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NORTHCOTE ENERGY LIMITED - Acquisition of Project & Options & GBP1.5m Placing

PR Newswire

London, March 24

Northcote Energy Ltd / Index: AIM / Epic: NCT / ISIN: VGG6622A1057

25 March 2013

Significantly Increased Net Acreage, Reserves and Production throughAcquisition of 1,040 Acres in Oklahoma & Exercise of Options to Increase WI in

Northcote, an onshore US oil and gas exploration and productioncompany, is pleased to announce that it has entered into a number oftransactions which will significantly increase its exposure to the proven andproducing Mississippi Lime formation in Osage County, Oklahoma. This will beachieved through an agreement to acquire 100 per cent. of the outstandingmembership interests of Oklahoma Energy LLC (`OKE') (`the OKE Acquisition' or`OKE Agreement') and through the exercise of the remaining Horizon optiontogether with a further acquisition to increase the Company's working interest(`WI') in the producing Horizon Project (`the Horizon Project') from anaverage 37.5% to an average 50.15% (net revenue interest (`NRI') - 39.80%).OKE is the operator and holder of a 100% WI in 1,040 acres in Oklahoma thatare currently held by production and, in the Board's view, have significantpotential to produce from the proven Mississippi Lime formation (`the OKEProject').

In connection with these transactions, which are in line with theCompany's strategy to grow net production and reserves in proven US onshoreformations, the Company is also pleased to announce that it has raised £1.5million (before expenses) through an oversubscribed placing by Shore CapitalStockbrokers Limited (`Shore Capital') of 100,000,000 new ordinary shares ofno par value in the Company (`Ordinary Shares') at a price of 1.5 pence pernew Ordinary Share (`the Placing'). The funds raised will, in addition to theacquisition costs associated with the transactions and proposed workprogrammes thereon, be used to accelerate the Osage County work programme.

OKE Acquisition Highlights

- Acquisition of OKE triples Northcote's net acreage in the Mississippian playin Osage County, Oklahoma:

- Average gross current production of 12 barrels of oil per day (`bopd') (5bopd net to OKE) from the shallow Bartlesville formation which generatesaverage gross revenue of over US$30,000 per month (over US$12,450 net to OKEper month)

- The OKE Acquisition results in the Group becoming an accreditedoperator in Osage County

- 3D seismic programme planned to assess targets in the highlyprospective Mississippi Lime

- Near term potential to increase daily production from existingwells via workover programme on existing wells at an estimated total cost ofUS$150,000

- Infrastructure in place to support existing and increased production fromthe Bartlesville and other formations including the Mississippi Lime andCleveland Sands

- Acquired through cash (US$50,000) and share (US$250,000) considerationtotalling US$300,000 with a further US$200,000 to be paid from production

- Assets are subject to a 41.5 per cent. term overriding royalty interestwhich expires on the holder receiving the Production Payment (as definedbelow) at which time OKE's NRI increases from 41.5 per cent. to 80 per cent.

Horizon Highlights

- 50.15 per cent. interest in the Horizon Project will be acquiredthrough the exercise of the Company's remaining Horizon Project option and afurther purchase of an additional WI from Horizon Drilling Partners(`Horizon')

* exercise of Horizon Project Option to acquire average 7.25 per cent. working

interest in 10 wells for a $600,000 consideration payable in equity (at a

price of 1.75 pence per new Ordinary Share)

* acquisition of a further 6 per cent. WI in 9 wells from Horizon for $480,000

cash consideration (together `the Horizon WI Acquisitions')

- On completion the combined impact on the Group's Horizon Project and WoodsCounty Project P1 PV10 is to increase it to US$61.94 million - net oil andcondensate reserves increase to 1,181 Mbbl and net natural gas reserves of3,107 MMcf (not including impact from the OKE Acquisition)

- Increased exposure to recently initiated workover and forthcoming fracturestimulation programme

Northcote's Chief Executive Officer Randy Connally said, "Thesemilestone transactions, conducted on the back of a successful andoversubscribed Placing to raise £1.5 million, will provide us with majoritycontrol over two projects in Osage Country, Oklahoma. They also confirm ourcommitment to consolidate our position in the region where, by targeting theMississippi Lime, we believe we can materially bolster both our net productionand reserves.

