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Nostra Terra Oil & Gas says immediate priority is to finalise breakthrough deal

Nostra Terra Oil & Gas chief operating officer Alden McCall confirmed the company is still in negotiations to land a potentially transformational deal in the US, adding “we will announce it as soon as we can”.
Nostra Terra Oil & Gas says immediate priority is to finalise breakthrough deal

Nostra Terra Oil & Gas (LON:NTOG) chief operating officer Alden McCall confirmed the company is still in negotiations to land a potentially transformational deal in the US, adding “we will announce it as soon as we can”.

In April the ambitious junior confirmed it was discussions with “several parties” with a view to acquiring “larger interests in established reservoirs capable of delivering strong cash flow and increased payout”.

Yesterday McCall confirmed NTOG’s “immediate priority” was to finalise a deal, though he wasn’t prepared to give any further details until negotiations are concluded.

He was one of the speakers at last night’s Proactive Investors One2One Forum, where he was joined by chief executive Matt Lofgran.

There McCall set out the company’s strategy, which will focus on deploying horizontal drilling techniques in existing oil plays in the US. “Over the past decade rigs drilling horizontal wells in the US have increased from 10 per cent to 50 per cent,” McCall told the Proactive audience.

They have been used offshore and in Alaska for decades.

More prominently, however, they have delivered phenomenal results when used to unlock the potential of the gas plays in the Barnett and Haynesville formations in Texas, the Marcellus shale of Pennsylvania and the giant Bakken play that straddles the US-Canada border.

The ability to place the well bore precisely within a given formation has allowed operators to stimulate, or frac and open perforations almost exactly where they choose.

The result has been the world-wide phenomenon, termed unconventional gas shales.

These enhanced capabilities have transformed the natural gas industry and operators are racing across every continent around the world to apply them.

Today, a parallel push is to apply horizontal drilling and fraccing techniques to conventional formations to bring uneconomic or declining fields back to life.

“We don’t want to be the first to try a risky new technique or attempt to tap into a new and unfamiliar reservoir,” Nostra chief operating officer Alden McCall told Proactive Investors during a recent interview.

“The learning curve is fairly steep and it is measured in tens of millions of dollars.

“Instead, we are utilising techniques developed and proven in the shale plays and applying them in established reservoirs where the geology is well-known."

The mystery in all of this is where exactly Nostra Terra is planning to point the drill bit, and with just whom it will bring in.

“The plan is to pinpoint former and current producing areas that may not have produced their full potential due to barriers within the reservoirs,” McCall said.

The barriers essentially isolate, or compartmentalise the hydrocarbons within the larger reservoir through differential permeability, which happens in sandstones such as the Woodbine, or from unconnected fracture systems in carbonates such as the Austin Chalk.

Drilling in established reservoirs in the way set out by McCall last night reduces risks significantly.

Nostra will team-up with local partners familiar with the area and the geology and the plan is to build a pipeline of these safer targets.
Working with multiple operators on varying targets has the benefit of alleviating the bottlenecks that tend to de-rail the progress of traditional oilfield developers.

Nostra’s strategy under chief executive Lofgren has been to mitigate the potential downsides of any project.

The company’s withdrawal from the Ukraine, a part of the world that is geologically complex and fraught with political danger, is a good example of this safety-first approach.

It has also terminated its agreement with Hewitt Petroleum, operator of NTOG’ interests in Kansas.

The dissolution of the partnership with Hewitt allows it to retain ownership of the Bloom project in Kansas and to receive US$1.3 million in cash by the year end.

Bloom establishes sustainable production and cash flow in the US. The plan from here is to upscale.

“We've been hard at work and now have multiple deals in various stages of review and negotiation,” Lofgran reveals.

“While the first deal is close to being announced, we aren't stopping there.

“I think it's important to understand that our strategy allows us the ability to deliver great returns without being tied to a single asset. We plan to continually upgrade our portfolio."

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Nostra Terra Oil and Gas Company plc Timeline

February 20 2017

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