LONDON (Alliance News) - Northcote Energy Ltd Friday said it has agreed a farm-out of a 30% interest and 23.4% net revenue interest to North American Petroleum at its Zink Ranch project, as it gave an update on its 2014 work program.
The onshore US oil and gas exploration and production company said North American Petroleum will earn an interest in only those wells at Zink Ranch in which it participates under the farm-out agreement.
Under the terms of the deal, North American Petroleum must fund USD600,000 of Northcote's development costs at Zinl Ranch in order to earn the interest.
"The acquisition of the additional interest in the Zink Ranch project in February was fundamentally about improving the ratio of NRI to WI on this project to a more attractive 78% with the acquisition announced on February 27," Randall Connally, Chief Executive, said in a statement.
"Having completed that objective it was possible to bring in a partner to help fund the capital required to develop that project while allowing Northcote to manage both its exposure to any one project and its capital to ensure that the sustained and broad work program across all of our properties can proceed smoothly," Connally added.
Meanwhile, Northcote gave an update on its 2014 work programme, which is designed to increase production beyond its 250 barrels of oil equivalent target and substantially increase the company's proven producing reserves.
Northcote said the work programme commenced with the completion of the Burkhart #1 well on the Big Hill Unit.
Following completion of the Big Hill 1 workover, in the coming days, Northcote will move to the Zink Ranch project where it will commence the first 4 of 14 planned recompletions of existing well bores.
Northcote said necessary preparations, permitting and surveys for the drilling program, including the first Mathis new drill and first two Zink Ranch new drills, are underway.
"The commencement of the first projects planned under the 2014 work programme are the first of what will be a very busy year for Northcote with up to 31 recompletions, 4 to 5 new drills and 2 to 3 fracs planned for the year," Connally said.
"We look forward to providing regular updates on our progress as we move forward and the impact that our work is having on overall company production levels once the results from our projects have stabilized. We continue to be confident in hitting our 250 BOE/d target this summer," Connally added.
Northcote shares were Friday quoted at 0.685 pence, down 0.7%.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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