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NORTHCOTE ENERGY LIMITED: Interim Results


Northcote Energy Ltd / Index: AIM / Epic: NCT / ISIN: VGG6622A1057 / Sector: Oil & Gas

30 September 2013

Northcote Energy Ltd (`Northcote Energy' or `the Company')


                               Interim Results

Northcote Energy (AIM: NCT), an onshore US oil and gas exploration and
production company, is pleased to announce its interim results for the six
month period ended June 30 2013.

Highlights:

- Rapidly advancing strategy of building an extensive low-risk
onshore oil and gas production company

- Quadrupled production since January 2013 to 100boepd

- Increased net acreage by 500% to 2,895 net mineral acres since
listing

- Current P1 reserves with an NPV of US$61.9m based on
approximately half of acreage held- upgrade expected in the coming months

- Development programme in place to rapidly increase production and
reserves

- Targeting in excess of 250 boepd by mid 2014

- Partnership agreement to provide non dilutive capital on an
attractive risk basis to participate in field development

- Evaluating additional opportunities to consolidate our position
in Oklahoma and to expand into other prospective US onshore locations

Northcote Energy Managing Director Randall Connally said, "In our first 6
months since listing we have made dramatic progress in increasing our net
acres, reserves and production. Our current focus is in the state of Oklahoma
where we have built an excellent platform for further rapid growth in the
right address. With already increased production and a steep development curve
projected, we expect a re-rating of our stock which is currently trading at a
66% discount to P1 reserves for only half of our portfolio. With reserve
upgrades targeted in the second half and with a production target of in excess
of 250 boepd next year, we expect to build on the rapid progress made to date
and generate considerable value for shareholders."

CHAIRMAN'S STATEMENT

Since our Admission to AIM in January 2013 we have quadrupled our daily
production, in the process hitting our 100 BOEPD 12 month target five months
ahead of schedule, increased our net leasehold position by 500% to over 3,000
net mineral acres, and almost doubled our proven reserves to US$61.9million.
Achieving all this during our first six months as a listed entity demonstrates
our ability to rapidly and significantly increase net production, reserves and
acreage in the Mississippi Lime formation, our focus area in Oklahoma, as we
look to build Northcote into a leading producer of oil and gas in the region.

The Board believes that this growth has been impressive and is especially
pleased that the Company's net attributable reserves have increased from
0.94million barrels of oil equivalent ("BOE") at IPO to 1.699million BOE. This
does not include any reserves from our interests in the new projects, such as
Oklahoma Energy and Mathis. We expect to announce additional reserves and P1
PV10 later this year after reserve reports have been prepared for these
additional projects. This will significantly add to our reserves per share and
demonstrates the potential within our current asset portfolio. This
significant growth results from the successful implementation of operational
initiatives such as hydraulic fracture stimulation programmes, new wells and
workover campaigns, and the acquisition of additional assets which consolidate
and leverage our position in Osage County, where we believe our management
team provides a significant competitive advantage to the Company. Our reserves
are detailed in the table below:
                               (Grand Total) As of November 1, 2012

Gross Reserves Net Reserves Net Cash Flow

Oil & Natural Oil & Natural Future Future Future Future NPV

Condensate Gas Gas Net Net Net Net Disc @

Condensate Reserve OPEX & Capital Cash 10%

Taxes

Flow Reserve Class / (MbbI) (MMcf) (MbbI) (MMcf) ($000) ($000) ($000) ($000) ($000) Category Proved Developed 418 1,413 40 192 4,314 2,530

- 1,784 1,178 Producing Proved Developed 2,491 6,571 1,030 2,714 102,920 13,777 1,854 87,290 56,372 Behind Pipe Proved Shut in 300 944 1 2 57 8

