LONDON (Alliance News) - Northcote Energy Ltd Tuesday said it has conducted a placing to raise GBP2.8 million to pursue investment opportunities in the Mexican energy sector and said it is currently evaluating a number of opportunities including one with its existing joint venture partner in the country.
Northcote said it raised the proceeds by issuing 1.24 billion new shares at 0.225 pence per share to new and existing investors, representing around 20.77% of the company's enlarged issued share capital and said the placing price represents a 18.2% discount to the closing middle market price on May 1.
Northcote shares dropped 9.1% to 0.250 pence per share on Tuesday morning.
In connection with the placing, the company also issued over 90.7 million warrants to its brokers to subscribe for new shares in the company exercisable during three years from admission, at a price of 0.225p per share.
Northcote is now evaluating "multiple projects" in Mexico, both within the company's existing joint venture with local firm Gaia Ecologica as well as through its own contacts, it said.
"Whilst nothing formal has been agreed at this stage, due diligence is underway on an opportunity to participate in a joint venture to construct and operate a waste remedial plant in a prime onshore oil and gas basin in Mexico - this could offer a low cost opportunity to generate cash flows in the near term and has potential for expansion in line with expected increase in drilling activity," said Northcote.
The remedial plant would be strategically located in one of the primary onshore oil and gas basins in Mexico with easy access to port facilities to allow for treatment of waste associated with both onshore and offshore drilling, it said.
"The joint venture partners are performing due diligence on this opportunity, it is expected that the plant could be commissioned within six months of construction commencing and is expected to be a significant driver of positive cash flows should it become fully operational," said Northcote.
It also said advanced discussions with US-based companies with experience in midstream and downstream oil and gas services are under-way with the aim of setting up a partnership as Northcote expands into Mexico.
"The financial firepower we now have gives us the flexibility to takedown new business opportunities in Mexico. In addition to generating near term recurring revenues and solid cash flows for Northcote these steps will solidify our position as a strong partner for Mexican and international companies in opportunities emerging through the energy reform in Mexico and will, we believe, lead to opportunities across the sector, including participation in lucrative oil and gas concessions as well as other major projects in the future," said Managing Director Randall Connally.
In addition, Northcote said the Shoats Creek well in Louisiana, US, in which Northcote holds a 70% stake, will be drilled in the next 10 days after the necessary drilling permit was secured.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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