Nostra Terra adds to its footprint in South Texas

By Amy McLellan

Nostra Terra Oil and Gas continues to add to its portfolio. The AIM-quoted E&P has acquired a one per cent working interest in the San Miguel Prospect stretching for 35,000 acres in South Texas, building on last month’s acquisition of an interest in the 20,000 acre Don Pedro prospect. This represents Nostra Terra’s second acquisition this quarter, with plans to acquire additional interests if appropriate.

This is an active project, with the first well already drilling ahead and due to complete within one month. It will be drilled to a depth of 4,500 ft and will be extended horizontally 5,100 ft. More wells are planned, with plans for one well at least every four months. NTOG will fund this from internal cashflow. The targets here are shallow oil targets with associated liquids-rich natural gas, with up to nine stacked-formations making the play prospective for horizontal drilling, which has proved successful elsewhere in the area.

The hydrocarbon province of South Texas is one of the most prolific in the United States. It offers many potential targets, such as the Eagle Ford, Escondido, Olmos, San Miguel, Austin Chalk, Buda, Georgetown, Edwards and other formations, often in excess of 250 feet thick in pay. Importantly, the Eagle Ford is considered to be the original source rock for the hydrocarbons in most of the stacked pays along the trend.

NTOG says this Eagle Ford trend has the same “stacked pay” characteristic that is consistent with its breakthrough Chisholm Trail project in Oklahoma, which are relatively robust even at lower oil prices. “Such areas allow for the “multiplier effect” where numerous zones can be exploited within the same leases,” says the company.

Chief executive Matt Lofgran said that between the San Miguel and Don Pedro prospects, investors should see a new well every over month. “This compares very well with Chisholm Trail [its breakthrough project in Oklahoma] where over the last few years we announced 18 wells in a period of 26 months, with a number of operators,” he said.

The company is keen to make more acquisitions in this area to have a “material impact on production and reserves going forward,” said Lofgran, who sees the current oil price environment as an opportunity. “Many operators have cut their CAPEX drilling budgets significantly, simply waiting for oil prices to strengthen while we see this period is an opportunity to grow.” It targets assets that are already producing, currently drilling or are immediately drill-ready.

These acquisitions will help keep momentum: in Q1 2015 production surpassed 11,000 boe, up 79 per cent over the same quarter in 2014, delivering revenues of US$446,956 for the three month period. As well as Oklahoma and its new core area in South Texas, NTOG also has 100 per cent of the White Buffalo prospect in the prolific Big Horn Basin of Wyoming, with up to 20 potential locations for horizontal drilling and a recoverable potential of 13 million barrels of oil, which offers some significant upside for the future.