"Secured at an attractive price and held by production, OKE notonly triples the Company's net acreage and adds considerably to our existingnet production and revenues, but it also offers significant developmentpotential to increase our production profile. Additionally, our status asoperator means there that we control the timing of future appraisal anddrilling activities. The identification and acquisition of OKE is testament tothe calibre and contacts of our management team, and we view the decision bythe vendor to receive payment in shares as a vote of confidence in our abilityto create significant value for all shareholders going forward.

"We are also delighted to increase our working interest in theHorizon Project which now confers a majority interest in the project onNorthcote. At the time of our admission to trading on AIM, our P1 reserves hadbeen assigned a PV10 of US$33.8 million by our competent person. Followingcompletion of the Horizon WI Acquisitions, our P1 reserves at the Project willhave almost doubled from the figures at the time of AIM Admission to US$61.96million and to 1,182 Mbbl of oil and condensate and 3,109 MMcf of gas,increasing the significant asset backing to our market valuation. We arecontinuing our development programme across all of our projects and also theevaluation of other opportunities in our area of focus and I look forward toupdating the market on our progress in due course."

Acquisition of OKE

The Company has entered into the OKE Agreement to acquire from Mr.Vince Coble ("Seller") 100 per cent. of the outstanding membership interestsof OKE for the following consideration:

1. US$50,000 in cash (`OKE Cash Consideration');

2. US$250,000 to be settled by the issue of 9,523,809 new OrdinaryShares at 1.75 pence per new Ordinary Share (`OKE Consideration Shares'); and

3. up to a maximum payment of US$200,000 in cash payable at therate of US$10 per boed produced up until 4 March 2020.

The OKE Acquisition will complete on payment of the OKE CashConsideration and this is expected to occur on or prior to the admission ofthe Placing Shares to trading on AIM which is expected to occur on 3 April2013. Under the OKE Agreement, the OKE Consideration Shares must to be issuedto the Seller within 120 days from completion of the OKE Acquisition. Thenumber of OKE Consideration Shares issued to the Seller may be reduced shouldthe Company makes any claims under the OKE Agreement against the Seller duringthis 120 day period. The Company will make a further announcement when the OKEConsideration Shares have been issued and will make an application for theseshares to be admitted to trading on AIM.

OKE is an approved operator in Osage County, Oklahoma and as suchwill on completion of the OKE Acquisition give Northcote operator status andcapacity to operate new or existing projects. OKE is a 100 per cent. WI holderand operates the OKE Project which comprises 1,040 acres in Osage County,Oklahoma, of which the producing wells produce an average of 12 barrels perday of oil (gross) from the shallow Bartlesville formation, equating toaverage gross revenues of over US$30,000 per month.

Prior to Northcote agreeing to purchase OKE, OKE had sold a termoverriding royalty interest (`Royalty') to BlueRock Capital, LLC (`BlueRock').This Royalty confers a direct NRI on BlueRock in the project assets. TheRoyalty expires after BlueRock has received an agreed amount and an internalrate of return of 15 per cent. per annum (together the `Production Payment')out of its share of the project's gross revenues. Northcote has agreed to payBlueRock US$400,000 at completion to reduce the outstanding balance of theProduction Payment to US$1.23 million. Pursuant to the Royalty, BlueRockreceives 41.5 per cent. of gross project revenues. Under certaincircumstances, including higher oil prices, BlueRock will receive anadditional 8.3% of gross revenues until payout, with a corresponding reductionin the gross revenues received by OKE. After payout of the Production Payment,the Royalty expires and OKE's NRI reverts to 80 per cent. At all times, OKE'sworking interest in the project is 100%. The Production Payment is not a debtpayable by OKE and, as such, the arrangement is non-recourse to OKE, unsecuredand does not appear on OKE's balance sheet.

