NORTHCOTE ENERGY LIMITED – Transaction with Shoats Creek Development

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

20 January 2016

Northcote Energy Ltd  (‘Northcote’ or ‘the Company’)

Enters into Balance Sheet Enhancing Transaction with Shoats Creek Development

Northcote is pleased to announce that it has substantially improved its balance sheet through two transactions with Shoats Creek Development, Inc. (‘SCDI’), its partner in the development of the Shoats Creek Field, Beauregard Parish, Louisiana.  The total reduction in company liabilities resulting from the above transactions is US$535,800.00.

In the first transaction, Northcote has agreed to assign a 23.0% working interest (‘WI’) and 16.56% net revenue interest (‘NRI’) in the Lutcher Moore #20 (‘LM20’) well to SCDI in exchange for (a) the termination of US$220,800 in debts and trade accounts payable; (b) a retained over-riding royalty interest (‘ORRI’) of 0.7912% in LM20; and (c) a back in after payout (‘BIAPO’) of approximately 4.3125% working interest and 3.105% NRI in LM20.

Northcote has further agreed (the second transaction) with SCDI that it will jointly form a trust for the purposes of settling certain trade payables incurred in conjunction with activities at the Shoats Creek Field in Q4 2014 (‘the Trust’).  Pursuant to this agreement, on formation, SCDI will contribute to the Trust an interest it retained from a previous transaction with Red Rock Resources plc of 0.6% over-riding royalty interest and BIAPO of 3.75% WI / 2.7% NRI in each of the next two wells drilled at Shoats Creek Field.  Northcote will contribute a 0.6% ORRI and 3.75% WI / 2.7% NRI BIAPO in LM20 carved from the interests retained from the first transaction described above.  Northcote will receive a credit against amounts owed by Northcote to SCDI of US$315,000 in conjunction with the second transaction.

The total reduction in Company liabilities resulting from the above transactions is US$535,800 and net of the interests assigned to the Trust, Northcote will retain a 0.1912% ORRI and 0.5625% WI/0.405% NRI BIAPO in LM20.  The debts being satisfied through this transaction were debts previously disclosed in Northcote's interim results to 30 June 2015.  Following the transactions, Northcote will retain a 70% WI / 52.8% NRI in the LM20 well which is due to commence production in the near term. Northcote will remain interested in a 70% WI/ 52.8% NRI of the Shoats Creek Field.

As part of the agreement SCDI has further agreed that Northcote shall have the option, at its sole discretion, to name itself operator of any well, lease or the entire Shoats Creek Field at any time.

As at 31 December 2015, Northcote had an unaudited cash balance of approximately US$0.3m, having paid the majority of the costs associated with the infrastructure program at Shoats Creek Field. Estimated other current assets of US$0.3m and current liabilities of US$1.1m; the effects of this Transaction will reduce current liabilities to approximately US$0.6m. The Company expects to be generating cash flow near term once the LM20 well commences production and is working on raising additional funds through asset sales, as previously announced, or other corporate transactions.  The Board is confident that it will be able to raise the necessary working capital required to support the Group’s ongoing operations and will provide an update when these arrangements have been completed.

Northcote Managing Director Randall J Connally said, "These related transactions result in a substantial improvement to our balance sheet and liquidity which positions us to continue developing and better manage the Shoats Creek Field in the challenging oil price environment in which we find ourselves.

"While an eventual recovery in oil prices will certainly be welcomed, a low cash operating cost per barrel on the LM#20, due to the conventional nature of the reservoir, positions us to generate meaningful cash flow at current oil prices.  Together with the liquidity and balance sheet enhancement resulting from these transactions improves our position to weather the storm which is affecting our industry.”

**ENDS**

For further information visit www.northcoteenergy.com or contact the following:

Notes:

Northcote Energy Limited is an entrepreneurial energy company with diverse interests.  The Company combines a portfolio of US exploration and production assets in Louisiana and Oklahoma with the development of new business opportunities in the US and also in Mexico as well as Indonesia via a strategic relationship with CEB Resources.