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 Northcote Energy Ltd / Index: AIM / Epic: NCT / ISIN: VGG6622A1057 / Sector: Oil & Gas

14 January 2013

Northcote Energy Ltd ('Northcote' or 'the Company')

Completion of £1.0 million fundraising, acquisition of Northcote Energy Limited and

First Day of Dealings on AIM

Northcote (AIM: NCT), an onshore US focussed oil and gas exploration and production company, is pleased to announce the admission of its enlarged issued share capital to trading on AIM. Dealings will commence at 8.00 a.m. today. This follows the completion of an oversubscribed placing by Joint Broker Shore Capital Stockbrokers Limited ('Shore Capital') of 100,000,000 new Shares at 1 pence per Share to raise £1.0 million (before expenses) ('the Placing') and the acquisition of Northcote Energy Limited, which has completed today. This values the enlarged business at approximately £8.6 million at the Placing Price.  Beaumont Cornish Limited is Nominated Adviser and Joint Broker to the Company.

Key Highlights

·; US onshore oil and gas company with a portfolio of projects with development potential, primarily located in the reopening Mississippi Lime formation, Oklahoma and current net production of 26.4 barrels of oil equivalent per day ('boepd')

·; Funds raised will be used to fund the fraccing of up to six wells in Osage County in 2013, drill two wells to develop the Company's Layton Sand's acreage and allow participation in a 12 well drilling programme in Woods County as well as for general working capital

·; Underpinned by net proven reserves of 661,000 barrels of oil and 1,678 million cubic feet ('MMcf') of natural gas, with a net present value ('PV10') of US$33.8m (as per Competent Person's Report ('CPR'))

·; Lease interests alongside leading industry operators including Midstates Petroleum and Chesapeake Energy

·; Placing of £1.0m to implement growth strategy - CEO Randall J. Connally also converted US$250,000 loan into equity at the Placing Price

·; Strategy to continue developing its portfolio of assets focussing on lower risk development plays utilising horizontal drilling and fraccing to unlock known oil accumulations.

·; Participating in a rapidly growing oil extractive sector in a stable and politically supportive jurisdiction

Unless otherwise defined herein, defined terms used in this announcement have the meaning given to them in the Company's Admission Document.

Northcote's Chief Executive Officer Randall J. Connally said, "Northcote is a revenue generating, asset backed US onshore oil and gas production company providing an opportunity to invest alongside leading operators including Midstates Petroleum and Chesapeake Energy, in production and development projects located in proven hydrocarbon formations, and, in the process, be a part of the energy revolution currently taking place in US E&P. 

"With existing production generating revenues and proven reserves with a net present value of US$33.8m, far exceeding our initial market capitalisation, we believe we have a lot of room to create value for our shareholders. 

"From here, we will look to build Northcote into a significant presence in US onshore oil and gas production and exploration. With a management team in place that has a proven track record and expertise in sourcing projects, we expect to substantially grow and diversify our asset portfolio and, in the process, generate value for shareholders. With this in mind, I look forward to providing the market with regular updates on our progress in delivering on our strategy."

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

Full details

Introduction

Northcote is an independent oil and gas company. It has existing oil and gas production and reserves and it is also focused on expanding its production and reserves in one of the conventional resource plays in the USA, referred to as the Mississippian Lime Resources Play. The Northcote Lease Interests are principally in the Mississippian formation, Layton and Cleveland sands, and Hunton oil and gas plays in Oklahoma, USA. The Northcote Lease Interests can be split into two groups of assets: interests in ten producing leases in Osage County and acreage in Woods County. Northcote and its interests are more fully described below.

Information on Northcote and its assets

Background of Northcote

Northcote Energy Limited (formerly Everest Energy Limited) was admitted to trading on ISDX (then known as PLUS Markets) on 8 June 2011 as an investing company. On 22 October 2012 it agreed to acquire Northcote Energy Limited ("Northcote CI"), a company incorporated in the Cayman Islands for the purpose of investing in the acquisition, exploitation, and development of oil and gas properties in the US. Having considered several potential acquisitions, from March to November 2012, Northcote CI acquired from a number of vendors the Northcote Lease Interests located onshore in the United States, in what is referred to as the Mississippian Lime Resources Play. In connection with these acquisitions, Northcote has certain commitments to the vendors of the Northcote Lease Interests, details of which are set out below.