All leases are held by production and OKE retains the ability todevelop the Cleveland and Mississippian zones at its discretion. Initially,Northcote intends to undertake a US$150,000 capital expenditure programme onthe project aimed at increasing production from the existing wells. Theprogramme will comprise workovers of existing wells, installation of electriclines, pump replacement and perforation and testing of additional zones.BlueRock has agreed to make US$150,000 available to OKE to fund thisexpenditure by way of an increase in the outstanding balance of the ProductionPayment to US$1.4million. In addition, Northcote intends to undertake 3Dseismic and additional work on the OKE Project

The Project was initially developed by Halliburton in the 1980s andconsequently there is excellent data in relation to the drilling andcompletion of a number of wells on the acreage. Whilst not Halliburton'sfocus, the data indicates the area may be prospective for production from theMississippi Lime formation through the application of horizontal drilling. Inaddition, the Project is located two miles due east of existing productionfrom the Mississippi Lime play.

Horizon Project WI Acquisitions

On completion of the Horizon Project acquisitions, the Company'saverage WI in the Horizon Project will increase to over 50 per cent. throughtwo separate transactions which increases its exposure to the recentlyinitiated workover and forthcoming fracture stimulation programme. TheCompany's interest in the Horizon Project will have a P1 PV10 of US$61.94million (up from US$33.5 million on the Company's admission to trading onAIM). Net oil and condensate reserves will stand at 1,181 Mbbl and net naturalgas reserves at 3,107 MMcf. Further details of this are set out in Appendix 1of this announcement.

Eagle Option

As more fully described in paragraph 13.2(g) of Part V of theCompany's AIM admission document, Eagle Production & Development LP (`Eagle')granted Northcote's wholly owned subsidiary, Northcote Oklahoma, LLC, anoption to acquire an average 7.25 per cent. WI in the Horizon Project in OsageCounty for US$600,000 (`Eagle WI'). Since admission Eagle has assigned theinterests to Osage Energy Holdings, LLC.

Nothcote Oklahoma LLC has exercised this option and expects toenter into a sale and purchase agreement with Osage Energy Holdings, LLC toacquire the Eagle WI shortly. The consideration for the interest is US$600,000and will be satisfied by the issue of 22,857,143 new Ordinary Shares at aprice of 1.75 pence per new share (`Osage Energy Holdings ConsiderationShares'). The sale and purchase agreement will include the wells under optionbut also includes a small working interest of 2.52% in Burkhart #3 well. TheCompany will make a further announcement when the acquisition of the interesthas completed and will make an application to for the Osage Energy HoldingsConsideration Shares to be admitted to trading on AIM.

Horizon Acquisition

Additionally, the Company has entered into a agreement with Horizonto acquire a further 6 per cent. WI in the Horizon Project for US$480,000payable in cash (`the Horizon Acquisition'). The Company will make a furtherannouncement when the Horizon Acquisition has completed.

The Placing

The Company has raised £1.5 million (before expenses) by way of anoversubscribed Placing by Shore Capital of 100,000,000 new Ordinary Shares(`Placing Shares') with existing and new investors at a price of 1.5 pence pershare, which is a discount of approximately 4.75 per cent. to the closingmiddle market price of 1.575 pence per Ordinary Shares on 22 March 2013, beingthe last dealing day prior to the date of this announcement. The Placing isconditional, inter alia, on admission of the Placing Shares to trading on AIMand it is expected that trading in the Placing Shares will begin, at 8.00 a.m.on Wednesday 3 April 2013. The Placing Shares will rank pari passu in allrespects with the Company's existing Ordinary Shares.

The net proceeds of the Placing are expected to be used by theCompany as follows:

- to satisfy the OKE Cash Consideration, the OKE Debt Repayment andUS$350,000 for 3-D seismic and additional work on OKE's assets;

- to satisfy the cash consideration for the Horizon Acquisition;and

- US$820,000 to fund an accelerated Osage County work programme.

Further issue of equity

The Company is also making an application for 1 million OrdinaryShares to be admitted to trading on AIM. These Ordinary Shares are beingissued in satisfaction of adviser fees in relation to the AIM Admission(`Adviser Shares'). It is expected that admission will occur, and dealings inthe Adviser Shares will begin, at 8.00 a.m. on Wednesday 3 April 2013. Theseshares will rank pari passu in all respects with the Company's existingOrdinary Shares.

