Nostra Terra Regulatory News (NTOG)

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Final Results for the Year Ended 31 December 2010

24 June 2011

Highlights

·; Oil and gas production established in US

·; First Texas well achieved payout in 35 days

·; Operating subsidiary formed

·; Operating loss for the year £591,000 (2009: £659,000)

·; Settlement agreement secured post year end to terminate relationship with HPI

·; Interests acquired in two additional prospect units in Texas

For further information, visit www.ntog.co.uk or contact:

Nostra Terra Oil and Gas Company plc

Matt Lofgran, CEO

mlofgran@ntog.co.uk Telephone: +1 480 993 8933

Religare Capital Markets

Peter Trevelyan-Clark/Ben Jeynes Telephone: +44 (0)20 7444 0800

Alexander David Securities Ltd

David Scott / Bill Sharp Telephone: +44 (0)20 7448 9820

Lothbury Financial Services Limited

Gary Middleton / Michael Padley Telephone: +44 (0)20 7868 2010

Chairman's statement

I am pleased to present the annual report and accounts of Nostra Terra Oil and Gas Company plc for the year ended 31 December 2010.

This has been an eventful, and generally very positive, year for the company. Having set course on a new strategic direction in the second half of 2009, we have made considerable progress in implementing this strategy. Early in 2010, Nostra Terra began producing oil and gas in the US by participating in the redevelopment of a number of mature wells in Kansas. At the same time, the company transferred its original Ukrainian interests to a local operating entity while retaining rights to 25% of any future net profits from the assets with no further cost exposure.

In June 2010, we acquired a small (2%) interest in a horizontal redevelopment well within the Austin Chalk formation in Texas. The results exceeded our expectations, with the well producing sufficient oil and gas to pay back the total cost of redevelopment within just 35 days.

We were also pleased in June 2010 to welcome Alden McCall to our board of directors as Chief Operating Officer. Alden is a Certified Petroleum Geologist and MBA, who has previously held senior exploration positions with a number of US-based oil and gas companies. He has exceptional industry contacts and knowledge of both the geology of the major US hydrocarbon basins and the advanced technologies that can be used to transform the productivity of these mature basins - and win "new oil from old fields". His key priorities are to accelerate the growth of our portfolio in horizontal plays like the Austin Chalk by identifying, evaluating and acquiring substantial interests - operated as well as non-operated - that will build our cash flow and our reserve base.

More details about our progress and plans through the reporting period and to the time of preparing this report are contained in the Chief Executive's review.

While establishing Nostra Terra as an oil producer has been an exciting and important milestone this year, it has not all been plain sailing. As I reported in my interim statement, the performance of our Kansas properties (Hoffman, Boxberger and Bloom) was below our expectations and our view of their potential. Accordingly, we undertook a comprehensive review covering all aspects of the redevelopment programme, which involved detailed discussions with the operator of the Kansas properties, Hewitt Petroleum Inc. and related entities (the "HPI Entities"). As a result of these discussions, Nostra Terra and the HPI Entities agreed shortly after the year end to terminate their relationship.

A settlement agreement, the principal terms of which are outlined in the Chief Executive's review and which the board views as a very positive outcome for the company and our shareholders, was finally concluded in May 2011.

With this difficult situation now resolved and Nostra Terra assuming operatorship for the first time, on the Bloom Property, we are now able to focus all our attention and energy on delivering our ambitious growth strategy. Our aim is to build a diverse, balanced and efficiently managed portfolio of assets within proven hydrocarbon regions of the US that will generate strong and sustainable cash flow through the use of advanced technology.

As always, I would like to thank all our shareholders for their continued support, and we look forward to reporting on further significant progress in the year ahead.

Sir Adrian Blennerhassett

Chairman

Chief Executive's review

During the year ended 31 December 2010, Nostra Terra laid the foundations on which we aim to build a profitable and fast-growing upstream business within established US hydrocarbon provinces.

We became an oil and gas producer, first in Kansas and later in Texas, and we are now an operator through our wholly-owned subsidiary, Churchill Operating LLC. After year end, we also made significant additions and improvements to our asset portfolio, which we are now looking to grow further in both scale and quality.

Nostra Terra incurred an operating loss for the year of £591,000 (2009: loss of £659,000), while revenues rose to £137,000 from £33,000 in the prior year.

At year end, the group held cash reserves of £720,000.