- 48 33 Proved Undeveloped 3,464 9,830 111 199 10,625 1,587 949 8,089 4,359

Total Proved 6,672 18,758 1,181 3,107 117,916 17,902 2,803 97,211 61,942

Probable Behind Pipe - - - - - -

- - - Probable Undeveloped 1,800 5,366 3 8 259 38

41 179 102

Total Probable 1,800 5,366 3 8 259 38

41 179 102

Total 2P 8,472 24,124 1,184 3,115 118,175 17,940 2,844 97,390 62,044

Possible Behind Pipe - - - - - -

- - - Possible Undeveloped 2,100 6,210 3 9 300 44

48 208 117

Total Possible 2,100 6,210 3 9 300 44

48 208 117

Total 3P 10,572 30,335 1,187 3,124 118,475 17,984 2,892 97,598 62,161

We are focused on the Mississippi Lime formation, a proven and producing hydrocarbon formation, due to both the highly attractive economics it offers and the excellent access to infrastructure, making it an ideal environment for rapid expansion. At between US$2.5million and US$4.0million, drilling costs are relatively low in the Mississippi Lime and third party commentators believe it has one of the lowest breakeven oil prices among onshore US plays. In recent years, US independents such as Chesapeake Energy, Devon Energy Corp. and SandRidge Energy have successfully built a strong presence in the Mississippi Lime. Northcote also actively seeks to take advantage of the multiple pay zones that exist in its focus area and as such is actively developing other objectives including the Layton and Bartlesville sands.

Our core portfolio currently consists of the Horizon Project (51% working interest ("WI")), the contiguous Mathis Project (100% WI), and the OKE Project (100% WI), where our 100% acquisition conferred Northcote with operator status in the region. We also have smaller working interests in the Bird Creek Project, Osage County (3.125% WI), the De Agua Project, Woods County (0.125% WI) and the South Weslaco Gas Unit, Hidalgo County, Texas (up to 25% WI). With this in mind, we have set a new production target of reaching 250 BOEPD by the end of July 2014 to be met through an aggressive work programme on existing properties that will consist of continuation of the fracture stimulation programme, new drilling and exploitation of existing well bores.

We have a highly experienced team on the ground, led by our CEO Randy Connally, who was involved in the successful formation of Eagle Energy Company of Oklahoma ("Eagle"). In less than 3 years Eagle was transformed from a small, gas focused E&P company to a significant player, which was acquired by Midstates Petroleum for US$650 million in October 2012. The Board plans to utilise Randy's experience to build Northcote in the mid term.

Horizon Project, Osage County (51% WI)

The Horizon Project currently produces from 10 wells with one further well pending completion. The project has excellent infrastructure for continued low cost development in the area. The significant and on-going progress we have made at this asset reflects our multi-faceted approach to increasing our exposure to the proven substantial reserves.

Since listing we have increased our WI in Horizon from 28% to 51% through the exercise of options at minimal cost to the Company, which automatically enhanced our P1 PV10 and proven reserves considerably.

We initiated our operational campaign through a workover programme at Horizon which centred on four wells not scheduled for fracture stimulation in the near term. This involved increasing water disposal capacity through a pipeline project, re-acidizing, pumping down fluid levels and in some cases installing larger submersible pumps. This low cost work had a positive impact on overall production. The pipeline project in particular has provided significant production gains and we continue to see additional production gains as the water is pumped down.

We elected to participate in the deepening of the Burkhart#1 well, which was originally drilled to and produced from the Mississippi Chat formation, and it has successfully reached its target depth of 4,226 feet. This well will be completed in the Mississippi Lime formation and plans are currently being discussed with our working interest partners in the well.

Initially we plan to complete our hydraulic fracturing campaign at Horizon. We have completed fracks at Big Hill #1 and Big Hill #2, which were deemed our worst two performing wells when we acquired our interest in the project. We chose to frack these two wells first to gain an understanding of the variables associated with fracking in this area; optimization of a frac depends on a number of variables associated with the well, but also the characteristics of the formation in a particular region. Big Hill #1 returned positive results from the frack which contributed towards hitting our 100 BOEPD target. We reported an open flow rate of up to 1,210 Mcf/day of natural gas (215.5 boepd gross, 88.4 net to Northcote). These numbers are highly encouraging and have demonstrated that the fracture stimulation has enabled the well bore to open up unexploited reservoir.

We experienced significant technical issues with the frack at Big Hill #2. Remedial action has been taken and the well is back on test and is currently producing approximately 120 thousand cubic feet per day of natural gas. However, management believes that given the issues associated with the well, specifically split casing and a damaged submersible pump that were discovered immediately after the frac, there is a significant likelihood that the frac did not adequately stimulate the well and the reservoir remains, in effect, unfracked. The performance of this well will be closely scrutinised but, at this stage, it seems likely that it will be a candidate for further stimulation at a future date.