Share Capital

Following admission of the Placing Shares and Adviser Shares (andprior to admission of the OKE Consideration Shares and the Osage EnergyHoldings Consideration Shares) the Company's issued share capital will consistof 991,412,716 Ordinary Shares (`Enlarged Share Capital'). The Placing Sharesrepresent approximately 10.09 per cent. of the Enlarged Share Capital.

Following completion of the OKE Acquisition and the acquisition ofthe Eagle WI, application will be made for the 32,380,952 OKE ConsiderationShares and Osage Energy Holdings Consideration Shares to be admitted totrading on AIM ("Admission") in due course, details of which will be includedin a further announcement.

All of the technical information, including information in relationto reserves 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.

TECHNICAL GLOSSARY

`bopd' means barrels of oil per day

`boe' means barrels of oil equivalent: a unit of energy based onthe approximate energy released by burning one barrel (42 US gallons or158.9873 litres) of crude oil.

There are 42 gallons (approximately 159 liters) in one barrel ofoil, which will contain approximately 5.8 million British Thermal Units(MBtus) or 1,700 kilowatt hours (kWh). The value is necessarily approximate asvarious grades of oil have slightly different heating values. BOE is used byoil and gas companies in their financial statements as a way of combining oiland natural gas reserves and production into a single measure.

`boepd' means barrels of oil equivalent per day

`Mbbl' means thousand barrels

`Mcf' means thousand cubic feet

`Mmcf' means million cubic feet

`1P' means Proved Reserves

`2P' means Proved plus Probable Reserves

`3P' means Proved plus Probable plus Possible Reserves

`P2' means Probable Reserves

`P3' means Possible Reserves

`PV10'means net present value using an annual discount on cashflowof 10% per annum.

`WI' means Working Interest, a percentage of ownership in an oiland gas lease granting its owner the right to explore, drill and produce oiland gas from a tract of property. Working interest owners are obligated to paya corresponding percentage of the cost of leasing, drilling, producing andoperating a well or unit. After royalties are paid, the working interest alsoentitles its owner to share in production revenues with other working interestowners, based on the percentage of working interest owned

APPENDIX 1 - COMPETENT PERSON'S REPORT UPATE

The following has been extracted from Moyes & Co's Revision Letter dated 13March 2013.

Northcote has exercised two agreements effective March 1, 2013allowing for the acquisition of additional working, revenue, and overrideinterests in its Horizon Project, Osage County in the amount of a 6.00%/4.50%working/revenue interest and in the amount of a 7.88%/6.04% (average)working/revenue interest in the nine leases in Osage County producing from theMississippian formation. An additional 2.52%/2.27 revenue/working interest hasbeen acquired for the Burkhart #3 well, targeting the Layton formation. Theseincreased interests are outlined in the following table.

Big Hill 2H & 4H-12 37.875 28.406 2.228 30.634 51.750 38.931 2.228 41.158

Little Drum & Sarah 37.875 28.406 2.228 30.634 51.750 39.049 2.228 41.276(MS1)

Steinberger 1H-10 37.875 28.406 2.228 30.634 51.750 39.018 2.228 41.246

West Little Drum & 39.938 29.953 2.103 32.056 53.375 40.254 2.103 42.357Lauren (MS2)

Detailed below is the updated table from the Moyes Revision letterdated 13 March 2013 that shows the updated reserve and cash flow summariesincluding Northcote's properties in Osage (not including impact from the OKEAcquisition) and Woods County:

All reserve estimates have been prepared using standard engineeringpractices generally accepted by the petroleum industry and conform to theguidelines adopted by the Society of Petroleum Engineers.

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

Northcote Energy Ltd is a revenue generative US onshore oil and gasproduction company focussed on the rapidly emerging Mississippi Lime formationin Oklahoma. The Company participates with leading operators, includingMidstates Petroleum and Chesapeake Energy, in low risk development plays whereadvanced techniques, such as horizontal drilling and fracing, are used tounlock known oil accumulations and dramatically improve recovery rates.Northcote has a balanced mix of production and development projects with netproven reserves of 1,182 Mbbl of oil and condensate and 3,109 MMcf of gas anda P1 PV10 of US$61.96 million (as per CPR). Management is focused onincreasing production through a multi-well drilling and fracing campaign in2013.