1st Jun 2016 09:46
LONDON (Alliance News) - Nostra Terra Oil & Gas Co PLC Wednesday said it has lost the exclusive right to acquire an interest in producing assets based in New Mexico after failing to meet the payment deadline.
The company, however, remains in the race for the assets as it is still hoping to raise the necessary funds to complete the deal by issuing a bond instrument, but threw in further doubt a deal could be completed as it warned "financing conditions remain tight" within the oil and gas industry.
The company is also looking at other potential new projects which could catch its eye.
Nostra Terra struck a deal to purchase a 60% working interest in the producing south west US assets over the Permian Basin from Alamo Resources II LLC for a total of USD3.0 million, but failed to pay the bulk of that consideration by the original deadline at the end of March.
Despite being given extra time to raise the funds to complete the deal, Nostra Terra has failed to pay Alamo Resources by the latest deadline which ended on Monday. Although not out of the race, other interested parties are now free to make offers and evaluate the assets, potentially giving Nostra Terra some competition for the assets.
"Nostra Terra continues to work closely with the seller to complete the proposed acquisition and the board of the company will continue its efforts to secure the necessary debt funding but it has not negotiated a further extension to the closing of the acquisition of the Permian assets," said the company on Wednesday.
The assets in question comprise of 55 active vertical producing wells and 12 active injector wells, which in November 2015 were producing a combined total of around 122 barrels of oil per day. Nostra Terra said Wednesday it believes the purchase price of the assets and the projections made still suggest a "financially attractive proposition".
"The board has sought to minimise dilution to existing shareholders where possible and as such is seeking to close the acquisition of the Permian assets through the issue of a bond instrument. Nostra Terra remains in ongoing discussions with a number of interested parties for provision of a bond but despite the recent rally in the price of oil, financing conditions remain tight within the industry," said Nostra Terra.
"Additionally, Nostra Terra continues to receive and review a number of promising proposals for the introduction of new projects to the company. The board remains convinced that current market conditions present Nostra Terra with a significant opportunity to secure new assets, which have the potential to deliver material shareholder value over the medium term," the company added.
Separately, Nostra Terra said it has also nearly completed its cost cutting initiative which started in the middle of 2015, and said the results will be unveiled shortly.
Nostra Terra shares were trading up 2.2% to 2.30 pence per share on Wednesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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