0.530 -0.030

kansas

In July 2009, Nostra Terra acquired a 50% working interest in three leases, nine previously produced but inactive wells and two inactive salt water disposal wells in the Bloom Property, located within the Chase-Silica Field in Rice County, Kansas. Three Bloom wells have so far been brought back into production, and are currently producing approximately 20 barrels of oil per day.

In May 2011, the company took full ownership of Bloom and will assume operatorship of the property through its wholly owned subsidiary, Churchill Operating LLC. Nostra Terra believes there is scope to improve the productivity and profitability of Bloom significantly.

texas

• The company made its first small but very encouraging step into Texas in 2010 when it acquired a 2% interest in the redevelopment of an existing well. This entailed the drilling of a new section extending almost 2,000 feet horizontally from the original vertical wellbore into the Austin Chalk formation.
  
  Austin Chalk wells characteristically flow at high initial rates followed by steep decline curves before stabilising, and this well is no exception. Nevertheless, the total redevelopment costs of $890,000, including Nostra Terra's share, were fully recovered in just 35 days, and the well produced sufficient oil and gas to exceed twice payout of its original cost in less than a year. There is also the possibility of drilling a second horizontal section into a lower zone within the producing formation at a later date.
• At the beginning of 2011, Nostra Terra acquired a 1% working interest in a second Texas project – the Vintage Hills Prospect Unit, located within the large Giddings Field in Texas. The first horizontal well on the prospect unit, Agnello #1, was spudded by operator New Century Exploration, Inc. in January to target one of four separate Austin Chalk reservoirs that had been identified as oil-bearing by earlier vertical drilling in the unit.
  
  During the initial three-day test period, the well flowed at rates ranging between 402 and 139 barrels of oil equivalent per day, and to date it has produced approximately 1,800 barrels of oil and 3,600 barrels of oil equivalent in natural gas. Further lateral sections may be drilled in future to access the other oil-bearing Austin Chalk reservoirs within the Vintage Hills Prospect Unit.
• Shortly after acquiring our interest in Vintage Hills, we entered into a second agreement with New Century Exploration, Inc., to acquire a 3% working interest in the Nesbitt Prospect Unit, located in the Woodlawn Field in Texas.
  
  The Nesbitt Prospect is a horizontal development project targeting the Middle Pettet Limestone formation. Most of the production to date from Woodlawn has been from the Lower Pettet "Crane" zone, but previous vertical drilling on the acreage indicated that the Middle Pettit Limestone is also oil-bearing; while much thicker than the "Crane" zone, it is less porous and permeable, which could make it an ideal candidate for horizontal drilling.
  
  The first of potentially three wells planned within the Nesbitt Unit was spudded in March 2011 and was drilled vertically to a depth of approximately 7,000 feet followed by a horizontal section of just under 3,000 feet. Significant hydrocarbon shows were encountered in the target formation during drilling. Additional downhole work has still to be carried out before the well can be completed and fully tested.

colorado

In June 2011, Nostra Terra added to its exploration portfolio and further diversified its operational relationships by entering into an agreement with Plainsmen Partners, LLC to acquire a 16.25% working interest in the Verde Prospect, located in south-eastern Colorado. The leases cover approximately 636 net acres in which an initial test well will be drilled during the third quarter of 2011 into the Mississippian formation to a projected total depth of 5,300 feet.

Interpretation of newly acquired 3D seismic data supports the subsurface mapping of a structural high being 25 to 50 feet up-dip to historical production from the Lower Morrow Keyes. Should the initial test well prove successful, two to three further development wells could be drilled, in which Nostra Terra also has the right to participate.

Lower Morrow/Keyes target
The Lower Morrow/Keyes Sandstone has produced from four wells down-dip within the immediate area. Those wells produced a combined total of 60,000 barrels of oil. When the last two wells were plugged in 1991, due to the prevailing economics of the day, they were producing approximately 3 to 5 barrels of oil per day. The initial drilling location is positioned to recover "attic" oil in the Keyes at a higher point on the structural feature.

Mississippian target
The Mississippian section has not been adequately tested on top of the structural feature, and is considered an exploration target. One well on the south flank of the Verde structure had drill stem test (DST) recovery of 190 feet of slightly oil cut mud; another well on the southeast flank had DST recovery of 70 feet of drilling mud with dead oil.

Marmaton target
The Marmaton formation, at 3,700 feet, had an oil show on DST down-dip. Interpretation of the 3D seismic shows 25 feet of Marmaton closure at the proposed location, and an amplitude anomaly indicating attractive reservoir thickness.

oklahoma

Also in June 2011, the company further advanced its strategy of securing larger working interests in emerging plays when it signed an agreement with Pathfinder Development Capital, LLC to acquire a 30% working interest in the Bale Creek Prospect, located in northern Oklahoma.

Based in Norman, Oklahoma, Pathfinder Development Capital, LLC is a multi-disciplined geotechnical company specialising in finding new oil from old fields within the US. Combining the most advanced technology with cost-effectiveness, Pathfinder is able to identify, delineate and grade additional prospects where there are known oil and gas reserves and frequently multiple pay zones, thereby reducing risk and increasing upside potential. Pathfinder acted as operator on behalf of Shell in the Fayetteville Shale play in Arkansas, which has become an important source of natural gas through the use of horizontal drilling.

The Bale Creek Area of Mutual Interest (AMI) covers a contiguous area of over 3,500 acres. It is located within a very prolific oil system of multi-pay potential from as many as eight stacked reservoirs, from the Ordovician up to the shallower Permian formations.

The project development plan consists of two phases. The first step in Phase 1 involves acquisition and interpretation of new 2D and 3D seismic data. Based on the tightly-controlled interpretation, a pilot hole will be drilled and logged to determine the most promising of all the potential productive zones. The next step will be to drill three horizontal wells into the selected zone and to install the necessary production and transmission facilities. Permitting and leasing activities for Phase 1 are currently under way, and drilling of the first well is scheduled to start in the fourth quarter of 2011.

Phase 2 of the Bale Creek project will include up to four more horizontal wells plus additional production and transmission facilities. Nostra Terra and Pathfinder expect to be in a position to make the final determination on Phase 2 in the first half of 2012.