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UPDATE - Nostra Terra targeting higher risk/higher reward wells

Published: 20:50 20 Jun 2014 AEST

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While results are pending for its most significant well to date, Nostra Terra (LON:NTOG) has decided to commit to another.

Nostra’s 20%-owned Gant 1-22H, or CT14 well, operated by Ward Petroleum, is in the process of coming online and recently began flowing back fracking fluids, as well as oil and gas.

In the meantime, the company has agreed to participate in another Ward well, also with a 20% interest. The total well cost is estimated at US$4.15mln, thus Nostra’s share will be US$830,800.

The well will be drilled for a total measured depth of 11,700 feet, with a 7,180 foot true vertical depth and a 4,200 foot lateral.

At the same time Nostra told investors it expects drilling to start on the group’s first exploration well in the High Plains prospect, in Texas, during the third quarter. It is also taking a significant 20% working interest (WI) in the well.

Nostra says the dependable revenue streams from the Chisholm Trail play means it can take these higher risk, higher reward opportunities.

"While CT14 is flowing back, Ward Petroleum has permitted another well where we again have secured a 20% working interest,” said chief executive Matt Lofgran. “In addition to this, the High Plains Prospect is moving forward. The planned well, where we also have a 20% WI, is permitted and the rig is being secured.

“As we continue to grow our portfolio, these larger WIs in wells could have a substantial impact on our future production levels and our cash flow."

Chief operating officer Alden McCall told Proactive Investors that the Chisholm Trail has been a good launch pad for Nostra, allowing it to mature as a company.

“It’s given us a firm base,” he said, adding that “from there we are now positioned to take higher risk interests in wells, in the High Plains area for example.”

Working interests of 20% are bigger than the stakes Nostra has taken hitherto, but McCall said the change reflects “greater confidence” and the “great relationship” it has built with Ward Petroleum.

Broker Northland Capital Partners said: “Success in developing revenue streams from wells in the Chisholm Trail [CT] prospect has enabled management to increase the materiality of its interests as shown with the CT16 well election. Those revenues have also allowed management to expand the portfolio to encompass the High Plains Prospect.

“Whilst the CT wells have proven to be low risk, the High Plains prospect represents higher risk exploration. However, based on the current geophysical data, the prospect could provide healthy expansion potential depending on the results of the Q314 well,” the broker said.

Northland reiterated its ‘buy’ rating and price target of 0.37p.

Shares were up 2.6% at 0.277p at midday.

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