First oil was produced from the Hoffman Property in February 2010, followed a few weeks later by the Boxberger and Bloom Properties. By May 2010, a total of seven wells had been brought back into production on the three Kansas properties and were producing a total of approximately 73 barrels of oil per day (bopd).

These initial volumes were below our expectations, and they continued to be through the year. As we announced in our half yearly report last September, Nostra Terra initiated a detailed review of the redevelopment programme including geological, engineering and operational aspects. Following extensive discussions with the operator of the Kansas properties, Hewitt Petroleum, Inc. and related entities (the "HPI Entities") as well as a number of technical advisers, Nostra Terra and the HPI Entities agreed in January 2011 to end their relationship and entered into a settlement agreement.

A revised agreement was eventually closed in May this year, and the principal terms were as follows:

·; Nostra Terra acquired 100% working interest in, and assumed operatorship of, the producing Bloom Property;

·; Nostra Terra assigned its interest in the Boxberger Property, where operations were suspended pending the resolution of title issues, to the HPI Entities, as well as its interests in all other HPI-operated assets (including Hoffman, the undeveloped adjoining acreage within the Trapp Field and the Koelsch Property) and the Liberty #1 exploration well;

·; Nostra Terra received a US$1.3 million note, secured by other assets of the HPI Entities, which will mature on 31 December 2011 and accrues interest at 10% per annum. An early settlement discount of 3% per 30-day period prior to the maturity date is available to the HPI Entities;

·; In the expectation that HPI's successor, Richfield Oil & Gas Company, will become publicly traded prior to the expiration of the HPI note, Nostra Terra has the right, but not the obligation, to convert the principal amount outstanding under the note into shares of Richfield at US$0.25 per share; and

·; Richfield has issued Nostra Terra a warrant to subscribe for up to 6 million shares of Richfield common stock with an aggregate exercise price of US$1.5 million at a strike price of US$0.25 per share, expiring one year after admission to trading on the Toronto Stock Exchange or the TSX Venture Exchange.

This review and resolution was extremely time-consuming, but it was crucial in ensuring the company is able to pursue its long-term growth objectives successfully. The board believes the revised terms agreed with HPI represent a more positive outcome for our shareholders than those of the original agreement which lapsed unclosed three months earlier, and provide us with a better asset base than we had previously.

We remain confident that there is scope, under our operatorship, to improve the productivity of the Bloom Property, where current production is approximately 20 bopd (gross). More importantly, we are now in a position to further expand our asset portfolio, and to focus all our resources on identifying and acquiring larger and more value-adding interests within established and emerging oil plays.

The appointment of Alden McCall as our Chief Operating Officer in June 2010 greatly enhances our capabilities both in operational and deal-making terms. As a Certified Petroleum Geologist who has held senior positions within a number of US-based upstream companies over the past 25 years, Alden has acquired tremendous knowledge of mature US hydrocarbon basins and of the potential presented by recent advances in drilling technology to capture new oil from these historic fields. He has also developed strong relationships with many leading players within the US industry.

Alden was instrumental in securing our first foothold in Texas which, though small, proved extremely encouraging. Our aim is to replicate this successful application of horizontal drilling technology with more and larger acquisitions in established US sandstone and carbonate reservoirs, and we believe there are abundant opportunities available.

This first Texas well, in which Nostra Terra has a 2% interest, is located in the Austin Chalk formation. Its redevelopment involved the drilling of a new section extending just over 1,900 feet horizontally from the original vertical wellbore. First oil was produced from the horizontal section in June 2010.

Austin Chalk wells characteristically flow at high initial rates followed by steep decline curves, and this well is no exception. Nevertheless, the total redevelopment costs of $890,000, including Nostra Terra's share, were fully recovered in just 35 days. The well, which has now produced sufficient oil and gas to exceed twice payout of its original cost, has been experiencing dropping production in recent weeks and several workover options are being evaluated. The well is expected to remain profitable, albeit at lower production volumes, for several years. There is also the possibility of drilling a second horizontal section into a lower zone within the producing formation at a later date.

Other post year end activities

Just after year end, the company acquired a 1.2% working interest before payout (BPO), 1.0% after payout (APO) in the Vintage Hills Prospect Unit, located within the large Giddings Field in Texas. The first horizontal well on the prospect unit, Agnello #1, was spudded by operator New Century Exploration, Inc. in mid-January to target one of four separate Austin Chalk reservoirs that had been identified as oil-bearing by earlier vertical drilling in the unit.

