Nostra Terra Oil and Gas Company plc (LON:NTOG) shares rose more than 50% on Tuesday as it seemingly gazumped AIM peer Mosman Oil & Gas Ltd (LON:MSMN) to the acquisition of a producing oil field in Texas.
The Pine Mills oil field may be some 160 kilometres away from Dallas, nonetheless, the asset’s acquisition seems fitting of a soap opera.
Earlier in November Mosman announced it had agreed to effectively buy an 80% interest in the Pine Mills field by acquiring Buccaneer Operating LLC, the operating subsidiary responsible for the asset, in a deal with Cue Resources for US$975,000.
However at the time it cautioned of a legal dispute between Gale Force Petroleum and Hammerhead Managing Partners, relating to the other 20% of Pine Mills, and it was further complicated by the existence of a pre-emptive right which created an option for an alternative sale of the project.
That is where Nostra Terra comes in.
Nostra Terra has this morning announced a separate deal with GFP Texas Inc, a subsidiary of Gale Force Petroleum, which acquired the asset via pre-emption.
GFP Texas has in turn has sold Nostra Terra the asset for US$1.025mln.
The effective date of the transaction is set as November 1, as such Nostra Terra says it is now the operator of the Pine Mills field.
Meanwhile, Mosman in a statement said it has referred this matter to its lawyers who are currently reviewing the contractual validity of what the company refers to as ‘the purported pre-emption’.
Pine Mills oil field
The asset at the centre of this somewhat entangled story is an old oil field, that is currently still producing 100 barrels of oil per day.
Pine Mills, a 12 acre property, has already produced some 12.3mln barrel of oil since operations began there in the 1950s. Water injection and electronic pumps had helped increase production since 2007.
The operation comprises 15 active wells, five oil storage tanks, four currently shut-in wells suitable for reactivation as well as a service rig.
Nostra Terra this morning highlighted that the Pine Mills operation is profitable below US$30 per barrel.
It also notes that it is presently seen to have 373,000 barrels of proved reserves, in shallow conventional reservoirs with high porosity.
The company added that it see potential to raise output to 150 bopd in the near term – by accessing pay that’s currently ‘behind the pipe’, as well as reactivating existing wells and new infill drilling.
Perhaps significantly, Nostra highlights further upside potential in deeper exploration targets as well as the development of heavy oil resources on the property.
It was also highlighted that Cue Resources had recently paid to upgrade all the Pine Mills infrastructure including ‘downhole refurbishments’.
Nostra chief executive Matt Lofgran said: "The Pine Mills project is a perfect fit for Nostra Terra's strategy."
“Our goal has been to acquire assets, which we operate and where we control the pace of development. Pine Mills fulfills both key criteria. With Pine Mills profitable below $30 per barrel, the project will help underpin our business model as we continue grow the business.”