10 Jul 2014 07:00
Northcote Energy Ltd / Index: AIM / Epic: NCT / ISIN: VGG6622A1057 / Sector: Oil & Gas
10 July 2014
Northcote Energy Ltd ('Northcote' or 'the Company')
2014 work programme update
Northcote (AIM: NCT) is pleased to provide an update on its 2014 work programme and the
issue of £300,000 zero coupon secured loan notes (`the Note') to further accelerate drilling work at Zink Ranch.
Highlights
· In order to deal with the current and anticipated increases in gas & fluid flows resulting from the 2014 programme infrastructure improvements are required.
o Currently production is constrained and work to alleviate this is ongoing and is targeted to be completed in the coming weeks.
· Zink Ranch will continue to be the focus of activities in July and August and the initial work will include the commencement of a new drill programme:
o Permitting has been submitted on 4 new wells;
o The first well will spud in July; and
o Activity in neighbouring property highlights prospectively of programme.
· The new drills will take priority over the recompletions given their expected impact to the 250 BOEPD target.
o The second phase of the 2014 programme will commence in Q3 and will include the remaining Zink recompletions;
o Phase two, which will be completed in September/October 2014, is designed to increase production beyond our 250 BOEPD target.
· The acceleration of the drilling programme at Zink Ranch will be funded by the issue of £300,000 convertible loan notes. Northcote has committed to use the anticipated cash flows from the new production to accelerate their repayment.
Northcote CEO Randy Connally said, "Northcote's ongoing and diversified work programme across its core Osage County portfolio is delivering results and we continue to work diligently on our Zink Ranch campaign. The infrastructure and well equipment upgrades currently being undertaken will remove the current bottlenecks and allow for full production and efficiency at all of our wells, including the four recompleted recently. This work consists of a number of relatively small, discrete projects and fortunately we have the manpower to address these quickly. In the interim we are moving ahead with the first of the contemplated new drill wells on Zink Ranch and plan to have the infrastructure upgrades completed to coincide with completion of these wells.
"Going forward, with multiple projects proceeding in parallel, we remain confident in achieving our objective of 250 BOE/d this summer. This target is certainly deliverable in the short term, and all the work required to enable us to hit this target will be completed in July or early August. While we would be delighted to be in a position to announce the culminated IP results from all initiatives before the end of this month, we are also realistic that short term flexibility on this timeframe, which was set only by our management team a year ago, may be required as we wait for the results to flow through together. We are committed to delivering long term success, and with this in mind, we want to ensure that the rates recorded are accurate and indicative of longer term production. Looking ahead, once this target has been hit, we will embark on phase 2 of our continuous programme, which will take us through to the end of September or October 2014, at which point we expect our net production to be substantially higher than 250 BOEPD."
Update on Continuous 2014 Work Programme
Infrastructure
The infrastructure work has commenced and is progressing effectively. As an operating field, Zink Ranch has a range of gas systems and water systems in place. With this in mind, modifications have to be made across all areas of the infrastructure simultaneously, rather than incrementally, in order to deal with the increased fluid and gas volumes that are expected from the 2014 programme. The infrastructure work will include the following:
- The installation of compressors to support increased natural gas flow rates;
- The installation of upgraded pumps to improve oil flow rates;
- The upgrade of salt water disposal capacity to ensure environmentally responsible management of the increased water volumes associated with high production rates resulting from the work programme;
- Additional tank battery capacity allows increased production to be added.
New drills
Permits for four new drill well locations at Zink Ranch have been submitted. One location is on an existing previously staked location, and has a complete archaeological survey. Archaeological approval on the remaining three locations is pending and preparation for the drilling of the first Zink Ranch well continues with the expectation that we will announce the spud of the first well in July.
Recompletions
On acquisition of the Zink Ranch Project, production stood at 20 BOEPD gross. As reported on 4 June 2014, the initial gross flow rates for the 8-A well, over a 2 day test, of 11.5 BOPD and 159MCF/D equating to 38 BOEPD gross highlight the potential of the recompletions.
The results of the 3 recompleted wells, alongside longer test production on the 8-A, are to be announced following completion of additional infrastructure work to support the higher field natural gas volumes. A further 10 wells remain to be recompleted at Zink Ranch during the remainder of the 2014 work programme.
Secured convertible Loan Note
Further to the announcement on 27 February 2014, the Company has issued the remaining £300,000 (gross) zero coupon secured convertible bonds (`Note') to Darwin Strategic Limited (`Darwin'). The proceeds will be applied to the Zink Ranch drilling programme.
In issuing the remaining bonds Northcote and Darwin have modified the agreement with Darwin such that the redemption of one £50,000 bond per month starting August 2014 will be accelerated, such that from October two £50,000 bonds will be redeemed per month. This accelerated repayment is anticipated to be funded from the free cash flow being generated from the aforementioned work programme.
Furthermore the Company has agreed with Darwin that any proceeds from a local bank facility will be used to repay part or all of the convertible bonds.
**ENDS**
For further information visit www.northcoteenergy.com or contact the following:
Randy Connally | Northcote Energy Ltd | +1 214 675 7579 |
Ross Warner | Northcote Energy Ltd | +44 7760 487 769 |
Dan Jorgensen | Northcote Energy Ltd | +44 20 7024 8391 |
Roland Cornish | Beaumont Cornish Ltd | +44 20 7628 3396 |
Jerry Keen | Shore Capital Stockbrokers Limited | +44 20 7408 4090 |
Bidhi Bhoma | Shore Capital Stockbrokers Limited | +44 20 7408 4090 |
Stefan Olivier | Cornhill Capital Limited | +44 20 7710 9618 |
Hugo de Salis | St Brides Media and Finance Ltd | +44 20 7236 1177 |
Elisabeth Cowell | St Brides Media and Finance Ltd | +44 20 7236 1177 |
All of the technical information, including information in relation to reserves and resources 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.
Notes:
Northcote Energy Ltd is a producing oil & gas company with a portfolio of US exploration and production assets principally focused in Osage County, Oklahoma. The Company has substantial acreage in the US where its primary focus is on the Pennsylvanian and Mississippi Lime formations. Northcote is currently undertaking a continuous 2014 work programme which includes recompletions, new wells, fracks and workover programmes in order to grow Northcote's production and reserves.