During the initial three-day test period, the well flowed at rates ranging between 402 and 139 barrels of oil equivalent per day, and to date it has produced approximately 1800 barrels of oil and 3600 barrels of oil equivalent in natural gas. The well is currently experiencing intermittent plugging in the lateral section, and a remedial workover is about to be conducted. Further lateral sections may be drilled in future to access the other oil-bearing Austin Chalk reservoirs.

Shortly after acquiring our interest in Vintage Hills, we entered into a second agreement with New Century Exploration, Inc., to acquire a 3.64% working interest BPO (3% APO) in the Nesbitt Prospect Unit, located in the Woodlawn Field in Texas.

The Nesbitt Prospect is a horizontal development project targeting the Middle Pettet Limestone formation. Most of the production to date from Woodlawn has been from the Lower Pettet "Crane" zone, but previous vertical drilling on the acreage has indicated that the Middle Pettit Limestone is also oil-bearing; it is also much thicker, but less porous and permeable than the Lower Pettet - making it an ideal candidate for horizontal drilling.

The first of potentially three wells planned within the Nesbitt Unit was spudded in March 2011 and was drilled vertically to a depth of approximately 7,000 feet followed by a horizontal section of just under 3,000 feet. Significant hydrocarbon shows were encountered in the target formation during drilling. Additional downhole work has still to be carried out before the well can be completed and fully tested, and a workover rig is due to arrive on site in early July.

Looking forward

There is no question that the resolution and conclusion of our relationship with HPI occupied a great deal of the board's time during and beyond the reporting period. However, we are pleased to have finally resolved this complex matter on terms that we believe are in the best interests of Nostra Terra's shareholders.

During the remainder of 2011, our priorities are to operate the Bloom property in a way that will improve its productivity and profitability, and to step up the pace of our growth by identifying, screening and acquiring a diverse pipeline of assets in established oil and gas plays - including larger interests, and both operated and non-operated properties - where we can generate added value and strong, sustainable cash flow through disciplined cost control and the use of advanced technology.

Matt Lofgran

Chief Executive Officer

Consolidated income statement

for the year ended 31 December 2010

Consolidated statement of comprehensive income

for the year ended 31 December 2010

Consolidated statement of changes in equity

for the year ended 31 December 2010

Share capital is the amount subscribed for shares at nominal value.

Retained loss represents the cumulative losses of the Group attributable to owners of the Company

Share premium represents the excess of the amount subscribed for share capital over the nominal value of those shares net of share issue expenses. Share issue expenses in the year comprise costs incurred in respect of the issue of new shares on the London Stock Exchange's AIM market.

Translation reserves occurs on consolidation of the translation of the subsidiary's balance sheet at the closing rate of exchange and its income statement at the average rate.

 Consolidated statement of financial position

31 December 2010

Consolidated statement of cash flows

for the year ended 31 December 2010

Note to the consolidated statement of cash flows

for the year ended 31 December 2010

RECONCILIATION OF LOSS BEFORE TAX TO CASH GENERATED FROM OPERATIONS

Notes to the financial statements

for the year ended 31 December 2010

GENERAL INFORMATION

The financial information set out in this announcement does not constitute the Company's financial statements for the years ended 31 December 2010 or 2009. The financial information for 2009 is derived from the financial statements for 2009 which have been delivered to the Registrar of Companies.

The financial statements for 2010 have been audited and will be delivered to the Registrar of Companies. The auditors have reported on the 2010 statements; their report was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

The preliminary announcement has been prepared on the basis of the accounting policies as stated in the financial statements for the year ended 31 December 2010.

Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. 

A copy of the Company's annual report and accounts for 2010 will be posted to shareholders on or before 29 June 2011 and will be available on the Company's website (www.ntog.co.uk).

1. ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.

2. EARNINGS PER SHARE

The calculation of earnings per ordinary share is based on earnings after tax and the weighted average number of ordinary shares in issue during the year. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group had two classes of dilutive potential ordinary shares, being those share options granted to employees and suppliers where the exercise price is less than the average market price of the Group's ordinary shares during the year, and in 2009 Convertible Loans.