We have also advanced our share of the funds to secure the frack of the next two wells, both of which are fully funded. The third frack is anticipated to commence in early October subject to completion of certain work, which is underway, on the surface location as required by regulatory authorities, with the fourth frack following shortly thereafter. We plan to frack 4 wells total in 2013, and will continue our programme across all the wells in our portfolio in 2014.

Mathis Project (100% WI)

In June 2013 we completed the acquisition of a 100% working interest in leases covering an additional 960 acres (`Mathis') contiguous to the our Horizon Project for a relatively small payment of US$325,000.

The Mathis Acquisition comprises 1,280 gross acres, inclusive of 320 gross acres previously acquired via farm-in. This acquisition adds 960 acres contiguous to two of the Company's existing wells acquired as part of the Horizon Project in Osage County, Oklahoma. The approximate 320 acres held by the Steele and Steinberger producing wells were held by Northcote in the Mississippian only, but with this acquisition Northcote acquires rights to drill to all formations on those leases. The acquisition is therefore highly strategic, allowing us to consolidate our regional position and also further leverage our existing field infrastructure at Horizon going forward.

Twenty Two vertical well bores exist on the property and its production directly offsets the Steele and Steinberger, which are two of the best performing wells on the Horizon Project. 3-D seismic exists covering a portion of the leasehold and the Company has already identified two potential horizontal well locations with two additional locations possible, subject to further geologic analysis. Significantly, all of the leases are part of a "unit" and as such, production on any part of the unit holds the entire lease by production.

Oklahoma Energy Project ("OKE") (100% owned)

We completed the acquisition of a 100% working interest in the 1,040 acre OKE Project in April 2013 for a total sum of US$700,000, of which US$250,000 was settled in equity and a further US$200,000 earn-out to be paid from production.

On completion of the acquisition of OKE, Northcote gained operator status and capacity to operate projects in Osage County, Oklahoma. This project has huge potential and we have already commenced work to unlock this potential. The first stage of our work programme has been completed and was highly successful increasing production by 150% since acquisition to 37 BOPD.

The second stage of the workover programme is now underway and targeting an increase in gross production at OKE to 50 bopd by the end of 2013. In conjunction, we are evaluating additional Mississippian opportunities on the acreage to significantly enhance production and reserves with at least one well scheduled to be drilled within the next twelve months. Importantly, the project has the required infrastructure in place to support increased production.

These initiatives to increase production will be highly beneficial to Northcote as we aim to accelerate the pay-out of the 41.5% BlueRock term royalty inherited on acquisition. BlueRock's royalty will expire when it has received US$1.23 million and an internal rate of return on that amount of 15% from its share of the Project's revenues. On expiry of BlueRock's royalty, our net revenue interest will increase to 80% and leave us well positioned to develop all zones within our tenure.

Bird Creek Prospect, Osage County: (average 3.125% working interest)

We acquired a 3.125% working interest in the Bird Creek Prospect shortly after listing. We have already elected to participate in the drilling of two wells, one of which, the Bray #1, has been drilled to target depth of 1,820 feet and encountered good oil shows across 10 feet of pay from 1,704 to 1,714 feet. While the results from the well, together with well data from nearby wells suggested we were on the outer edge of a structure, the porosity was less than desired. We next participated in drilling the Keese #1 well which is complete and a second Keese well (third overall), the Keese #2, is currently being completed. On completion of the second well, work will begin to install the necessary production facilities in order to permit production from the wells, at which point production data will be announced. The Bray #1 will be completed as a salt water disposal well.

DeAgua Project, Woods County: (average 0.348 % working interest)

This smaller working interest in the DeAgua Project enables us to participate in wells alongside Chesapeake and Midstates, two of the leading operators in the Mississippi Lime.The pace of drilling on this project has been a disappointment as the operator has been focused on other acreage in their portfolio. However, one well, the Cook 1H-12, in which Northcote has an approximate 1.0% working interest, is being completed and results will be announced in due course.

Partnerships

In July 2013 we were pleased to announce the formation of our first partnership vehicle, Northcote Drilling Partners LLP (`the Partnership'). This enables U.S. investors to participate with Northcote in the development of oil and gas assets located onshore US, initially in Oklahoma. Full details of the partnership can be found in the announcement dated 4 July 2013, but in essence, the Partnership will de-risk Northcote's development programme by providing it with a non-dilutive source of capital that offers direct upside participation in additional assets, whilst also providing opportunities to optimize our portfolio by sharing the costs associated with higher risk, but also high reward. Importantly, our subsidiary, Northcote Energy Development, is managing general partner of the Partnership and receives a participation in the revenues generated by the partnership for this role.

