Nostra Terra Regulatory News (NTOG)

31 October 2017

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

3rd Permian Basin Acquisition, New well and Finance Update

Nostra Terra (AIM:NTOG), the oil and gas exploration and production company with a portfolio of assets in the USA and Egypt, is pleased to announce its third acquisition in the Permian Basin of Texas ("the Acquisition") and financing update. The Acquisition includes a target which was previously drilled and produced oil. Operations for a twin well are scheduled to commence in November.

Highlights

- Acquiring a 53.25% Working Interest over a 120 acre lease ("the Lease")

- Acquisition cost of US$40,000

- 3 drill ready locations

o Shallow, conventional wells

o Leases all Held By Production ("HBP")

- Plan to drill a new "twin" well already underway ("the Twin Well")

o Targeting previously successful well mistakenly drilled by offset operator, resulting in 350 barrels produced in less than 3 days

o Drilling permit already in place

o Rig expected onsite early November 2017

- Nostra Terra will carry existing Working Interests for drilling of first well

o The Company will cover 71% of the first well cost, being approximately US$340,000

- Well profile

o Anticipated 2:1 Return on Investment ("ROI") at $40/barrel oil

o Estimated Ultimate Recovery ("EUR") of 35,000 barrels of oil per well

o Target 25-40 bopd average 1st year

o Shallow decline curve

- Additional growth potential through in-fill drilling, using 10-acre well spacing instead of existing 40-acre spacing

- Director bridge loan of £300,000 to fund Acquisition and drilling of the Twin Well

- Further progress made on Senior Lending Facility

o Expected interest rate of 4.5% - 5.5%

Acquisition

The Acquisition covers 120 acres of the Permian Basin, Texas ("the Lease"). Nostra Terra has secured a 53.25% working interest in the Lease. The total cost of the Acquisition and drilling of the Twin Well is expected to be approximately US$380,000.

There are 3 drill ready locations on the Lease based on 40-acre spacing. There is further potential to increase the number of drill ready locations through in-fill drilling using 10-acre spacing. Current production is circa 3.5 barrels of oil per day ("bopd"), which allows the lease to be Held By Production. This means Nostra Terra has the flexibility to develop the Lease further without any deadlines or the Lease expiring. Nostra Terra can elect at its discretion when to invest in further development of the Lease as conditions allow.

Nostra Terra's Board believes the Acquisition represents excellent value to the Company. The profile of the wells indicates approximately 35,000 barrels of oil EUR, generating an estimated Return on Investment of 2:1 at $40/barrel oil.

Planned Twin Well of previous successful well

A Twin Well is planned for drilling at the Lease over the course of November.

By way of background, the operator of a neighbouring lease drilled a well, which produced 350 barrels of oil in less than 3 days. However, once the operator completed a directional survey of the bottom-hole location it discovered the well had crossed the boundary of the Lease. The operator of the neighbouring well plugged and abandoned the well and has provided all its data to assist with planning and drilling of the Twin Well.

The planned drilling operation of the Twin Well at the Lease will target the same bottom-hole location as the discovery well made by the neighouring operator.

The drilling permit for the Twin Well has been granted. Work is scheduled to begin on preparing the location (drilling pad) at the start of November. The rig is expected to move onsite in early November 2017 and drilling will commence. Target depth is expected to be reached before the month end and completion of the well will follow shortly thereafter.

Under the terms of the Acquisition, Nostra Terra will pay 71% of the drilling costs of the Twin Well. All working interest owners will be "heads up" (pay their pro-rata share after that).

Target production for the first year of the Twin Well is expected to be in the 25 bopd to 40 bopd range. A shallow decline curve is anticipated.

Senior Lending Facility, Director Bridge Loan and Related Party Transactions

Having secured its Hedging Facility with BP Energy Company, Nostra Terra has been negotiating with various providers of Senior Lending Facilities (as announced 19 October 2017). These negotiations are at an advanced stage, with the Company having received a non-binding letter of intent from one facility provider already. The Company remains in discussion with the other potential providers.

While there is no guarantee final agreement will be reached with any of the providers, initial indications suggest that Nostra Terra could secure a $5,000,000 to $25,000,000 Senior Lending Facility, with an initial borrowing base of up to US$1,500,000 (prior to hedging) at an annual interest rate in the range of 4.5% to 5.5%.

If secured, Nostra Terra will be able to deploy funds from the Senior Lending Facility at the Company's sole discretion, with no restriction to specific assets or geographical location. In this event, the Company expects initially to use this working capital in the Permian Basin, where it plans to grow production and cash flow from existing and new assets and through targeted acquisitions.

In order to minimise dilution to shareholders, two directors of the Company have agreed to provide bridge loan financing to fund the Acquisition. Discovery Energy Limited ("DEL"), a company which is wholly owned by Non-Executive Chairman, Ewen Ainsworth, and Stafford Geoscience Limited ("SGL"), a company which is wholly owned by non-executive Technical Director, John Stafford, have together provided a bridge loan to the Company in the amount of £300,000 ("the Bridge Loan"), which bears an interest rate of 7.5 per cent per annum. The term of the Bridge Loan is two years, however it is the Company's intention to repay the Bridge Loan with proceeds from its Senior Lending Facility by the end of 2017. No arrangement or other fees have been charged for the provision of the Bridge Loan.

In addition, DEL has agreed to lower the interest rate on the loan it made to the Company on 29 November 2016 to 7.5% (the "DEL Loan"). DEL has also extended this £230,000 loan by a further 12 months.

These loans are deemed to be related party transactions in accordance with the AIM Rules for Companies. Accordingly, independent director for the purpose of the Bridge Loan, Matthew Lofgran, and independent directors for the purpose of the amendment to DEL Loan, Matthew Lofgran and John Stafford, having consulted with the Company's Nominated Adviser, Strand Hanson Limited, consider that the terms of the Bridge Loan and the amendment to the DEL Loan, respectively, are fair and reasonable insofar as the Company's shareholders are concerned.

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

Matt Lofgran, Chief Executive Officer of Nostra Terra, commented:

"We are particularly excited about the potential of the planned Twin Well. The operator of a neighbouring lease drilled a discovery well, which crossed the boundary into the lease area of our new working interest. On realizing this, the well had to be plugged and abandoned in accordance with process, but the neighbouring operator has shared its data. As such this presents Nostra Terra with an immediate drill target of a proven prior producing well.

This was an opportunity that we didn't want to pass up, given the fit in the portfolio and especially the discovery on the lease. The Board is in full agreement about the value in the acquisition and its fit in our portfolio of leases. I'm very happy to have such strong support from my fellow Directors. Assuming we secure it, we anticipate using the Senior Lending Facility to repay the loan along with drilling additional wells. Shareholders can expect to see more news flow, as we expand our footprint in the Permian Basin acquiring new leases and building production.

We look forward to providing updates about operations at the Twin Well in the coming weeks."

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