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Nostra Terra Oil & Gas Company PLC, a company in the Oil & Gas sector, is making strategic adjustments under the leadership of Paul Welch. The Texas-focused firm, known for its oil and gas operations, is working on incremental improvements that may significantly influence its financial outlook.
Before Welch’s tenure, Nostra Terra (LSE:NTOG) faced financial challenges, including a notable debt of $4.2 million. The company has since managed to service this debt while maintaining modest cash generation. The next phase involves utilizing £462,000 in new investment, though raised at a significant discount, to enhance production and efficiency.
Focused Operations
The company's current focus is on Pine Mills in East Texas, an area with a long history of production dating back to 1949. Pine Mills targets the Woodbine horizon and currently averages 75 barrels per day (BOPD) from nine wells, with four functioning as injectors. These wells are characterized as long-life, low-decline assets.
The £462,000 investment is intended to bring an additional 50 barrels per day online by reactivating some idle wells that need workovers. Welch highlights that some workovers involve basic repairs, such as replacing pump units or gearboxes, while others address more complex issues like bad casing.
Incremental Improvements
Nostra Terra is also pursuing a waterflood operation, which involves balancing withdrawals with injections to boost production. This method could potentially add around 30 barrels per day. Welch notes that these improvements involve minimal incremental costs, aiming to optimize water management to enhance production efficiency.
Analysts estimate Nostra Terra's netback, or effective margin on production, to be approximately $39 per barrel at a $75 crude price. The anticipated increase in daily production could elevate annual cash flow from about $200,000 to approximately $1.2 million.
Prospects
The company plans to introduce output from the Fouke-3 well, where it holds a 33% working interest. If the well performs as expected, contributing around 124 barrels per day, the annual cash flow could rise by an additional $1 million.
Nostra Terra has also arranged a deal with partner Cyprus Production to carry out an infill drilling program using modern 3D data. The focus is on ‘up-hole’ pay zones, including the Subclarksville horizon. The aim is to drill several new wells with expected initial flow rates exceeding 100 barrels per day. The company’s June presentation outlined potential for three infill opportunities that might add over 300 barrels per day, which could lead to a significant increase in cash flows.
In line with its strategic focus, Nostra Terra is streamlining its portfolio by selling two assets in West Texas and negotiating the sale of a property in South Texas.
The planned strategy under Welch's leadership is a detailed approach aiming for profitability. The execution of these incremental changes is expected to generate substantial financial benefits over time.