Financial Review

Gross production at Horizon during the period averaged over 100 BOEPD, significantly less than the full potential of the project. During the period under review, production was affected by the work programme across the project, which resulted in production at a number of the wells at our Big Hill and Little Drum units being temporarily suspended whilst work was completed. We look forward to reporting substantially increased revenues in our year end accounts, as the full year effects of our work programme are shown through increased production.

During the period the Group reported a loss of $2,183,000 of which $1,273,000 (2012: $Nil) related to a one-off goodwill impairment related to the reverse acquisition completed in January 2013. In addition the loss includes IPO costs of $366,000 and non-cash share based payments of $64,000 (2012: $Nil).

During the period, Northcote raised a total of $5.2million via placing. The funds raised, both on admission and post admission, are being used to accelerate our work programmes across both our original and expanded portfolio of projects. As part of the placings we were delighted to welcome Cape Bouvard Equities Pty Ltd, one of Australia's largest private investment companies, to our shareholder register.

Outlook

We have significantly grown Northcote during the first six months of the year, our first as a public entity. We now have a strong core portfolio with excellent upside potential, operator status in Osage County and an exciting and de-risked development campaign to considerably bolster our production to 250 BOEPD and build on our already sizeable reserves by the end of July 2014. In tandem with this, our experience and network in Osage County will help us secure further value accretive opportunities to consolidate our position, a proven strategy which will substantially enhance Northcote's value, and build the Company into a leading oil and gas company in the State of Oklahoma.

We have set, and are confident of meeting, the following operating targets:

- 5,000 net acres by 31 December 2013; and

- 250 boepd production by 31 July2014.

I would like to take this opportunity to thank our Board, management and advisers for their hard work during this exciting period, which has seen us achieve the first of our annual production targets, 5 months early, and we look forward to the next 12 months as we continue to deliver our growth plans by the execution of our ongoing work programme.

Ross Warner

CHAIRMAN

For further information visit www.northcoteenergy.com 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

Limited Bidhi Bhoma Shore Capital Stockbrokers +44 (0) 20 7408 4090

Limited Hugo de Salis St Brides Media and Finance +44 (0) 20 7236 1177

Ltd Elisabeth Cowell St Brides Media and Finance +44 (0) 20 7236 1177

Ltd Notes:

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.

Consolidated statement of comprehensive loss (unaudited)

Six months Nine months Six months

ended ended 31 Dec 2012 ended

30 June 2013 (unaudited and 30 June 2012

(unaudited) restated) (unaudited)

US$'000s US$'000s US$'000s

Revenue 360 113 - Cost of sales (234) (53) - Gross profit 126 60 - Administrative expenses - Impairment of goodwill 1,273 - - - Other administrative expenses 1,133 241 - Total administrative expenses (2,406) (241) - Operating loss (2,280) (181) - Finance income 125 - - Finance costs (28) - - Loss before tax (2,183) (181) - Income tax expense - - - Loss after tax attributable to (2,183) (181) - equity holders of the parent

Exchange differences arising on (166) 3 12 translating foreign operations

Total comprehensive loss for the (2,349) (178) 12 period attributable to equity holders of the parent

Weighted average number of shares 874,756,198 102,870,880 14,950,001

0. 2 cents -

Basic and diluted loss per share 0.2 cents

Consolidated statement of financial position (unaudited)


                                                                                  
                         30 June
                                                                                
      31 Dec
                                                                                
                            2012
                                                        30 June 2013            
        2012          (unaudited

(unaudited and and

(unaudited)

restated) restated)

US$'000s

US$'000s US$'000s Assets Non-current assets Intangible Oil & Gas assets 1,575

400 - Tangible Oil & Gas assets 4,055

978 - Total non-current assets 5,630

1,378 -

Current assets Receivables 241

111 - Cash and cash equivalents 1,420

11 31 Total current assets 1,661

122 31 Total assets 7,291

1,500 31

Liabilities Non-current liabilities Promissory notes 50

476 - Provisions 72

- - Total non-current liabilities (122)

(476) -

Current liabilities Trade and other payables 323

80 62 Other loans 343

250 - Provisions 128

- - Total current liabilities (794)

