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LONDON (Alliance News) - Nostra Terra Oil & Gas Co PLC on Monday said it has started work to reduce the operating costs at the Pine Mills oilfield in the US state of Texas after acquiring an 80% stake in the asset last month for just over USD1.0 million.
The company said management have paid their first visit to the site since the acquisition and have identified "significant cost savings" across the operation in addition to picking the initial workover targets to grow production in the near term.
Work has commenced on an updated reserves report, initially being undertaken by internal personnel, before being ratified by an independent
On a gross basis, the field was producing about 100 barrels per day when the acquisition was completed at the back-end of November. The acquisition became effective from the start of November, meaning Nostra Terra was entitled to its share of production from then onwards.
Lifting costs at the field are currently running at about USD30 per barrel, comparable to the current spot WTI price of USD54 per barrel.
"Based on due diligence completed prior to completion of the Acquisition and work completed in the first week as the field's operator, Nostra Terra's operational team believes it has identified significant potential cost savings that can be introduced quickly. Nostra Terra will report to the market as it makes progress in implementing these cost-cutting measures," said the company.
"Further, Nostra Terra's operations team has created an initial workover schedule for a number of existing oil wells, with the expectation of delivering near-term, incremental increases in daily oil production," Nostra Terra added.
A longer term plan for the entire field will be drawn up for the wider development of Pine Mills to increase overall production.
Nostra Terra also plans to use the field to raise some more funds without diluting shareholders. The company plans to hedge "a portion" of its share of production to fund the workovers and drilling that is to be conducted at Pine Mills. It did not state how much money it was looking to raise.
"By implementing a careful hedging policy, Nostra Terra will be able to hedge a portion of current production in order to secure returns, while leaving the company further room for upside. This balances short-term capital requirements with the longer-term desire to maximize returns," said the company.
Nostra Terra shares were up 0.8% to 1.82 pence per share on Monday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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