AIM listed oil and gas exploration group Nostra Terra Oil Gas Co Plc (LON:NTOG) has signed an agreement to acquire a 2% interest in an Austin Chalk re-entry well in Lee County, Texas, for US$17,800. Despite its modest size, the company said the deal would give it a holding in a long-standing production well which is being redeveloped with the objective of recovering significant additional oil and gas reserves. It added that the move would hopefully be a successful first step in building a substantial, long-term presence in Texas.

The agreement is the latest move in a reinvigorated strategy at Nostra Terra which last summer ditched efforts to develop oil and gas interests in Ukraine in favour of buying up assets in the US under the stewardship of newly appointed CEO, Matt Lofgran. Since then, the company has acquired stakes in a string of properties in Kansas and Utah with estimated total proved reserves (gross) of 4.75 million barrels of oil and 2.3 billion cubic feet of natural gas. Last week it said the process of refocusing the company had led to a loss of £3.8m in 2009 but added that it was encouraged by the progress that had been made in implementing its new strategy.

Today’s deal with Sherpa Energy Resources involves a well that was originally drilled vertically in 1984 and produced oil and gas for many years from the historically prolific Austin Chalk formation. The redevelopment plan is to re-enter and horizontally drill a lateral section into the Lower Austin Chalk, extending up to 2,000 feet from the original wellbore. This technique has already been used very successfully on a number of similar wells within the area. The total cost of drilling the lateral section and equipping the well is estimated at US$890,000. Nostra Terra’s proportionate contribution to these costs has been satisfied through the agreement fee.

Matt Lofgran said: “Participation in the redevelopment of this well diversifies and extends our growth strategy into Texas in addition to Kansas and Utah. While our initial stake is just 2%, I am hopeful that this will be a successful first step in building a substantial, long-term presence in Texas. We intend to enter into partnerships with other companies that recognise the potential of horizontal Austin Chalk wells to produce additional commercial reserves using today's drilling technologies. There are literally hundreds of potential Austin…

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