(330) (62) Total liabilities (916)

(806) (62) Net assets 6,375

694 (31)

Capital and reserves Share capital -

38 15 Share premium 15,588

1,421 529 Shares to be issued 1,888

- - Foreign currency translation reserve (189)

(23) (14) Reverse acquisition reserve (8,202)

- - Accumulated loss (2,710)

(742) (561) Total equity attributable to the parent entity 6,375


         694                (31)


Consolidated statement of changes in equity (unaudited)
                                                                     Foreign
                                                                  currency

translation Reverse

reserve acquisition

Share capital Share premium Shares to reserve Accumulated loss Total equity

be issued

US$'000s US$'000s US$'000s US$'000s US$'000s US$'000s US$'000s Balance at 1 15 529 - (26)

- (561) (43) January 2012 Total comprehensive - - - 12

- - 12 loss for the period Balance at 30 15 529 - (14)

- (561) (31) June 2012 Total comprehensive - - - (9)

- (181) (190) loss for the period Issue of share capital 22 880 - -

- - 902 Share-based payments 1 12 - -

- - 13 Balance at 31 38 1,421 - (23)

- (742) 694 December 2012 Total comprehensive - - - (166)

- (2,183) (2,349) loss for the period Issue of shares - 15,014 1,888 -

- - 16,902 Conversion of - 250 - -

- - 250 debt to equity Share issue costs - (443) - -

- - (443) Reverse acquisition (38) (503) - - (8,202) - (8,743) adjustment Share options - - - -

- 60 60 issued Share warrants - (151) - -

- 155 4 issued Balance at 30 June 2013 - 15,588 1,888 (189) (8,202) (2,710) 6,375

Consolidated statement of cash flows (unaudited)


                                                                                  
                              Six months
                                                                                
                                ended 30
                                                                                
                                Jun 2012

Six months ended 30 Jun 2013 Nine months ended 31 Dec 2012 (unaudited and

(unaudited) (unaudited and restated) restated)

US$'000s

US$'000s US$'000s Cash flows from operating activities: Net loss for

- the period (2,183)

(181) Items not involving cash: Depreciation of

- property, plant and equipment 24

- Impairment of

- goodwill 1,273

- Share-based

- payment expense 64

- Net interest

- expense 28

- Net foreign

- exchange (125)

- Change in working capital items: (Increase)/Decrease

- in receivables (90)

(107) Increase/(Decrease) in

- trade and other payables 1

5 Net cash used in

- operations (1,008)

(283) Cash flows from investing activities Acquisition of

- subsidiary (450)

- Purchases of property,

- plant and equipment (1,826)

- Payments to acquire

- intangible assets (325)

- Interest received 3

- - Net Cash acquired

- on reverse acquisition/ acquisitions 577

- Net cash used in

- investing activities (2,021)

- Cash flows from financing activities Proceeds from

- issue of convertible loans -

250 Proceeds from

- issue of share capital 5,243

13 Share issue costs (442)

- - Proceeds from

- borrowing 363

- Repayments of

- loans (696)

- Loan and bank

- interest paid (30)

- Net cash generated

- by financing activities 4,438

263 Net increase/ (decrease) in cash and cash

- equivalents 1,409

(20) Cash and cash equivalents, beginning of period 11

31 31 Effect of foreign

- exchange rate changes -

- Cash and cash equivalents, end of period 1,420

11 31

Significant non-cash transactions relate to the issue of shares on reverse acquisition of Northcote Energy and issue of shares as consideration for Oil & Gas acquisitions during the period.

Notes to the consolidated financial statements (unaudited)

For the six months ended 30 June 2013

(Stated in U.S. dollars)

1. Basis of preparation

The condensed consolidated interim financial statements have been prepared in accordance with the requirements of the AIM Rules for Companies. As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing this interim financial information. The condensed interim financial statements should be read in conjunction with the annual financial statements for the period ended 31 December 2012, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

The interim financial information set out above does not constitute statutory accounts. They have been prepared on a going concern basis in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union. Statutory financial statements for the year ended 31 December 2012 were approved by the Board of Directors on 27 March 2013. The report of the auditors on those financial statements was unqualified.

The 2013 interim financial report of the Company has not been audited or reviewed by the Company's auditor, PKF Littlejohn LLP.

