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UPDATE - Nostra Terra doubled production in the fourth quarter

Last updated: 13:13 04 Feb 2015 GMT, First published: 14:13 04 Feb 2015 GMT

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--ADDS BROKER COMMENT--

Nostra Terra (LON:NTOG) has told investors that production doubled over the course of the fourth quarter, with net output averaging 169 barrels oil equivalent per day (boepd) in the month of December.

Net production for the whole three month period increased by 68%, the company said.

In this record quarter for the company four new wells came online.

Among them, the CT-14 (or Gant 22) and CT-16 (Bollenbach 1-33H) were 20% owned by the company and as such had a particularly significant impact on the production profile – the former began at a rate of 286 boepd, while the latter started at 555 boepd.

The steep rise in production has helped offset the impact of falling oil prices, which fell some 50% during the quarter.

"We had a great quarter, more than doubling our production and delivering to shareholders as projected,” said chief executive Matt Lofgran.

“Although during the period we saw oil prices halve, Nostra Terra still realized an increase in revenue of 20% over the previous quarter.”

For the three month period Nostra’s net production amounted to 12,376 boe and it generated a total of US$707,978 in revenue.

The company said it expects properties that are already in production will remain economic in the current oil price environment. It does, however, reveal that most operators that it works with have decided to postpone new drilling until oil prices strengthen.

Nostra added that its operations remain cash flow positive, and management is being careful in deciding when and where cash flows are reinvested. The company said it will continue to be disciplined in maintaining low corporate overhead.

At the company’s recently acquired, wholly owned White Buffalo project the company continues early stage work and preparations with a view to moving quickly to drilling as oil prices recover.

It is also Nostra's intention to seek to take advantage of the low oil price by finding new opportunities to add growth through the US mid-continent.

“Our existing production comes from both vertical and horizontal wells and our operating costs are relatively low,” Lofgran said.

“We are currently cash flow positive with free cash flow adding to our existing cash in the bank.

"We anticipate oil price volatility going forward; however, the consensus in the industry is that crude oil prices will be higher at the end of the year than they are now.

“Management will continue to be careful with funds while remaining vigilant in the search for potential growth opportunities, which may arise in these interesting times.”

Northland Capital analyst Andrew McGeary repeated a ‘buy’ recommendation for Nostra following this morning’s update.

“A positive end to the year from Nostra Terra if not for the oil market in general,” McGeary said in a note.

“The top line looks in line with our numbers (£1.24m versus £1.26m) reflecting strong performance from key wells that offset some of the oil price weakness in the final quarter. 

“The statement reads well with management showing restraint in committing capex and benefiting from a good base of production that is exceeding monthly costs at present. 

In terms of progress with White Buffalo, McGeary points out that Nostra is not under time pressure to advance drilling and it remains well positions will low overheads to advance when prices recover.

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