Nostra Terra Regulatory News (NTOG)

8 April 2020

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Fundraise and Appointment of Joint Broker

Partial Loan Conversion

Corporate Update

Related Party Transactions

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 that it has raised £318,055 (the "Fundraise"), before expenses, in order to strengthen its balance sheet and position the Company for potential further growth in 2020 despite challenging market conditions.

Highlights:

· £318,055, before expenses, raised via a Placing and Subscription

o Directors have participated in the Subscription, amounting to, in aggregate, £90,000

· Fundraise completed to strengthen the Company's balance sheet

· Portfolio of conventional oil assets with relatively low operating cost

· Significant reduction in CEO's remuneration

· Additional reductions in overheads being implemented, with cost review ongoing

· Reduction in corporate debt pursuant to the Partial Loan Conversion

· Novum appointed as joint broker

Fundraise

The Company has raised, in aggregate, £318,055, before expenses, by way of a placing of 20,000,000 new ordinary shares (the "Placing Shares") (the "Placing") and a subscription of 107,222,000 new ordinary shares (the "Subscription Shares") (the "Subscription") at a price of 0.25 pence per share (the "Issue Price"). The net proceeds of the Fundraise will be utilised to further the Company's strategy and for general short to medium term working capital purposes. Further fundraises are likely to be necessary thereafter.

The Issue Price represents a discount of approximately 47% to the closing middle market price of the Company's ordinary shares on AIM of 0.47 pence on 7 April 2020, being the latest practicable date prior to this announcement. The Placing Shares and Subscription Shares (together, the "Fundraise Shares") represent approximately 64% of the Company's issued share capital.

The Placing was conducted by Novum Securities Limited ("Novum") acting as agent for the Company. Novum has been appointed as a joint broker to the Company with immediate effect.

Issue of Warrants

Participants in the Fundraise will be issued with one warrant for every two Fundraise Shares subscribed for (the "Warrants"), resulting in the issue of 63,611,000 Warrants. The Warrants will be exercisable for a period of two years at a price of 0.60 pence per share, which equates to a premium of 140% to the Issue Price.

In addition, Novum will be issued with 10,000,000 Warrants in connection with its services to the Company both with regard to the Placing and acting as joint broker.

The Company does not currently have the requisite share authorities to issue new ordinary shares in connection with the potential future exercise of Warrants. Therefore, the issue of the Warrants is conditional on shareholder approval at a duly convened general meeting. Further announcements in this regard will be made in due course. The receipt of the proceeds from the Fundraise is conditional only on admission of the Fundraise Shares and the Fee Shares to trading on AIM.

Directors' Participation in the Subscription

Matthew Lofgran and Stephen Staley, CEO and Non-Executive Chairman of the Company respectively, have subscribed for 32,000,000 and 4,000,000 Subscription Shares respectively, amounting to subscriptions of £80,000 and £10,000 respectively (the "Directors' Subscriptions"). Accordingly, 16,000,000 Warrants and 2,000,000 Warrants will be issued to Mr Lofgran and Mr Staley respectively (the "Director Warrants").

On completion of the Fundraise, Messrs Lofgran and Staley will be interested in 38,525,976 ordinary shares and 4,000,000 ordinary shares respectively, representing 10.8% and 1.1% of the Company's then enlarged issued share capital.

In addition, Ewen Ainsworth, a former Director of Nostra Terra, has subscribed for 5,000,000 Subscription Shares. As such, Mr Ainsworth will be issued with 2,500,000 Warrants.

Issue of Fee Shares

8,000,000 new ordinary shares have been issued to Novum as part of its advisory fees in connection with the Placing and acting as joint broker to the Company (the "Fee Shares").

Partial Loan Conversion

The Company is also pleased to announce that Discovery Energy Limited ("Discovery") (a company controlled by Ewen Ainsworth) has agreed to convert £57,500 of the outstanding loan owed to Discovery (the "Discovery Loan") by the Company into 23,000,000 new ordinary shares at the Issue Price (the "Conversion Shares") (the "Partial Loan Conversion"). Following the Partial Loan Conversion, £229,811, being principal and interest, remains outstanding under the Discovery Loan. The Company is in constructive dialogue with Mr Ainsworth with regard to restructuring the remaining amounts outstanding, particularly in the context of the challenging operating environment.

Corporate Update

At the beginning of the year, the Board designed a 'Low Cost, High Impact' work plan for 2020, focusing on growing production, primarily from existing assets, while still seeking additional opportunities that could be transformational for the Company. Included in these plans for the year were planned reductions in overhead costs.

During the oil price volatility of 2015/2016, the Company repositioned its portfolio for a lower oil price environment and, in 2017, took the prudent step to begin hedging a significant part of its production. Low cost production from conventional reservoirs form the basis of Nostra Terra's cashflow and this is protected by recently negotiated hedges guaranteeing approximately US$56/bbl for around half of the Company's production (as announced on 1 April 2020), which provides a level of support in the current depressed oil price environment.

