Final Results-NOSTRA TERRA OIL AND GAS COMPANY PLC

Final Results-NOSTRA TERRA OIL AND GAS COMPANY PLC

Notice of AGM

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 announce its final results for the year ended 31 December 2022 (the "Results"). A copy of the Results, along with a Notice of AGM, is being posted to Shareholders and is available on the Company's website, www.ntog.co.uk. The AGM will be held at at the offices of Druces LLP at Salisbury House, London Wall, London EC2M 5PS at 11.00 a.m. on 30 June 2023. Extracts from the Results are set out below.

This announcement contains information for the purposes of Article 7 of the EU Regulation 596/2014.

Chairman's Report

2022 - Good progress in line with strategy

I am pleased to present Nostra Terra Oil & Gas Company PLC's annual report for the year ending 31 December 2022.

The past year saw the start, but sadly not the end, of the Russian invasion of Ukraine. The sanctions and boycotts on Russian oil and the end of most covid-related restrictions on travel and work meant high oil prices in early 2022 and for much of the year. However, the continuing Chinese lockdowns served to act as something of a damper on the global demand for goods, in turn reducing demand and hence the price of hydrocarbons. At the end of 2022, the WTI spot benchmark stood at around $79.

As planned, Nostra Terra took advantage of the generally strong oil prices during the year to consolidate production and to invest further into our existing acreage. Strong cash flows meant that we were able to drill both the Fouke #2 (East Texas) and the Grant East #1 (Permian Basin) wells without diluting existing shareholders. The Fouke well has been a good producer, though the Grant East well suffered from completion problems.

Also, in line with our strategy for 2022, further workovers on existing wells took place during the year. These have supported our production volumes and our revenues.

All in all, 2022 provided the Company with the highest production and revenues since it was founded.

Toward the close of the year, this was a contributing factor to the increase in the borrowing base of the senior facility provided to Nostra Terra by WAFD from $3,350,000 to $4,350,000, though increases in interest rates globally also led to an increase in the interest rate associated with this facility.

After the year-end, and at the time of writing, we await the outcome of the Texas Railroad Commission's Field Allowable Hearing on the Fouke Wells in the Pine Mills Field, East Texas. Our request to allow production at significantly higher daily rates from these wells was unopposed; success would mean we can continue to benefit from the full achievable flow rates of these prolific wells.

In March 2023, we replaced Jeffrey Henry LLP with MAH, Chartered Accountants as the Company's auditors. Jeffrey Henry LLP no longer had sufficient capacity to service Nostra Terra and a number of others of its clients' needs and so had to withdraw from providing audit services to several companies.

As always, Nostra Terra continues to actively seek out and assess new opportunities both in the US and further afield. Thank you for your continuing support throughout the last year.

Dr Stephen Staley

Non-Executive Chairman

1 June 2023

 

 

Chief Executive Officer's Report

2022 was a record year of production and revenue for Nostra Terra, while keeping costs relatively flat, resulting in a significant increase in gross profit. The Company remained focused on growth without any dilution to shareholders.

At the beginning of the year, we brought on a new well in Pine Mills (32.5% working interest). Following this, the Company drilled a new well on the newly acquired Grant East Lease (100% working interest). Both of these were funded from existing resources.

Revenues for the year were $4,021,000, an increase of 76% from $2,282,000 in 2021, reflecting a combination of a 19% increase in production sales and an improving commodity price environment (average $91.17 per barrel sold in 2022 compared to $61.45 in 2021). Gross profit before non-cash items (depreciation, depletion, and amortization) was $2,242,000, vastly improved from a gross loss of $574,000 in 2021.

The Board continues to focus on its stated aim of increasing cashflow and reserves for the year ended 2023.

United States

All of Nostra Terra's operations in the US target conventional reservoirs (i.e., not shale), typically with lower lifting costs and longer-life reserves than unconventional ones.

East Texas (33- 100% WI)

Nostra Terra's core asset is the Pine Mills field (100% WI) providing stable production. In 2022 production from the area accounted for 84% of the Company's sales (50-75% WI).  Production remained stable throughout the year from the core producing wells, while the Company's focus was on growing production in the new farmout area.

At the beginning of 2022, the Fouke 2 (32.5% WI) well was drilled and put into production. The well was then tested and flowed at a rate of 145 bopd over a 24-hour period with a 0% watercut and placed into continuous production. This production rate exceeded that of the offset Fouke 1 well by 77% because the Fouke 1 had been limited by field rules ("allowable") to 82 bopd per well. As a result of the past performance of the Fouke 1 and the test rate of the Fouke 2, the operator requested a substantial increase in the field allowable rate so that both wells can be produced at higher and more efficient rates. The hearing took place in April of 2023 and a decision is expected to be handed down during Q3 2023. Until a decision by the Texas Railroad Commission is made the operator continues to produce both wells above the current allowable cap, to obtain sufficient technical information to support the increased field allowable.

West Texas (50 - 100% WI)

In 2022 production from the area accounted for 8.4% of the Company's sales (50-75% WI). In April 2022, the Company announced the Grant East lease acquisition (100% WI) and preparations to drill. Drilling took place in May 2022. The well encountered 24 feet of gross reservoir section in the Upper Clear Fork and 108 feet of gross reservoir section in the Lower Clear Fork, which compares favourably with the NTOG-operated wells on an adjoining lease. However, during the completion operations the fracture stimulation propagated out of zone and intersected a deeper water bearing horizon that produced at high water rates, rendering the well uneconomic to produce.  The Company has completed a technical study of the completion operations and this information will be used in future operations to improve the completion results. The well was funded from existing resources, thus avoiding dilution to shareholders.

South Texas (100% WI)

In 2020 the Company acquired the Caballos Creek asset, comprising two leases. There are no current plans for expansion in this area.  Production from this area accounted for 7.2% of Company sales.

Senior Lending Facility

In December 2022, the Company completed a redetermination of its Senior Lending Facility, resulting in a significant increase in the Borrowing Base. The Borrowing Base was increased from $2,350,000 at the end of 2021 to US$4,350,000 based upon a combination of increased production volumes, reserves, pricing and subsequent cashflows. The size of the Facility and Borrowing Base will continue to be reassessed at least twice yearly. The interest rate ending December 2022 was 6.5%

The Facility is not restricted to any geographical region. Nostra Terra can deploy funds from the Facility for operational purposes and acquisitions in its current areas of operation or in other areas of the world, should the opportunity arise.

Outlook
The Company enjoyed a record year for revenue and cashflow. Two wells were drilled during the year using existing resources, while debt levels were reduced. The Company plans to continue to pursue opportunities both within and outside the existing asset portfolio where we believe value can be created for shareholders.

We're grateful for the support of our shareholders throughout the year. On behalf of the entire team at Nostra Terra, we thank you and look forward to continued success in the future.

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