NORTHCOTE ENERGY LIMITED: Operations Update - OKE Project
Northcote Energy Ltd / Index: AIM / Epic: NCT / ISIN: VGG6622A1057 / Sector: Oil & Gas
1 July 2013
Northcote Energy Ltd (`Northcote' or `the Company')
Operations Update - Oklahoma Energy Northcote (AIM: NCT), an onshore US oil and gas exploration and production company, is pleased to announce a positive update on its operations at the newly acquired 1,040 acre Oklahoma Energy project (`OKE' or `the Project'), in which Northcote is the operator with a 100% working interest. Key Highlights * First stage of workover programme completed increasing gross production by 150% to 37 bopd from 12 bopd at acquisition. * Second stage of workover programme underway targeting increase in gross production at OKE to 50 bopd by year end to accelerate the pay-out of the BlueRock royalty arrangement * First oil sales from OKE post acquisition were made in May * Evaluation of high impact Mississippian opportunities to significantly enhance production and reserves with at least one well scheduled to be drilled as part of our 2014 programme. * Area prospectivity highlighted by successes of Encana Corporation and Chaparral Energy in developing Mississippian * Previously published P1 PV10 of US$61.94 million does not include the OKE Project - Northcote focusing on enhancing P1 PV10 through increased production and reserves at OKE and across portfolio
Northcote's Chief Executive Officer Randy Connally said, "The increased production at OKE following electrification of the lease is highly positive and follows swiftly on the back of the exciting initial results from our first frack at the majority owned Horizon Project. We are now moving to re-enter and workover other existing well bores and we expect these initiatives to increase the gross OKE production from the shallower Bartlesville formation from the current 37 barrels to 50 barrels of oil per day gross by year end, which will help accelerate the payout of the BlueRock production royalty. Assuming achievement of our target of 50 gross barrels a day by year end, we expect to retire the BlueRock facility before year end 2015 at which point, the NRI to Northcote will increase from 41.5% to 80%. Of course, this timetable would be significantly accelerated by the drilling of new wells.
"Importantly, both Encana Corporation and Chaparral Energy have experienced recent success through Mississippian development to the north and south of the OKE project. This, along with the positive results from our continued evaluation of a range of Mississippi Lime targets in the project area, at least one of which we anticipate including in our 2014 drill programme, underpins our confidence that we can significantly bolster our existing production and reserves through development at OKE over the next 12 months."
The OKE Project comprises 1,040 acres in Osage County, Oklahoma. Due to the historic lack of investment, Northcote was able to significantly increase its acreage position within the Mississippi Lime play on attractive terms. This offered the Company an opportunity to apply its strategy of optimising underperforming assets. The recent successes experienced by Encana Corporation and Chaparral Energy, which have completed Mississippi wells on leases to the north and south of OKE, has strengthened the Company's confidence further.
Upon acquisition the property was producing an average of 12 barrels per day of oil (gross) from seven wells targeting the shallow Bartlesville formation. The first stage of the workover programme, designed to optimise the mechanical operation of the field, has now been completed increasing production from 12 bopd to 37 bopd. Prior to the acquisition of OKE, the field was partially operated using internally generated power from surplus gas production. This meant that production was constrained by the gas volumes produced and were only producing intermittently.
The workover involved connecting the field to the electrical grid to establish a consistent power source and also to upgrade pumps and motors at a number of locations. The installation of new pumps and motors, in conjunction with the electrification, has resulted in enhanced recoveries and constant 24/7 operating capacity.
In parallel to the aforementioned workover OKE offers further production and reserve enhancement opportunities, which are expected to lead to an increase in Bartlesville production to 50 bopd gross by the end of the year.
The Company plans to include at least one prospective location on this property in its high impact 2014 drilling programme. Our 2014 programme is anticipated to include the completion of the current frac programme at our Horizon project and also the participation in the drilling of operated and non-operated wells including Mississippi Lime targets at Oklahoma Energy. A successful Mississippi well at OKE can be expected to lead to a significant production and reserve increase because the current P1 PV10 of $61.94million does not include any reserves in connection OKE or the recently completed Matthis acquisition.
The former owner of OKE entered into the agreement with BlueRock Capital, LLC (`BlueRock'), whereby OKE sold a term overriding royalty interest (`Royalty') to BlueRock to finance the acquisition and development of the Project. It is Northcote's objective to boost production in the short term in order to accelerate the payout of the Royalty.
As from the date of the acquisition OKE has an obligation to pay at least 41.5% of the gross revenues generated from the OKE project to BlueRock. This obligation will be extinguished once BlueRock has received in cash an amount equal to the facility balance, plus an internal rate of return of 15%. During the term of the facility, Northcote earns a maximum of 41.5% of the gross revenues in the project. After pay-out, the Royalty expires and the company's NRI increases to 80 per cent.
For further information and the full Admission document visit www.northcoteenergy.com, see below or contact the following:
Randy Connally Northcote Energy Ltd +01 214 675 7579
Ross Warner Northcote Energy Ltd +44 7760 487 769
Dan Jorgensen Northcote Energy Ltd +44 (0) 20 7024 8391
Roland Cornish Beaumont Cornish Ltd +44 (0) 20 7628 3396
Jerry Keen Shore Capital Stockbrokers +44 (0) 20 7408 4090
Bidhi Bhoma Shore Capital Stockbrokers +44 (0) 20 7408 4090
Hugo de Salis St Brides Media and Finance +44 (0) 20 7236 1177
Elisabeth Cowell St Brides Media and Finance +44 (0) 20 7236 1177
Northcote Energy Ltd is a revenue generative US onshore oil and gas production company focussed on the rapidly emerging Mississippi Lime formation in Oklahoma. The Company participates with leading operators, including Midstates Petroleum and Chesapeake Energy, in low risk development plays where advanced techniques, such as horizontal drilling and fracing, are used to unlock known oil accumulations and dramatically improve recovery rates. Management is focused on increasing production through a multi-well drilling and fracking campaign in 2013.
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