LONDON (Alliance News) - AIM-listed Nostra Terra Oil and Gas Company PLC Wednesday saw its shares rise strongly after it said it has acquired the working interest in 6,100 net mineral acres in the White Buffalo Prospect for USD1.2 million from Ward Petroleum Corp.
In a statement, the oil and gas company, which has a portfolio of assets in the US, said the potential fracking prospect is in the Big Horn Basin of Wyoming and comprises several targets including the proven Phosphoria Formation. Up to 20 potential locations for horizontal wells with 4,500 foot laterals, are "possible" with recoverable potential of up to 13 million barrels of oil, according to Nostra Terra.
The USD1.2 million price tag, which was funded through cash and debt, includes Ward Corp's costs for lease brokerage, legal costs, title work, filings, geologic and geophysical interpretation. It also includes other overheads incurred over the period required to generate the concept, lease the core area and deliver the final package to Nostra Terra. According to Nostra Terra, the acquisition will increase its current net debt position by about GBP600,000.
Additional cash reserves have been allocated to fund further acquisitions, Nostra Terra said.
"Our production portfolio across Oklahoma, Texas and Colorado continues to grow and generate cash. However, our focus has always been to acquire a significantly sized prospect which we control and which provides substantial potential upside, not just in economics but a large number of drilling locations. Two large, respected oil companies in the USA, Devon Energy and SM Energy, have recently become active in the area, further validating the acquisition," Chief Executive Matt Lofgran said in a statement.
According to Nostra Terra, industry peers such as Devon Energy Corp and SM Energy Co have each acquired "significant" leasehold positions and will be testing and evaluating their own horizontal wells in the Phosphoria formation in the near future.
"The resources we're targeting currently range from USD118 million to USD236 million on PV10 based on horizontal drilling and fracking of 4,500 foot lateral section. This should demonstrate to current and prospective shareholders the significant potential increase in scale for the company."
PV10 means the pretax, net present value of acquisition cost and estimated future revenues to be generated from the production of hydrocarbons, discounted at the annual discount rate of 10%.
Chief Operating Officer Alden McCall said the Phosphoria was first completed as a prolific producer in this multi-zone basin as early as 1922. He said that many wells have been drilled throughout the years and, eventually, some of those fields implemented water floods.
"Due to compartmentalization, recovery from the waterfloods was far less than had been projected in simulations. The identification of a 'failed waterflood', or of a 'bleeding core', or significantly less than projected recovery, is each, individually considered an indicator of a reservoir that could benefit from horizontal drilling and completion," McCall said in a statement.
"When they are all found in the same general area, such as in the Phosphoria of the White Buffalo Prospect, things really get interesting," the COO added.
Nostra Terra shares were Wednesday quoted up 15.0% at 0.322 pence.