28 Feb 2013 07:00
NORTHCOTE ENERGY LIMITED - 40% Increase in Value of Total Net Proved ReservesNORTHCOTE ENERGY LIMITED - 40% Increase in Value of Total Net Proved Reserves
PR Newswire
London, February 27
Northcote Energy Ltd / Index: AIM / Epic: NCT / ISIN: VGG6622A1057 /
Sector: Oil & Gas28 February 2013
Northcote Energy Ltd (`Northcote' or `the Company')40% Increase in Value of Total Net Proved Reserves to US$47.5m
Northcote (AIM: NCT), an onshore US oil and gas exploration and productioncompany, is pleased to report the findings of a revision to the CompetentPerson's Report dated 20 December 2012 by Moyes & Co. which confirms a 40%increase in the value of Northcote's net attributable proved reserves fromUS$33.8 million to US$47.6 million. The reserves upgrade follows the exerciseof two of the Company's options to acquire an additional 10% working interest(the `Horizon Option') to an average 37.5% and an average 2.2% royaltyinterest (the `WCR Royalty Option') in the Horizon Project in Osage County,Oklahoma (`Horizon' or `the Project').
Key Highlights
- US$13.7 million increase in value of net attributable provedreserves to US$47.6 million following completion of the acquisition of Horizonand WCR Royalty Options
- Based on upgraded net attributable oil and condensate proved reserves of 914Mbbl and net attributable gas proved reserves of 2,376 MMcf
- Further growth potential through exercise of additional option toincrease working interest in Horizon by 8.33% to an average of 45.83%
- Expected increase in net production and reserves as a result oflarger exposure to recently initiated workover and imminent fracturestimulation programmes at the Horizon Project
Northcote's Chief Executive Officer Randy Connally said, "Within weeks of ourAdmission to AIM in January 2013, we have already increased the value of ournet proved reserves by almost half to US$47.6m. As a result, we havesubstantially increased the asset backing of the Company, which remainsconsiderably higher than our current market valuation. There is another optionin place to increase our interest in Horizon by a further 8.33% which, subjectto being exercised, should also result in a significant increase in netreserves and underlying value.
"With the fracture stimulation programme due to commence shortly and theworkover operations that are currently underway on four producing wells atHorizon, where we have already seen a small increase in net production at oneof these, we are highly confident that we will deliver a substantial increaseon our production by the end of 2013. With all this activity in mind, we hopeto maintain the excellent momentum behind the Company since Admission."
Reserves and Resources
The following has been extracted from Moyes & Co's Revision Letter dated 20February 2013*:
Northcote has exercised two option agreements effective 1 March 2013 allowingfor the acquisition of additional working, revenue, and override interests inOsage County in the amount of a 10.00%/7.50% working/revenue interest and inthe amount of a 2.20% (average) overriding royalty interest in the nine leasesin Osage County producing from the Mississippian formation. These increasedinterests are outlined in Table 1.
Ownership As of November 1, 2012 Ownership As of March 1, 2013 (%) (%) Well WI NRI ORRI WI NRI ORRI Total NRIBig Hill 27.875000 20.906250 0.000000 37.875000 28.406250 2.227500 30.6337501H-12
Big Hill 2H 27.875000 20.906250 0.000000 37.875000 28.406250 2.227500 30.633750& 4H-12
Little Drum 27.875000 20.906250 0.000000 37.875000 28.406250 2.227500 30.633750& Sarah(MS1) Steele 27.875000 20.906250 0.000000 37.875000 28.406250 2.227500 30.6337502-11HSteinberger 27.875000 20.906250 0.000000 37.875000 28.406250 2.227500 30.6337501H-10
West Little 29.937500 22.453125 0.000000 39.937500 29.953125 2.103000 32.056125Drum &Lauren (MS2)Table 1 - Northcote's increased interest in the Osage wells.
The additional interests acquired by Northcote will increase theirNPV10 in the Osage wells from US$28.74 million to US$42.50 million. Thesefigures are representative of the proved producing properties plus theirrespective behind pipe reserves. These wells have water fracture treatmentsplanned throughout 2013 and 2014 that will significantly increase productionaccounted for in the behind pipe category.
Northcote holds another option agreement allowing for theacquisition of up to an additional 8.33% working interest in the nine leasesin Osage County producing from the Mississippian.
