Nostra Terra (LON:NTOG) has arranged up to US$25mln of financing from Texas Capital Bank, which pays for more drilling and will allow the company to expand its portfolio.
The loan is tied to the group’s existing production, and based upon stabilised production from its top five wells US$500,000 will initially be available to the company.
Through the reworking of the CT-3 well and the recent addition of producing wells will unlock more financing by the end of the first quarter.
Interest of 4.25% will be charged on the drawn funds, and the company says no equity or warrants will be issued as part of the arrangements.
"We're pleased to be able to secure such a strong facility on very good terms for the company,” said chief executive Matt Lofgran.
“While we have always been cautious about debt, and will remain so, this facility will give us the ability to quicken the pace of growth through non-dilutive funds.
“We're happy to have the validation of a strong and conservative, Texas-based institution that is well known in the industry. With the granting of such a large facility its clear the bank supports our growth plans, which we have demonstrated over the last 12 months.”
Lofgran adds that the pace of development has increased significantly due to “great economics”, and that partner Ward Petroleum is making preparations for its next well - which will be Nostra Terra’s largest working interest to date.
Alden McCall, chief operating officer, gave further insight into the group’s expectations of the financing facility, saying: "The typical revolving facility is limited to only the risk-adjusted value of discounted future cash flow from wells that have been in continuous production for at least six months.
“We expect that the company will secure an increased facility borrowing base from the stabilising production of the newly reworked CT3 well and several more wells which are not currently reflected in the initial borrowing base.
“As the new wells come onto production, we anticipate that we will be able to expand the facilities substantially. All horizontal Hunton wells drilled in the area of Chisholm Trail, by at least six different operators, have continued to be successful.”