I’ve been awaiting confirmation on the new asset/s that Nostra Terra Oil & Gas (LON: NTOG) recently acquired in the USA. The White Buffalo Prospect in the Big Horn Basin of Wyoming.
From what I can gather this deal has taken many by surprise. Lofgran & Co’ have been working on it for a considerable period of time. We all knew they were after a Company Maker and all things said & done this is what they think they have got. But before we start remember that these assets will not drill themselves. Time, effort & funds will be needed to progress them to the drill/spud.
There’s a school of thought in the oil industry that the best place to find oil is to go where the oil already is, using new techniques. This is what NTOG have done. Our sources indicate that the oil is already there which is why two major USA oil companies are drilling/permitting into the exact same formation/acreage/s that NTOG have bought into. The Drilling is going to be horizontal & vertical using new techniques.
NTOG now control and operate a 100% Working Interest in 6,100 net acres, with up to 20/25 potential locations for horizontal wells spaced at 4,500 foot laterals. This could give them a provisional total recoverable potential of up to 13MMbo which could drastically increase as and when they firm up White Buffalo in the Big Horn Basin. The PV10 for a horizontal well (4,500 ft lateral) in the Phosphoria Formation is estimated at US$5.9 million (best case) to US$11.8 million (high case).
The Nostra potential mean project value is of the order of US$118 million dollars up to US$236 million dollars based on 20 horizontal wells. These numbers could rise significantly if they firm up their prospect with new data. Remember the Phosphoria Formation has a history of prolific production and there is additional potential from the Frontier and Muddy Formations.
SM Energy Co. (NYSE:SM) have spudded their first exploratory horizontal Phosphoria well which is situated in the south–central portion of Wyoming’s Big Horn Basin. This was reported in the local press on 22 August 2014. SME are drilling ahead at the Alvarado Unit which can be found using these co-ordinates on Google earth. #26-1PH, nw-ne 26-46n-92w, Washakie County.
This new activity by SME is roughly 1.5 miles southwest of a discovery well for the South Fork Field, a northwest/southeast–trending anticline that produces from the Phosphoria. Which was originally drilled by General Petroleum in 1947, producing (in 1947) 202bopd from vertical Phosphoria perforations. 70 years ago on a vertical drill they were getting decent oil flows. Remember that Devon Energy Corp. (NYSE:DVN) have also permitted two wells in the immediate area. These Company’s are big hitters. Devon has a Market Cap’ of approx. $28 billion while SM has a $5.5 billion MC.
White Buffalo, for a Company the size of NTOG, is a major acquisition. It’s roughly 20 times the size of the successful Chisholm Trail Prospect. This prospect could become a vibrant play in the area, which in turn will see oilers farming in. With 100% WI, in an area with increasing desirability, and a very large position, NTOG can promote (farm out) to other industry players, as is customary in the business. They would still keep a large WI, remain the operator, yet be carried for some of the exploration cost and likely recoup leasing cost at a premium. Indeed as far as our contact knows the farm-in process has already begun with several tentative approaches to NTOG. I asked the CEO if the whispers were true that potential ‘Farmees’ had already approached? He gave a “No Comment”
I’d certainly expect that a significant slice of White Buffalo will be farmed out in various chunks, providing Nostra Terra with funds to help cover the cost of drilling, while maintaining a major interest. This gives them considerable flexibility as to how to progress the drill bit on their known targets while maintaining significant upside potential for all partners and themselves as Operator. Should this play go the way of Chisholm Trail then this will turn the sp upon it’s head. We will be trading in pence not fractions of a penny. How high could it go? Depending on what news they now release it should break through the 1p barrier and hopefully carry on upwards. We just do not know how the market will react. One thing is for sure. It’s reacted very positively thus far on little news.
Take a good look at the photo’s. A new contact spent her Labour Day in the field of operations to get them for our site. Always good to get a look at exactly who and what is going on.
Pics 1/2 Shows the SM Energy drill site, which is a horizontal drill. The Alvarado Unit #26-1PH represents SME’s first attempt at establishing horizontal production within the Big Horn Basin. Take note of the 8 oil storage tanks which have a capacity of 400 barrels each. These tanks can be emptied daily. So is it fair to say that SM are looking at 3000bopd or thereabouts?
Does that mean that Nostra’s 1st well will be looking at the same bopd? After all it’s in the exact same formation & area as the SM drill? Time will tell, it’s early days.