Detailed below are the updated tables from the Moyes Revision letter dated 20February 2013 that show the updated reserve and cash flow summaries includingall properties on Osage and Woods County:
As of November 1, 2012 Gross Reserves Net Reserves Net Cash Flow ReserveClass/Category Oil & Natural Oil & Natural Future Future Future Future NPV Condensate Gas Condensate Gas Net Net Net Net Disc @ (Mbbl) (MMcf) (Mbbl) (MMcf) Revenue OPEX & Capital Cash 10% ($000) Taxes ($000) Flow ($000) ($000) ($000) Proved 417 1,411 33 146 3,507 1,920 - 1,587 1,035DevelopedProducing Proved 2,491 6,573 769 2,029 76,907 10,218 1,430 62,259 42,129DevelopedBehind Pipe Proved Shut In 300 944 1 2 57 8 - 48 33 Proved 3,464 9,830 111 199 10,625 1,587 949 8,089 4,359Undeveloped Total Proved 6,671 18,757 914 2,376 91,096 13,733 2,379 74,983 47,556 Probable - - - - - - - - -Behind Pipe Probable 1,800 5,366 3 8 259 38 41 179 102Undeveloped Total Probable 1,800 5,366 3 8 259 38 41 179 102 Total 2P 8,471 24,124 916 2,384 91,354 13,771 2,421 75,162 47,658 Possible - - - - - - - - -Behind Pipe Possible 2,100 6,210 3 9 300 44 48 208 117Undeveloped Total Possible 2,100 6,210 3 9 300 44 48 208 117 Total 3P 10,571 30,334 919 2,392 91,654 13,815 2,469 75,370 47,775All reserve estimates have been prepared using standard engineering practicesgenerally accepted by the petroleum industry and conform to the guidelinesadopted by the Society of Petroleum Engineers.
All of the technical information, including information in relation toreserves and resources that is contained in this announcement has beenreviewed internally by the Company's Technical Director, Mr. Kevin Green. Mr.Kevin Green is a Petroleum Geologist who is a suitably qualified person withover 30 years' experience in assessing hydrocarbon reserves and has reviewedthe release and consents to the inclusion of the technical information.
* The revision to Northcote's net reserve P1 PV10 is based solely on theincrease in the Company's interest in the Horizon Project following theexercise of the Horizon Option and the WCR Royalty Option. All other inputsremain the same as at the time of the original report dated 20 December 2012.
**ENDS**For further information and the full Admission document visitwww.northcoteenergy.com, see below or contact the following:
Randy Connally Northcote Energy Ltd +01 214 675 7579Ross Warner Northcote Energy Ltd +44 7760 487 769Dan Jorgensen Northcote Energy Ltd +44 (0) 20 7024 8395Roland Cornish Beaumont Cornish Ltd +44 (0) 20 7628 3396James Biddle Beaumont Cornish Ltd +44 (0) 20 7628 3396Jerry Keen Shore Capital Stockbrokers +44 (0) 20 7408 4090 LimitedBidhi Bhoma Shore Capital Stockbrokers +44 (0) 20 7408 4090 LimitedHugo de Salis St Brides Media and Finance +44 (0) 20 7236 1177 LtdElisabeth Cowell St Brides Media and Finance +44 (0) 20 7236 1177 LtdNotes:Northcote Energy Ltd is a revenue generative US onshore oil and gas productioncompany focussed on the rapidly emerging Mississippi Lime formation inOklahoma. The Company participates with leading operators, including MidstatesPetroleum and Chesapeake Energy, in low risk development plays where advancedtechniques, such as horizontal drilling and fracking, are used to unlock knownoil accumulations and dramatically improve recovery rates. Management isfocused on increasing production through a multi-well drilling and frackingcampaign in 2013.
The Horizon Project, Osage County Oklahoma
Northcote's interests in Osage County comprise working interests in 10producing wells, of which nine are unfracked horizontal wells producing fromthe Mississippian formation and one is a vertical well producing from theshallower Layton formation (Burkhart #3).
The workover programme was initiated based on evaluation of wells andbottomhole pressure tests run in December 2012 in preparation for the fracturestimulation programme. As part of the evaluation of wells, it was determinedthat Northcote could materially increase production from wells that were notpart of the planned four well fracture stimulation programme through aworkover programme that consisted of, depending on the well, re-acidizing,pumping down fluid levels and in some cases installing larger submersiblepumps.
Northcote intends to utilise hydraulic fracturing techniques in relation tothe unfracked horizontal wells. Hydraulic fracturing (`fracking') is theprimary choice for enhancing production, and typically has the effect ofincreasing productivity 2 to 20 times compared to an untreated well, byincreasing the amount of contact that the well bore has with high qualityreservoir rock.
The Company has commenced an evaluation of a number of low cost opportunitiesto develop other prospective formations on Northcote's existing leaseportfolio and other properties. As with the successfully producing verticalBurkhart #3 well, new well opportunities are targeted based on informationobtained through the on-going Mississippian programme and are undertaken onlyin situations where Northcote believes the well will generate compellingeconomics to Northcote shareholders.