Investors have given a modestly positive reaction to an update from US onshore energy play Nostra Terra Oil & Gas (NTOG:AIM) – the shares gaining 1.9% to 0.49p after it outlined plans to secure reserves-based lending (RBL) for its Chisholm Trail project in Oklahoma.
Shares in Nostra have been indifferent performers – falling 10.6% in the last 12 months despite significant operational progress – and this could partly be attributed to the fact that it is cagey on details about its projects in order to avoid giving its rivals an edge in a competitive leasing environment.
According to the £12 million cap's chief executive officer Matt Lofgran, RBL would not only give the firm greater financial flexibility, it should also provide some independent validation of the asset. RBL is a commonly used method of financing oil and gas projects which are already in production or where production is expected to commence in the near-term. It is usually based on the expected present value of future production from the relevant field or fields in question.
Lofgran says he is confident of securing a facility after publishing an independent audit of Chisholm Trail reserves next month. The project, in which the group acquired an initial interest last August (29 Aug), hosts shallow oil targets and ‘liquids-rich’ natural gas which can be exploited using horizontal drilling and hydraulic fracturing or 'fracking'.
Today's announcement also revealed the company will participate in a sixth well on Chisholm Trail after the completion of a fifth earlier this month. The first four wells, in which it has had varying working interests, have performed better than pre-drill expectations.
The new facility, combined with cashflow from output (the group announced in February that it surpassed the break-even point in the first month of the year), should help the company drill the wells necessary to reach its medium term production target of 250 barrels of oil equivalent per day (boepd) from a current level of around 125 boepd.