Going concern

The Directors, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the condensed interim financial statements for the period ended 30 June 2013.

Risks and uncertainties

The Board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group's medium term performance and the factors that mitigate those risks have not substantially changed from those set out in the Group's 2012 Annual Report and Financial Statements, a copy of which is available on the Group's website: www.northcoteenergy.com. The key financial risks are liquidity risk, foreign exchange risk, credit risk, price risk and interest rate risk.

Critical accounting estimates

The preparation of condensed interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in the notes of the Group's 2012 Annual Report and Financial Statements. The nature and amounts of such estimates have not changed significantly during the interim period.

Presentation currency

Upon completion of the RTO the presentational currency of the Group and its comparatives was made US $. This change was made as the Directors considered the US$ to most faithfully represent the economic effects of the underlying transactions, events and conditions in the Company. As a consequence of this change in presentational currency the financial information for the period ended 30 June 2012 and the period ended 31 December 2012 has been presented in US$ and has been described as "unaudited and restated".

2. Accounting Policies

The same accounting policies, presentation and methods of computation have been followed in these condensed interim financial statements as were applied in the preparation of the Group's annual financial statements for the period ended 31 December 2012 except for the impact of the adoption of the Standards and interpretations described below.

Changes in accounting policy and disclosures

(a) New and amended standards, and interpretations mandatory for the first time for the financial year beginning 1 January 2013 but not currently relevant to the Group.

Standard Impact on initial application Effective date

Deferred tax: recovery of underlying IAS 12 (Amendment) assets 1 January 2013 IFRS 13 Fair value measurement 1 January 2013

(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2013 and not early adopted

Standard Effective date

1 January IFRS 10 Consolidated financial statements 2013*1

1 January IFRS 11 Joint arrangements 2013*1

1 January IFRS 12 Disclosure of interest in other entities 2013*1 IAS 19 (Amendment 1 January 2011) Employee benefits 2013*2 IAS 27 (Amendment 2011) Separate financial statements 1 January 2013 IAS 28 (Amendment Investments in associates and joint 1 January 2011) ventures 2013*1 IAS 32 (Amendment Offsetting financial assets and 2011) financial liabilities 1 January 2014

1 January IFRS 9 Financial instruments 2015*2

Financial Instruments: Disclosures

Offsetting Financial Assets and 1 January IFRS 7 Financial Liabilities 2013*2

1 Effective date 1 January 2014 for the EU.

2. Not yet endorsed by the EU

3. Reverse acquisition of Northcote Energy Limited

On 14 January 2013 the Company acquired 100% of the issued share capital of Northcote Energy Limited, Cayman Islands ("Northcote CI"), a US focused on-shore oil and gas company, for a consideration of US$10.4 million to be satisfied by the issue of 645,084,519 new Shares to the Sellers. Northcote Energy Limited was incorporated as an investment vehicle focused on the completion of a natural resources acquisition. The Directors identified and completed the acquisition of Northcote CI in line with this strategy and to further the business interests of the Company.

In accordance with IFRS 3 (Revised) the acquisition represents a reverse acquisition and the details of the reverse acquisition are below:

Total consideration $000's Equity instruments in issue (5,995,841 ordinary 1,645 shares at 17.012p each) Recognised amounts of identifiable assets acquired and liabilities assumed ASSETS Receivables 40 Cash and cash equivalents 574 Total identified net assets 614 LIABILITIES Trade and other payables (242) Total identified liabilities (242) Total identified net assets 372 Goodwill 1,273

In a reverse acquisition the acquisition date fair value of the consideration transferred by Northcote Energy Limited is based on the number of equity instruments that Northcote CI would have had to issue to the owners of Northcote Energy Limited to give the owners of Northcote Energy Limited the same percentage of equity interests that results from the reverse acquisition. The cost of the combination was calculated using the fair value of all the pre-acquisition issued equity instruments of Northcote Energy Limited at the date of acquisition. The fair value of the share consideration was based on the latest share transaction of Northcote Energy CI from October 2012 of �0.17 immediately prior to the acquisition. Goodwill of $1,273,000 was be expensed immediately on acquisition and all the acquisition related costs will also be expensed in accordance with IFRS 3 (Revised).

