Nostra Terra raises £1.15m to develop Mesquite asset

Nostra Terra Oil & Gas announced on Wednesday that it has raised gross proceeds of £1.15m by way of a placement of 47,916,665 new ordinary shares, at a price of 2.4p each.

The AIM-traded firm said the placing was only conditional on the admission of the placing Shares to trading on AIM.

It said it would enable it to strengthen its position in the Mesquite asset in the Permian Basin, ahead of identifying and securing a farm-in partner to deliver the Mesquite Field Development Plan.

Nostra Terra said the Mesquite Asset in West Texas covered 2,184 gross acres, with 1,984 acres net to Nostra Terra, in the prolific Permian Basin.

The target formations at the Mesquite Asset were described as ‘tight’, meaning the oil-bearing rock formations were of low permeability.

As such, the target formations had characteristics that made them ideal targets for horizontal drilling, and had delivered substantial oil production in other areas of the prolific Permian Basin.

Comparable regional horizontal drilling had delivered initial oil production rates of between 200 and 300 barrels of oil per day, Nostra Terra noted.

It said that in the first complete iteration of the Mesquite Field Development plan, which covered 1,384 net acres, Mesquite was estimated to have a $21.6m net present value at a 10% discount, at $53 per barrel, and a $28.6m net present value valuation at a 10% discount at $60 per barrel, once fully developed.

The respective estimated internal rates of return were 34% at $53 per barrel and 46% at $60 per barrel.

Based on 5,000 feet of lateral wells at 160 acre spacing, each well at Mesquite was estimated to contain 300,000 barrels of recoverable oil.

It was expected each well would have a life of 20 years, and was expected to deliver 100,000 barrels of oil production over the first three years.

“Our goal with Mesquite is to find the right industry partner to work with on developing the asset,” said Nostra Terra chief executive officer Matt Lofgran.

“By significantly strengthening our balance sheet and welcoming institutional investment into the company at this time, we are positioned to retain more interest in the asset going forward.”

Lofgran said the board believed the Permian Basin remained “one of the most attractive” oil provinces globally, attracting billions of dollars in investment each year.

“In the Mesquite target area Nostra Terra still has first mover advantage, so it is important for a company of our size to move as quickly as it can in securing its position.

“We are on course to deliver substantial value to shareholders over the coming years.”