Nostra Terra Oil & Gas (LON:NTOG) had a very good day today, with its share price ending the day over 6% up. Over the last month, the share price has increased considerably, from a low of 3.43p to the current price of 5.17p, a 50% gain. Even at these highs however, the company’s valuation still stands at under £7 million. Considering that the company is making great progress with its drilling campaign, as well as the fact that oil has reached new highs this month, the company appears to be well positioned for future growth and for continued gains in its share price.
Today, the price of oil reached new highs after Trump announced that the USA would be pulling out of the Iran nuclear deal. After this news, the price of oil shot up to $77. At this price, Nostra Terra should be making some handsome profits, considering the fact that the CEO indicated earlier this year that the company could make profit even if oil was at $30 a barrel.
The company became cash flow positive back in February 2018 and has been using its surplus funds for the drilling of new wells. The company recently commenced the drilling of two new well locations in the Permian Basin area. The first well is due to be completed shortly and the drilling for the 2nd well will begin as soon as the first one has been completed. The Permian Basin area is a well known oil field in America, with drilling first commencing 100 years ago. The company should be giving another update shortly on the completion of the drilling of first well, and with the Permian Basin being a solid oilfield, I’m expecting great things.
Although Nostra Terra Oil & Gas only have 53% and 71% interests in the new wells, there could potentially be lots to gain revenue wise, when the wells have been successfully dug.
In one of my previous articles about NTOG, I mentioned that the main drilling locations for the company was Pine Mills and the Permian Basin
Even if the 2 new wells are discounted: we have the following:
Pine Hills – produced 129 barrels of oil per day throughout March
Twin Wells – produced 52 barrels of oil per day back in Feb
With Pine Hills and the existing Twin well formation in the Permian Basin, we’re looking at over$400,000 in revenue per month ((129+52)bpd*30 days*$77). Once the 2 new wells have completed, this revenue should increase. In addition, Nostra Terra is continuing to investigate possible future opportunities for drilling.
Given that Pine Hills is already cash flow positive, I think the current valuation of NTOG is fairly low, especially considering that the company is continuing to explore new wells to further increase its existing revenue. The current share price appears to be undervalued and could be considered a decent entry point for the new investor.
As always though, please do your own research before buying/selling this share; the opinions above are only my personal views and should not be considered as advice.
