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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 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.
Bloom
Nostra Terra holds a 50 per cent working interest in nine production wells and two salt water disposal wells on the Bloom lease, located in Russell 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 reserve report on the Bloom lease has not yet been completed.
Koelsch lease option
Nostra Terra also has an option to purchase from HPI – 50 per cent working interest in two production wells and one salt water disposal well in the Koelsch lease, also located in Russell County, Kansas. If Nostra Terra takes up the option, it would 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 would receive 75 per cent of revenues from the Koelsch lease until its costs had 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 ten production wells and a salt water disposal well within the Boxberger lease which, like the previous acquisitions, are located in Russell County, Kansas, about twelve miles north west of the Hoffman and Bloom properties.
The initial work programme agreed by the two companies involves reworking three of the wells (two producers and the salt water disposal well) with immediate effect, and field work began in September 2009. Nostra Terra will reinvest 100 per cent of its revenues from this early production in order to develop the remaining acquired wells on the Boxberger lease.
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 will be carried 75 per cent by Nostra Terra and 25 per cent by HPI until Nostra Terra has received revenue from the Boxberger wells 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 and Bloom 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 Boxberger lease is estimated to contain 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.
