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us mid-continent

Hoffman

Nostra Terra holds a 25 per cent working interest in five production wells (two of which are plugged) and one salt water disposal well on the Hoffman lease, located within the Trapp field in Barton County and Russell County, Kansas. Deepening and reworking the production wells and salt water well is expected to cost US$1,350,000, of which 25 per cent is to be met by Nostra Terra. If revenue is generated from production before Nostra Terra has contributed its full share of costs, the revenue flow will be adjusted on a pro rata basis for the amount paid by the company up to that point.

The Hoffman lease is estimated to contain total proved reserves of 834,000 barrels of crude oil and 400 million cubic feet of gas, excluding any probable reserves.

In February 2010, the company acquired a 50 per cent interest in an additional undeveloped 160 acres close to the Hoffman property and also within the Trapp field.

Bloom

Nostra Terra holds a 50 per cent working interest in nine production wells and two salt water disposal wells on the Bloom property, located within the Chase-Silica field in Rice County, Kansas. The estimated costs for deepening and reworking the nine production wells and reworking the two salt water wells are between US$1,820,000 and US$2,550,000. These costs will be met by Nostra Terra; the company will receive 75 per cent of net revenues from the lease until its actual costs have been repaid, and 50 per cent of net revenues thereafter.

As part of the acquisition terms for the Bloom lease, Matt Lofgran, CEO of Nostra Terra, assigned to HPI his working interest in another Kansas property, the Perth lease, in which HPI is already an equity partner.

The Bloom lease is estimated to contain total proved reserves of 2.26 million barrels of crude oil and 1 billion cubic feet of gas, excluding any probable reserves.

Koelsch

In March 2010, Nostra Terra exercised an option to purchase from HPI a 50 per cent working interest in two production wells and one salt water disposal well within the Koelsch field, located in Russell County, Kansas. Nostra Terra will meet the estimated costs of US$231,000 to deepen and rework the two production wells and to rework the salt water disposal well. The company will receive 75 per cent of revenues from the Koelsch lease until its costs have been recovered, and 50 per cent of the revenues thereafter.

Boxberger

Nostra Terra added to its US asset portfolio in August 2009 with a further acquisition from HPI – this time for a 50 per cent working interest in 11 wells, including at least two salt water disposal wells, on the Boxberger property which is located within the Gorham field in Russell County, Kansas.

The initial work programme on Boxberger involved reworking three of the wells (two producers and a salt water disposal well), and field work began in September 2009. In the following month, the first production well encountered commercially significant quantities of oil in two zones that had not previously been produced.

Production costs on Nostra Terra's US leases are low compared to most other sources of oil and gas.
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Operating costs and revenue from Boxberger will be carried 75 per cent by Nostra Terra and 25 per cent by HPI until Nostra Terra has received revenue equal to its initial development costs, after which all revenue and operating costs will be shared 50/50 between the two companies.

As in the Hoffman, Bloom and Koelsch leases, advanced production and enhanced recovery techniques will be applied to developing the existing Boxberger wells and maximising oil and gas flow from the original and additional productive intervals.

The initial reserve estimate for the Boxberger property is total proved reserves of 1.66 million barrels of crude oil and 800 million cubic feet of gas, excluding any probable reserves. The oil is of good quality (API gravity range 36-40), and will be sold at a price close to the WTI posted price.

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