Details of the adjusted earnings per share are set out below:

3. OTHER INTANGIBLES

Group

US mid-continent acquisition

On 15 July 2009, the Company entered into definitive agreements with Hewitt Petroleum, Inc. ("HPI") for the purchase and exploration of three properties in Kansas, USA for an initial consideration of US$235,000, which has been paid in cash with US$25,000 of the balance due within 60 days of execution of definitive agreements ("Execution"), US$425,000 within 90 days of Execution and US$100,000 to be satisfied by the assignment by Mr Lofgran to HPI of his working interest in another property known as the Perth field, where HPI is also a partner.

On 16 May 2011, the company entered into an agreement with Hewitt Petroleum, Inc. (now Richfield Oil & Gas Company) and Hewitt Energy Group, Inc. (together the "HPI Entities").

The principal terms of the agreement, which on closing led to termination of the operational relationship between the Company and the HPI Entities, were as follows:

Nostra Terra acquired 100% working interest (WI) in, and assumed operatorship of, the producing Bloom property;

Nostra Terra's existing 75% WI before payout (50% WI after payout) in the Boxberger property, where operations remain suspended pending the resolution of title issues, was assigned to the HPI Entities;

Nostra Terra assigned to the HPI Entities its interests in all other HPI-operated assets (including Hoffman, the undeveloped adjoining acreage within the Trapp field and the Koelsch property) and the Liberty #1 exploration well;

Nostra Terra received a US$1.3 million note to be secured by other assets of the HPI Entities (the "HPI Note"). The HPI Note will mature on 31 December 2011 and accrue interest at 10% per annum. An early settlement discount of 3% per 30 day period prior to the maturity date is available to the HPI Entities;

In the expectation that HPI's successor, Richfield Oil & Gas Company ("Richfield") will become publicly traded prior to the expiration of the HPI Note, Nostra Terra has the right, but not the obligation, to convert the principal amount outstanding under the HPI Note into shares of Richfield at US$0.25 per share; and

Richfield has issued Nostra Terra a Warrant, exercisable in whole or in part, to subscribe for up to 6 million shares of Richfield common stock with an aggregate exercise price of US$1.5 million, at a strike price of US$0.25 per share, expiring one year after admission to trading on the Toronto Stock Exchange or the TSX Venture Exchange. The warrant will be transferable, subject to the provisions of the US Securities Act 1933 (as amended).

On 18 February 2010, the Group via its wholly-owned subsidiary, Nostra Terra Overseas Ltd ("NTOL"), entered into a contract with Crimea Nadra Invest (CNI) relating to its assets in Ukraine.

Under the terms of the contract, CNI acquired all the rights and obligations associated with the Joint Activity Agreement of 27 January 2001 (the "JAA") covering NTOL's operations in Ukraine and in particular the Oktyabrskoe field licence, while NTOL retains a right to payment of 25 per cent of any net profits generated by CNI from the JAA, which runs for a period of 25 years from 27 January 2001. The consideration for the transaction is to be settled by the deferred payment from future oil sale proceeds of 360,000 Ukraine hryvnia (approximately £29,000), which will be applied towards general working capital.

4. PROPERTY, PLANT AND EQUIPMENT

5. TRADE AND OTHER RECEIVABLES

  The directors consider that the carrying amount of other receivables approximates their fair value.

6. TRADE AND OTHER PAYABLES

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing expenses.

The directors consider that the carrying amount of trade and other payables approximates their fair value.

7. RESERVES

8. EVENTS AFTER THE REPORTING PERIOD

On 17 January 2011, the Company granted options to subscribe for 3,000,000 ordinary shares of 0.1p each to Mr Stephen Oakes, exercisable at any time until 14 January 2014 (subject to extension if the Company is then in a close period) at a price of 0.37 pence per share, approximating to the average closing share price of NTOG over the 30 day period prior to grant. Mr Oakes has no other options or warrants over NTOG ordinary shares and is interested in 14,166,666 NTOG ordinary shares, representing approximately 0.88 per cent of the Company's issued ordinary share capital, as enlarged by the warrant exercise above.

On 20 June 2011, the Company entered into an agreement with Plainsmen Partners LLC ("Plainsmen Partners") to acquire a 16.25% working interest in the Verde prospect, located in south-eastern Colorado.

The leases cover approximately 636 net acres in which an initial test well will be drilled into the Mississippian formation to a projected total depth of 5,300 feet. The total estimated cost of the well is US$1,131,691, of which Nostra Terra's estimated portion is US$183,900. The net revenue interest of Nostra Terra's 16.25% working interest is 13.41%. Drilling of the well is expected to begin during Q3, 2011.