Two AIM-quoted E&Ps – Independent Resources (IRG:AIM) and Nostra Terra Oil & Gas (NTOG:AIM) - are in demand today as they announce a deal to enter a producing asset in Egypt. Shares in the two companies are up 13.7% to 0.85p and 14.7% to 0.11p respectively.
This move reflects a big departure for Nostra as it looks to contend with the collapse in the oil price. Speaking at a Shares event in March 2013 Nostra’s CEO Matt Lofgran had promised the audience no ‘Hail Mary passes’ (referring to a high risk play in American Football) and instead pledged to continue its low-risk onshore US model. While the Egyptian asset is onshore and is in production rather than being an exploration prospect, the risk profile in terms of geographic location is certainly higher.
The joint venture between Nostra and Independent – which already had a focus on North Africa - struck a deal to acquire a 50% non-operated stake in the East Ghazalat concession for $3.5 million. East Ghazalat currently has gross production of around 880 barrels of oil per day, and it has around one million barrels of proved and probable (2P) reserves. It also hosts two gas discoveries.
Nostra’s house broker Sanlam Securities comments: ‘This is a transformational transaction. The existing oil production is significant, but perhaps more significant is the development potential on the concession and the possibility of further acquisitions in North Africa. The RNS states that the JV continues to “appraise a number of other opportunities in Egypt and Tunisia, our countries of focus.”’