Nostra Terra Oil & Gas

by Michael on June 28, 2011

It is fitting I suppose that the first post of my new blog is written on Nostra Terra, in which I have shared a roller coaster of a journey over the last two years.

Nostra Terra Oil and Gas Company plc (AIM: NTOG) is an emerging oil and gas exploration and production company with recently acquired assets in established producing regions within the US mid-continent.

The share price for this UK AIM quoted company has ranged in this period from 0.1 pence to 2.7 pence and is pretty volatile to say the least. Following an 18% climb yesterday, today we had an 11% rise and we are now just shy of 0.9 pence. I myself have four purchases dating back to 2010 at 0.3 pence, 0.4 pence, 0.7 pence and 1.1 pence.

Recently it appears that the promises NTOG management made regarding the  negotiations to land a potentially transformational deal in the US look like they are now coming into fruition with a view to acquiring “larger interests in established reservoirs capable of delivering strong cash flow and increased payout” (to quote NTOG themselves).

And certainly it seems that a new strategy has been adopted to drill in established reservoirs in order to reduce risk significantly and team up with local partners familiar with the area and the geology with the plan to build a pipeline of these safer targets. Working with multiple operators on varying targets has the benefit of alleviating the bottlenecks that tend to de-rail the progress of traditional oilfield developers. The company’s withdrawal from the Ukraine, a part of the world that is geologically complex and fraught with political danger, is a good example of this safety-first approach.

A statement from Nostra says the following:

As the current work programme progresses to bring these properties into production quickly and efficiently, the company will continue to evaluate and acquire additional assets in the US mid-continent and other proven hydrocarbon-bearing regions where operating costs and geological risk are relatively low, and where production can be enhanced using proven new recovery technologies.

With its focus now on the US mid-continent, Nostra Terra has transferred its rights and obligations in the Oktyabrskoe field in Ukraine, but retains a right to 25% of any future net profits from the field, with no further cost exposure. This allows the company to focus all its resources on building a solid foundation within the US, on which to grow its oil and gas business steadily and selectively and thereby create significant and sustainable value for its shareholders.

Although speculative and risky, I am quite bullish on this share and can see it going back up in the short-term to around the 1.6 pence level. Here I may take some profit and let the rest run. Let us see what tomorrow brings.

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