TIDMNTOG
RNS Number : 2302P
Nostra Terra Oil & Gas Company PLC
08 June 2020
8 June 2020
Nostra Terra Oil and Gas Company plc
("Nostra Terra" or the "Company")
Operational and Corporate Update
Nostra Terra (AIM: NTOG), the oil & gas exploration and
production company with a portfolio of development and production
assets in Texas, USA, is pleased to provide an operational and
corporate update.
Highlights
-- Significant improvements in cashflow:
o Over 60% reduction in monthly overheads, versus 2019 monthly
average
o Lifting costs at Pine Mills reduced from c.$23/bbl down to
c.$16/bbl
-- Additional 1,600 bbl storage added to Pine Mills to provide flexibility on sales
-- Discovery Loan extended until 1 April 2022
-- Robust hedges remain in place - $48,000 received for May contract
-- Progress at Pine Mills farmout with decision on additional interest extended
The Board has performed a thorough review of all aspects of the
business, including all corporate and operational costs. As a
result, further reductions in overhead costs have been
achieved.
In addition, whilst the Directors consider Nostra Terra to
already be a low-cost operator in Texas, the Company has been able
to reduce lifting costs even more at Pine Mills over the last
couple of months, from c.$23 per barrel down to c.$16 per
barrel.
These cost reductions have yielded a significant improvement in
cash flow.
Reduction in Overheads
Nostra Terra has now achieved a reduction in monthly overhead
costs of over 60% versus the monthly average during 2019 (this
excludes one-time expenses already incurred - in particular, costs
dealing with the two requisitions initiated by one of the Company's
shareholders earlier this year). Savings have been made across many
aspects of the business, including significant cuts in remuneration
to the CEO (per RNS of 8 April 2020) and to the non-executive
directors. Both non -executive directors have now agreed to be paid
in shares, at a time to be determined, in lieu of 3 months of their
annual cash fees. The remainder of the non-executives fees in cash
is currently being deferred to be settled at a time to be agreed,
further aligning the interests of directors and shareholders.
Additional improvements in the field are described below.
Discovery Energy Limited Loans
The Company has reached an agreement to restructure existing
loans with Discovery Energy Limited ("Discovery") (the "Loans").
The Loans, of which GBP233,481 is, in aggregate, outstanding as at
1 June 2020, and which was repayable on demand, has been extended
to 1 April 2022, bearing an interest rate of 10% per annum,
accruing monthly, and consolidated into one loan (the "Discovery
Loan"). An initial payment of GBP10,000 has been paid to Discovery,
with payments of GBP5,000 per month to be made by the Company until
1 April 2022, with the balance outstanding due on or before that
date. The structure was agreed with careful consideration of the
group's cashflow requirements, in order to help the Company achieve
its immediate goal of reducing monthly costs as much as
possible.
A fee of GBP24,000 (the "Loan Fee") is payable to Discovery as
consideration for agreeing to reschedule the Loans, consolidated
into the Discovery Loan, until 1 April 2022. The Loan Fee, of which
GBP7,199 has been settled from the initial payment of GBP10,000,
will be further settled from the monthly repayments following
repayment of accrued interest with any balance being used to repay
the principal amount of the Loan. The amount of the Loan Fee due
and payable shall be reduced in the event that any amount of the
Discovery Loan is repaid early in the proportion of the amount
repaid to the total amount of the Discovery Loan.
Further, the Company owes to Mr Ainsworth and Discovery, in
aggregate, GBP85,292 in outstanding director and consultancy fees
(the "Additional Fees" and, together with the Loan Fee, the
"Fees"). The Additional Fees shall be subject to the same interest
rate as the Discovery Loan and shall be repayable on or before 1
April 2022 as per the Discovery Loan. Based on the above repayment
profile, and assuming no early repayments, the Company expects to
owe Mr Ainsworth and Discovery, in aggregate, GBP282,580 at 1 April
2022.
Related party transaction
Discovery is a vehicle controlled by Mr Ewen Ainsworth, who
served as a Director of the Company during the last 12 months.
Accordingly, the restructuring of the Loans and the payment of the
Fees are deemed to be related party transactions under the AIM
Rules for Companies.
The Directors of the Company consider, having consulted with the
Company's Nominated Adviser, Strand Hanson Limited, that the terms
of the restructuring of the Loans and the payment of the Fees are
fair and reasonable in so far as the Company's shareholders are
concerned.
Improvements at Pine Mills
During the lower oil price environment, the Company has moved
quickly to adapt and make further operational changes to both lower
its operating costs as well as increasing storage capacity.
In the past few weeks, the Company has i ncreased field storage
capacity to allow for greater production and inventory flexibility
in a volatile price environment. Four four-hundred barrel storage
tanks have been installed in the field; these tanks were purchased
at attractive prices during the previous oil price downturn in
2016, hence no additional capex was required. This 1,600 bbl
capacity provides Nostra Terra with more flexibility in choosing
when to sell its produced oil in order to maximize the received
price.
All field interventions are being screened for their economic
viability in the current low oil price environment. Some production
was temporarily suspended from some of the higher cost and less
productive wells. Lease operating expenses, including staff numbers
in the field, have been reduced to achieve significant cost
savings. This allows a focus on the more productive wells with more
robust economics at lower oil prices (i.e. $20 to $40 per
barrel).
Additionally, as announced on 22 April 2020, the Company
completed a farmout encompassing 80 acres of its 2,400 acres at
Pine Mills where Nostra Terra owns 100% working interest. This
provides Nostra Terra with a 25% working interest in the next well
once drilled, and which will be drilled at no cost to the Company.
The Company also retains the right to participate in an additional
10% working interest. Given the constraints to work and travel the
seismic and geology review did not take place until the middle of
May. Hence Cypress Mineral LLC ("Cypress"), the farminee, agreed to
allow a formal decision to be made 30 days from that time, which is
19 June 2020. The Board remains excited about the drilling plans
that can allow multiple wells and the progress Cypress is making
towards drilling. A further announcement will be made in due
course.
Hedges
Hedges, with strong counter-party, BP Energy Company, remain in
place for 2020 and continue to provide robust support to offset
lower oil prices. $48,000 was received for the May contract. Nostra
Terra is guaranteed $55.12 per barrel for 1,500 barrels per month
for the remainder of year.
Change of registered office address
The Company announces that its registered office address has
changed, with immediate effect, to Salisbury House, Suite 425,
London Wall, London EC2M 5PS.
Matt Lofgran , Nostra Terra 's Chief Executive Officer,
said:
"The combination of these improvements shows the Company has
taken prudent steps in the last year and has continued taking
action, making a significant improvement to cashflow. By adapting
swiftly to the lower oil price environment that we're now
experiencing, we benefit now and anticipate benefiting further as
prices hopefully continue to improve to more normal levels. At the
same time, the Company is planning to increase production through a
combination of existing assets, such as the farm-out at Pine Mills
and assessing workovers at Pine Mills, and screening for new assets
both internationally and in our core area."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014
For further information, contact:
Nostra Terra Oil and Gas Company
plc
Matt Lofgran, CEO Email: +1 480 993 8933
Strand Hanson Limited
(Nominated & Financial Adviser
and Joint Broker)
Rory Murphy / Ritchie Balmer /
Jack Botros Tel: +44 (0) 20 7409 3494
Novum Securities Limited (Joint
Broker)
Jon Belliss
Tel: +44 (0) 207 399 9425
Lionsgate Communications (Public
Relations)
Jonathan Charles Tel: +44 (0) 7791 892509
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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