July 28, 2016 - 2:00 AM EDT
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NORTHCOTE ENERGY LIMITED - New Revenue Stream at Shoats Creek Field

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

28 July 2016

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

Corporate Update

Northcote Energy Limited is pleased to provide the following update regarding its ongoing development of the Shoats Creek Field in Beauregard Parish, Louisiana (‘Shoats Creek’).  Shoats Creek Development Inc (‘SCDI’), the operator at Shoats Creek, has agreed a sales agreement to sell natural gas from Shoats Creek which should provide additional revenue from both existing and new wells drilled at Shoats Creek.     

HIGHLIGHTS:

  • Delivery of an additional significant revenue stream in the near term via the sale of natural gas following execution of a sales contract with a subsidiary of Enerfin Resources Company
  • Lutcher Moore #14 well (‘LM#14’) which produced 40 bopd and 2.5 mmcf of natural gas in testing will be the first to be tied in to the natural gas line; this is expected in September 2016 with first revenues in November 2016
  • LM#14 is expected to increase Northcote’s current net production at Shoats Creek by over 450% (Northcote has a 70% working interest and 52.8% net revenue interest in LM#14)
  • Decision to test LM#14 was based on 2001 study which estimated LM#14 has unrecovered reserves of up to 120,000 gross barrels of oil and 750,000 gross Mcf of natural gas
    • US$7.1 million gross undiscounted life of well revenue at current prices for LM#14 or US$3.8 million net to Northcote 52.8% NRI based on exploitation of up to six pay zones

Northcote Chairman Ross Warner said, “We are pleased to secure a contract with Enerfin allowing us to sell natural gas from the Shoats Creek Field.  As the LM #14 demonstrates, there are multiple existing well bores with tremendous potential for low cost near term revenue generation that could not be previously exploited without having the ability to monetise natural gas.  With natural gas prices in the US having increased by over 30% during the last few months to $2.75 per thousand cubic feet, the revenue potential from natural gas is well worth exploiting in addition to oil.”

Further Information

Agreement with Enerfin Field Services LLC (‘Enerfin’)

SCDI has entered into a natural gas sales contract with Enerfin.  The contract, with a primary term of three years, delivers an additional revenue stream to Northcote via the sale of natural gas produced at Shoats Creek. 

Prior to the commencement of gas sales at Shoats Creek, SCDI will be installing gas lines that will tie in to the proposed gas tap to support production.   It is estimated the total cost of this initial work will be less than US$450,000.  Gas sales are expected to commence after completion of this work.

The sales contract with Enerfin provides for payments to be made based on metered monthly sales of natural gas into the pipeline.  The natural gas price paid will be indexed to Henry Hub natural gas prices and adjusted for volumes produced and other customary charges.  Payment will be made at the end of month after the month in which gas volumes are sold.

Agreement with Enerfin enables exploitation of Lutcher Moore #14 well

The agreement covers both Lutcher Moore #14 and #20, but LM #14 will be the first well to be tied-in to the natural gas line.  During a 24 hour test, LM#14 produced 40 bopd and 2.5 million cubic feet of natural gas (or 189 revenue equivalent barrels) from the Cockfield formation.  Northcote has a 70.0% WI / 52.8% NRI in the LM#14 and as a result this is a high impact well for the Company.  Following the tie-in of the Well, Northcote’s net production at Shoats Creek is expected to increase by 450% to 110 barrels of oil equivalent (calculated on a revenue equivalent barrel basis) from net 20 barrels of oil per day currently.

For the purposes of calculating barrels of oil equivalent, the management team prefers to use a “revenue equivalent” barrel based on the ratio of per barrel oil prices and per Mcf natural gas prices. Using recent oil prices of approximately US$45.00 per barrel WTI and US$2.75 per Mcf natural gas, 16.25 Mcf of natural gas is equivalent to one barrel of oil in terms of revenue.  On this basis the addition of the LM#14 to production will increase Northcote’s net share of production by approximately 450%.

The 24 hour test of the LM#14 carried out by the operations manager was based on a 2001 study which attributed unrecovered reserves in up to six pay zones of up to 120,000 gross barrels of oil and 750,000 gross Mcf of natural gas to the well.  This represents gross undiscounted life of well revenue at current prices of US$7.1 million or, net to Northcote, US$3.8 million based on a 52.8% working interest.

The gas contract will also support tie in from the Lutcher Moore #20 and other wells.

The information contained within this announcement is deemed to constitute inside information under the Market Abuse Regulations (EU) No 596/2014

 **ENDS**

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

Ross Warner Northcote Energy Ltd +44 7760 487 769
Roland Cornish Beaumont Cornish Ltd +44 20 7628 3396
James Biddle Beaumont Cornish Ltd +44 20 7628 3396
Elliot Hance Beaufort Securities Ltd +44 20 7382 8300
Nick Bealer Cornhill Capital Limited +44 20 7710 9612
Elisabeth Cowell St Brides Partners Limited +44 20 7236 1177

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 Andalas Energy and Power Plc.

All of the technical information that is contained in this announcement has been reviewed internally by the Company's Technical Director, Mr. Kevin Green. Mr. Kevin Green is a Petroleum Geologist who is a suitably qualified person with over 30 years' experience in assessing hydrocarbon reserves and has reviewed the release and consents to the inclusion of the technical information.


Source: PR Newswire (July 28, 2016 - 2:00 AM EDT)

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