In the last month, following the significant drop in oil prices and the severe economic downturn caused by the spread of the coronavirus, the Board began prioritising certain, highly targeted work necessary to ensure maintenance of low cost production and the safety and regulatory requirements of the leases, subject to satisfying applicable regulations with regard to operating in the current coronavirus environment. Accordingly, further investment by the Company into its portfolio will be very limited until such time that the oil price strengthens.

The goals for the Company at this time are as follows:

1. To carefully manage existing assets and restrict work to that which improves the economics of each project in the light of the changing oil price environment.

2. To maintain low overheads and seek to reduce them further.

3. To expand the portfolio, seeking the right opportunities to grow the asset base, including significant transactions.

Existing Assets

The Company has identified multiple areas across its entire portfolio to increase production. As mentioned earlier, given the lower oil price environment, the Company is being very selective on the work done in order to preserve capital.

Nostra Terra has received multiple unsolicited approaches regarding additional opportunities around Pine Mills (outside of the Company's existing production, but acreage which the Company owns) and the Company is pleased to report that it is in advanced discussions with an operator regarding a potential farm-in for a portion of this Pine Mills area acreage, wherein a well would be drilled at no cost to Nostra Terra and the Company would retain a carried working interest.

A successful outcome from the potential farm-in partner drilling this well could provide a further significant increase in production in addition to the existing Pine Mills production. It could also open up and de-risk multiple additional well locations in the Pine Mills acreage to further drilling.

Cost Reductions

Matt Lofgran has agreed to a 60% decrease in annual salary until such time that the Company completes its next sizeable fundraise. The Directors of the Company (excluding Mr Lofgran) will have discretion over whether a fundraise is of sufficient size, at which point Mr Lofgran's salary will increase to 76% of its original amount. In addition, at such time of the relevant sizeable fundraise, the Company will settle the difference between Mr Lofgran's reduced salary and his increased salary on a monthly pro rata basis, with the first three months satisfied by the issue of new ordinary shares at the price associated with such fundraise and the balance settled in cash. These arrangements together being defined as the "CEO's Remuneration Arrangements".

In addition, the Non-Executive Directors are currently putting in place an executive Long Term Incentive Plan that will better align Mr Lofgran's remuneration with growth in value for shareholders. A further announcement in this regard will be made in due course.

Moreover, the Non-Executive Directors of the Company, being Stephen Staley and John Stafford, intend to accept short term reductions to their remuneration arrangements and a further announcement in relation to this will be made in due course.

Additional reductions have been made in overheads, with review ongoing as the Directors identify additional savings.

Potential Acquisitions

The Board continues to seek additional assets to expand the Company's portfolio, with the aim of adding to production, thereby increasing revenue and net cash flow, and increasing the Company's oil reserves, whilst also diversifying the portfolio. The Board has a wide range of exploration and operational experience in diverse areas around the world, and as such a number of potentially transformative opportunities are under consideration both inside and outside the USA. The current low oil price environment may provide opportunities for acquisitions at attractive valuations.

Related Party Transactions

Matt Lofgran and Steve Staley, as Directors of the Company, and Ewen Ainsworth, as a Director of the Company in the last 12 months, are considered to be related parties of the Company under the AIM Rules for Companies ("AIM Rules"). Accordingly, the CEO's Remuneration Arrangements, the Directors' Subscriptions and the issue of the Director Warrants, and the issue of the Conversion Shares, Subscription Shares and Warrants to Mr Ainsworth are considered to be related party transactions pursuant to Rule 13 of the AIM Rules. John Stafford, independent Director, having consulted with the Company's Nominated Adviser, Strand Hanson Limited, considers that the terms of the CEO's Remuneration Arrangements, Directors' Subscriptions and the issue of the Director Warrants, and the issue of the Conversion Shares, Subscription Shares and Warrants to Mr Ainsworth are fair and reasonable in so far as the Company's shareholders are concerned.

Admission and Total Voting Rights

The Fundraise is conditional only on the admission of the Fundraise Shares and the Fee Shares to trading on AIM ("Admission").

Application will be made for Admission of the Fundraise Shares, Fee Shares and Conversion Shares, which is expected to occur at 8.00 a.m. on or around 20 April 2020.

Following Admission, the Company will have 356,828,226 ordinary shares in issue, none of which will be held in treasury. Accordingly, the total number of voting rights in the Company will be 356,828,226 and shareholders may use this figure as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure Guidance and Transparency Rules.

Matt Lofgran, Nostra Terra's Chief Executive Officer, said:

"Considering the macroeconomic challenges we're pleased to raise additional equity to help Nostra Terra to progress in this adverse market. We look forward to building on the foundation in place throughout the year.

"I also want to take the time to welcome Dr Staley as the new Chairman of Nostra Terra. Stephen brings over 35 years of experience from working with smaller companies such as Predator Oil & Gas to larger companies like Conoco and Cove, the latter where they went from early-stage to a very successful exit within a few years. We're excited to be working with him and the leadership he'll bring to the Board."

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

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