The costs of the reverse acquisition of Northcote CI totalled $690,000; of this amount $366,000 was charged to the income statement in the period under review, with the remaining amount being recorded in the prior period ended 31 December 2012

4. Acquisition of Oklahoma Energy

Effective 1 April 2013 the Group acquired a 100% interest in Oklahoma Energy LLC ("OKE") , a US company with Oil & Gas assets in Oklahoma in exchange for consideration totaling $900,000 comprising $500,000 payable to the vendor and a $400,000 payment to BlueRock Capital LLC, a third party.

Prior to Northcote agreeing to purchase OKE, OKE had sold a term overriding royalty interest (`Royalty') to BlueRock Capital, LLC (`BlueRock'). The Royalty confers a direct NRI on BlueRock in the project assets. Northcote has agreed to pay BlueRock US$400,000 at completion to reduce the outstanding balance of the Production Payment to US$1.23 million.

The consideration for the acquisition is as follows:

1) US$50,000 in cash (`OKE Cash Consideration');

2) US$250,000 to be settled by the issue of 9,523,809 new Ordinary Shares at 1.75 pence per new Ordinary Share (`OKE Consideration Shares'); and

3) up to a maximum payment of US$200,000 in cash payable at the rate of US$10 per boed produced up until 4 March 2020.

4) payment to BlueRock $400,000

In accordance with IFRS 3 (Revised) the details of the acquisition are below:

Total consideration $000's Equity instruments in issue (9,523,809 ordinary shares 250 at 1.75p each) Earn-out provision ($10 per barrel of production to a 200 maximum of $200,000) Cash (including $400,000 BlueRock facility 450 payment) Total consideration 900

Recognised amounts of identifiable assets acquired and $000's liabilities assumed ASSETS Tangible Oil & Gas assets 87 Intangible Oil & Gas assets 850 Cash and cash equivalents 3 Total identified net assets 940 LIABILITIES Trade and other payables (40) Fair value of total net assets 900

5. Segmental analysis

In the opinion of the Directors, the operations of the Group comprise one single operating segment comprising production, development and sale of hydrocarbons and related activities. The Group operates in one geographic area, USA. The Group has head office operations in the UK but the quantitative thresholds of IFRS 8 are only met for the USA, which is therefore the Group's one reportable segment and the Directors consider that the primary financial statements presented substantially reflect all the activities of this single operating segment.

6. Oil & Gas Assets


                              Intangible    Tangible
                              assets        assets      Total

$'000s $'000s $'000s Cost At 1 January 2012 and 30 June 2012 - - - Additions 400 978 1,378 At 31 December 2012 400 978 1,378 Additions 325 3,014 3,339 Acquired through business combination 850 87 937 At 30 June 2013 1,575 4,079 5,654

Depletion charge At 1 January 2012 and 30 June 2012 - - - Charge for the period - - - At 31 December 2012 - - - Charge for the period - 24 24 At 30 June 2013 - 24 24

Net book value At 30 June 2013 1,575 4,055 5,630 At 31 December and 30 June 2012 400 978 1,378

Analysis of NBV by project: Oklahoma Energy 850 186 1,036 Other projects 725 - 725 Horizon Project - 3,869 3,869 At 30 June 2013 1,575 4,055 5,630

On 13 February 2013 the Group acquired an additional 10% working interest in the Horizon project for US$800,000 satisfied by the payment of $107,500 cash and the issue of 18,083,183 fully paid Shares in Northcote with the issue of a US$192,500 promissory note.

On 13 February 2013 On 13 February 2013 the Group acquired an additional 2.2% royalty interest in the the Horizon Project for US$300,000 satisfied by cash of US$101,000, the issue of 5,424,955 fully paid Shares in Northcote and the issue of a US$49,000 promissory note.

On 22 March 2013 the group agreed to acquire an average 7.25% working interest in 10 wells at the Company's Horizon Project for consideration of US$600,000 to be satisfied by the issue of 22,857,143 new Ordinary Shares at a price of 1.75 pence per new share.

Additionally on 22 March 2013 the Company entered into an agreement with Horizon to acquire a further 6% working interest in the Horizon Project for US$480,000 payable in cash.

Acquisition of Oklahoma Energy ("OKE") is described in more detail in note 3.

