine Mills - Significant Increase in Reserves

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 a significant increase in proved reserves at the Pine Mills oil field, in Wood County, Texas ("Pine Mills"), where Nostra Terra now owns 100% working interest. In addition, the Company has assessed significant additional "Possible" reserves, which could be impacted by new drilling activity in the area.

Highlights:

·    38% increase in net Proved reserves from approximately 326,000 barrels of oil (April 2017 as adjusted for increase in net working interest) to 450,280 barrels of oil (1P "Proved Developed Producing" and "Proved Developed Non-Producing")

·    Future potential upside in the Woodbine-Wagoner;

o 1.39 million barrels gross recoverable "Possible" reserves, internal assessment based  on an existing independent study

·    New drilling activity planned on neighbouring lease

Recent Activity and Additional Reserves

In recent months, while oil prices have both stabilised and improved, Nostra Terra has been approached by various operators regarding potential farm-in opportunities on the deeper rights at Pine Mills. Pine Mills is made up of several leases over approximately 2,400 acres; all leases are Held By Production (HBP), meaning they have no expiration date and no required work programme, and remain in effect so long as the leases remain in production.  This allows Nostra Terra the flexibility to farm-out should it so decide, or to drill further wells at its own discretion.

As a result, Nostra Terra has re-assessed an independent study of the lease area at Pine Mills undertaken by Cobb & Associates, Inc. in 2014, which focused on undeveloped upside potential. A total of 5 potential development projects were identified in the Woodbine and Sub-Clarksville Formations, including neglected oil "behind pipe" and up-dip "attic oil" which could be accessed mainly through well workovers. The largest upside identified is the potential development of the Woodbine-Wagoner oil "skirt" (23 deg API), with up to 12 potential new well locations and 1.39 million barrels of gross technically recoverable oil, classified as "Possible" reserves.

A neighbouring operator is planning to drill a well, which if successful, could de-risk some of these "Possible" reserves at Pine Mills. Nostra Terra has now formally granted the approval required by the Texas Railroad Commission (the local governing authority) to allow the operator to drill closer than usual to the common lease boundary. The well is currently being permitted and is anticipated to be drilled next month. Results of the well will be shared between the Operator and Nostra Terra.

Proved Reserves

In preparation of closing a new senior lending facility Nostra Terra has updated its reserve report, using a third-party engineer APN Energy, as required by the new bank. The facility will allow Nostra Terra to continue with the strategy of developing lower risk reserves such as Pine Mills and its Permian Basin acreage using non-dilutive funds.

Proved Developed Producing (PDP) plus Proved Developed Non-Producing (PDNP) reserves are assessed as of 1 December 2017 at 578,760 barrels of oil (gross) and 450,280 barrels of oil (net to NTOG after Royalties). This represents an increase in the net Proved reserves of 38% from 1 April 2017 (the previous report as adjusted for the increased working interest) due to improved production performance, steady operational costs, and improved commodity prices

The reserve figures stated above use the standards set by The Petroleum Resources Management, which is accepted by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers. The definitions can be found at www.spe.org/industry/docs/Petroleum_Resources_Management_System_2007.pdf

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

"Pine Mills has been a great asset; being a significant cash generator, and has been profitable every month since we took over operations. Our primary focus has been on increasing cash flow, but given the strengthening in the oil markets we can now look at other development and exploration potential. We're excited to have a significant increase in reserves."

Competent Person Disclosure

John Stafford, a Director at Nostra Terra with over 35 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. Stafford is a Fellow of the Geological Society and a member of the Petroleum Exploration Society of Great Britain.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").

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]

Notes to Editor:

On 29 November 2016, Nostra Terra acquired an 80% working interest in certain oil and gas interests comprising the Pine Mills oil field and associated assets in Wood County, Texas. Nostra Terra purchased the assets from GFP Texas Inc., which exercised its pre-emption rights following the proposed sale of Pine Mills by its previous owner and operator.

On 23 January 2017, Nostra Terra announced that it was the first operator of Pine Mills in the last 3 years (during the low oil price environment) to operate the oil field profitably. Nostra Terra has continued to operate the asset with a profit every month since that time.

On 26 January 2017, Nostra Terra acquired an additional 7.5% working interest from GFP Texas Inc., the owner of the 7.5% WI, increasing Nostra Terra's interest to 87.5%. The remaining 12.5% working interest was owned by Hammerhead Management Partners LLC. As part of the transaction with GFP, Nostra Terra inherited a Court Judgement (in Texas) due to Nostra Terra for $426,322 by Hammerhead, which is secured against Hammerhead's 12.5% WI in Pine Mills, giving Nostra Terra the right to foreclose on this 12.5% WI, without prejudice to still collecting the approximately $426,322 trade receivable.

On 6 September 2017, Nostra Terra successfully secured the remaining 12.5% Working Interest in the Pine Mills oilfield, Texas. Nostra Terra now has 100% ownership of Pine Mills.

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