Nostra Terra, the oil and gas exploration and production company with a portfolio of assets in the USA and Egypt, announces that on 14 June 2017 it reached agreement with Echo Energy plc ("Echo") to acquire Echo's 50% stake in Independent Resources Egypt Limited ("IRE") ("the Acquisition"). IRE owns a 50% non-operating interest in the East Ghazalat concession, Egypt ("the Concession") through its subsidiary Sahara Resources GOS Inc ("SRGOS"). The remaining 50% of the Concession is owned by North Petroleum International Company ("North"), which is the Operator.
Nostra Terra has agreed to pay to Echo a total consideration of up to US$500,000 once certain conditions are met. The conditions include:
· The first US$100,000, upon;
o Approval of the Acquisition and assignment of the East Ghazalat Concession to Nostra Terra by EGPC, including:
o Completion of formal registration of SRGOS with EGPC, including,
o Agreement on outstanding issues with North.
· A further US$200,000 payment, once production at East Ghazalat returns to 800 bopd for 30 consecutive days
· A further US$200,000 once production at East Ghazalat reaches 1,000 bopd for 30 consecutive days
· Each payment can be satisfied in cash or in new ordinary shares in Nostra Terra of 0.1p each at Nostra Terra's sole discretion. Should shares be issued they will be at the lower of either the mid-market closing price on the dealing day prior to the date of this Acquisition, or the mid-market closing price on the dealing day prior to the date upon which the consideration is payable.
Nostra Terra now owns 50% of the East Ghazalat concession. Nostra Terra has already begun constructive discussions with North regarding past expenses, revenues, the Default Notice (as announced on 25 Jan 2016), as well as the reduction of overheads and a work programme to increase production.
As a result of this Acquisition and the settlement of the TransGlobe Petroleum International Inc loan note at a significant discount to face value (as announced on 28 September 2016), the overall acquisition cost of this 50% stake in East Ghazalat is significantly lower than the originally agreed US$3.5 million cost (as announced on 06 October 2015). Assuming all production targets are met, Nostra Terra will have acquired just over 1 million barrels of 2P Reserves for the equivalent of US$1.09 per barrel of oil.
As at 31 December 2016 IRE had net assets of £0.38 million and made a loss for the year ended 31 December 2016 of £0.32 million. As of closing (today), IRE has no liabilities and its only assets comprised of its interest in SRGOS. No further liabilities exist between Nostra Terra and Echo.
Further updates about the progress in Egypt will be made in due course.
Matt Lofgran, Chief Executive Officer of Nostra Terra, commented:
"We're pleased to have reached an agreement with Echo allowing us to increase our interest in the East Ghazalat concession to 50%. This acquisition represents a significant milestone for Nostra Terra, as we have added just over 1million barrels of 2p reserves to our asset portfolio for a total cost of US$1.09 per barrel of oil. This positions Nostra Terra extremely well to deliver substantial shareholder value, even in the current oil market.
We are also very pleased to build on our productive working relationships with both EGPC and North. We have gone to great lengths to establish close ties with our partners in Egypt already this year. I have been to Egypt a number of times since the start of 2017 to meet with key decision makers, growing mutual bonds of trust. Together we have been working on a plan to develop East Ghazalat so that it meets its full potential.
During the past couple of years, given the non-alignment of partners and low oil prices, minimal investment has been made into East Ghazalat. Production subsequently declined quicker than normal decline rates. Despite this, East Ghazalat remains a highly attractive asset, especially in a recovering oil market. However, it has been clear for a while that significant changes were needed. There is a strong desire among the remaining partners to make this project a success and today's announcement is a positive step forward to achieving this goal.
We will continue to work closely with North, the operator of the oil field, to reduce operating costs so that they are better aligned with current oil prices. I remain confident and excited about the role Nostra Terra will have to play in realizing value at East Ghazalat."