7. Share options and warrants

The following is a summary of the share options outstanding and exercisable as at 30 June 2013, 31 December 2012 and 30 June 2012 changes during the period:

30 June 2013 30 June 2012 and 31

December 2012

Weighted Weighted

average average

exercise exercise

price price

Number (Pence) Number of (Pence)


                                                                 options
                                           of

options Outstanding at beginning of period - - - - Warrants in Northcote Energy Ltd at acquisition 1,000,000 1.00 - - Warrants granted post acquisition 20,669,046 1.15 - - Options granted to Directors 49,000,000 2.46 - - Outstanding and exercisable, end of period 70,669,046 2.06 - -

At 30 June 2013 the following share options were outstanding in respect of the ordinary shares:

Grant Date Expiry Date Number of Acquired/ Number of Exercise Exercisable at

Options Issued Options Price

b/fwd Outstanding per 30 June 13

Option

14.01.13 14.01.16 - 1,000,000 1,000,000 1.00p 1,000,000 14.01.13 14.01.16 - 14,669,046 14,669,046 1.00p 14,669,046 22.03.13 22.03.16 - 6,000,000 6,000,000 1.50p 6,000,000 05.04.13 05.04.18 - 14,000,000 14,000,000 1.75p1 - 05.04.13 05.04.18 - 17,500,000 17,500,000 2.25p2 - 05.04.13 05.04.18 - 17,500,000 17,500,000 3.25p3 -

- 70,669,046 70,669,046 21,669,046

1) Vests after 31.12.13 on condition that the Director is employed at that date and that net production is greater than 100 boepd;

2) Vests after 31.12.13 on condition that the Director is employed at that date and that net production is greater than 250 boepd;

3) Vests after 30.06.13 on condition that the Director is employed at that date and that net production is greater than 400 boepd;

The new options have been valued using Black-Scholes and the assumptions used are detailed below:

Grant date Share price Exercise Volatility Option life Dividend Risk-free investment Fair value per

at grant price yield rate

option 14-01-13 1.00p 1.00p 60% 3 years 0% 1% 0.655cents 22-03-13 1.50p 1.50p 60% 3 years 0% 1% 0.922cents 05-04-13 1.48p 1.75p 40% 5 years 0% 1% 0.694cents 05-04-13 1.48p 2.25p 40% 5 years 0% 1% 0.523cents 05-04-13 1.48p 3.25p 40% 5 years 0% 1% 0.208cents

The Group recognised $215,000 (2012: $Nil) related to equity-settled share based payment transactions during the year, of which $151,000 was charged to share premium and $64,000 was expensed. There is a further $184,000 (2012: $Nil) to be recognised in the subsequent financial period, in relation to the above issue of options.

8. Loans and borrowings


                      6% Bank    4.5%        6%           30      31      30
                      Debt       Promissory  Promissory
                                 notes       notes        June    Dec     June
                      $'000s
                                 $'000s      $'000s       2013    2012    2012

$'000s $'000s $'000s

Brought forward - - - - - - Initial drawdown 350 49 669 1,068 - - Interest 3 1 29 33 - - Repayments (10) (50) (648) (708) - - Carried at period end 343 - 50 393 - -

Principal terms and the debt repayment schedule of the Group's loans and borrowings are as follows for 30 June 2013 and 31 December 2012

Currency Interest rate Year of maturity Bank loans US$ 6% 2014 Promissory notes US$ 4.5% 2016 Promissory notes US$ 6% 2016

The promissory notes are unsecured and shall be payable between issue and a maximum of five years from the date of issue. In the event that the loan hasn't been paid down by maturity the outstanding principal and interest will be fully payable at maturity.

9. Provisions


                             30 June    31 Dec  30 June
                               2013       2012    2012

$'000s $'000s $'000s

Due within one year or less 128 - - Due after more than one year 72 - - Total provision 200 - - The provision is in respect of an earn-out provision payable to the vendor of Oklahoma Energy LLC. Up to a maximum payment of US$200,000 in cash payable at the rate of US$10 per boed produced up until 4 March 2020.

10. Events after the balance sheet date

Northcote Energy has entered into an agreement to acquire up to a 25% working interest (`WI') in certain producing leases at the South Weslaco Field, Hidalgo County, Texas. The effective date for the Acquisition will be 1 September 2013 and the consideration being paid consists of US$150,000 in cash and 12,348,372 new ordinary shares of no par value in the Company. The completion is pending and is contingent on the assignment of oil and gas leases to the Group but is expected to complete in the next few weeks.

There were no other events to report after the balance sheet date

END

-0- Sep/30/2013 06:08 GMT

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