Northcote's Lease Holdings and Producing Assets

·; interests in leases in Osage County, Oklahoma, totalling 1,680 gross acres with 10 producing leases. Nine of these producing leases are producing from the Mississippian formation and one lease is producing from the shallower Layton formation.

·; interests in leases in Woods County, Oklahoma, covering 5,026 gross acres with 1 producing well, 1 drilled well awaiting completion of pipelines, and a 12 well continuous drilling programme scheduled for 2013, with further drilling planned for 2014.

These assets are summarised in the table below.

WI = Working Interest; NRI = Net Revenue Interest, HBP = Held by Production

The Northcote Group has in place option agreements, which allow it to increase its interest in the Osage County leases as follows:

·; for consideration of $300,000 the Northcote Group has an option, exercisable until 30 September 2013, to acquire a 2.10 per cent. to 2.2275 per cent. overriding royalty interest in nine producing wells in Osage County;

·; for consideration of $800,000 the Northcote Group has the option to acquire an additional 10 per cent. working interest, exercisable until 30 September 2013 in leases in Osage County consisting of nine producing wells, three salt water disposal wells and other associated oil and gas equipment and infrastructure held by Horizon on or before 31 March 2013; and/or

·; for an additional consideration of $600,000, the Northcote Group has the option to acquire an additional 7.875 per cent. to 9.9375 per cent. working interest, exercisable until 31 May 2013, in nine Osage County oil wells.

Osage working interests

Northcote's interests in Osage County comprise working interests in 10 producing wells, of which nine are unfracced horizontal wells producing from the Mississippian formation and one is a vertical well producing from the shallower Layton formation (Burkhart 3).

Northcote intends to utilize hydraulic fracturing techniques in relation to the unfracced horizontal wells. Hydraulic fracturing ("fraccing") is the primary choice for enhancing production, and typically has the effect of increasing productivity 2 to 30 times compared to an untreated well by increasing the amount of contact that the well bore has with high quality reservoir rock.

Northcote acquired its working interests in Osage County from Horizon, which retains a material interest in the wells. Horizon is a significant shareholder in Northcote. The terms of the acquisition of the working interests provided, amongst other things, that Northcote would fund an initial capital programme of $1,332,000 on mutually agreed projects, of which approximately US$492,000 will be to fund Northcote's working interest and the remainder will fund Horizon's working interest obligation on those projects. Northcote does not operate the Osage properties but, by acting together with Horizon, it expects to be able to influence the timing of the frac programme.

Woods County working interests

Northcote's interest in Woods County, Oklahoma consists of a working interest in one producing well, one drilled well awaiting completion of pipelines and the ability to participate, in line with its working interest percentage, in the operators current twelve well continuous drilling programme scheduled for 2013 and also in future drilling.

The Woods County lease area is operated principally by Midstates. Northcote is non-operator and will be offered the opportunity to participate when the operator proposes to undertake a well-drilling programme in a section where it has a lease interest. When Northcote decides to participate it will be required to commit to funding its share of the drilling and completion costs incurred by the operator (proportionate to its working interest percentage) and to become a signatory to the operator's Joint Operating Agreement. In the event that production is successfully established at the well, the operator will credit the non-operating working interest holders with their share of oil and/or gas revenues less any operating costs or royalties payable to the lessor or assignor of the mineral rights. Northcote's interest in a lease will terminate unless there is current production in paying quantities, drilling operations or in certain other circumstances.

Conclusion from Competent Person's Report

Northcote has a well-positioned portfolio of producing properties in one of the most active oil plays in North America. The producing properties and behind-pipe reserves at both Osage and Woods County are reported with a total P1 PV10 of $33,817,000. These reserves are expected to provide a steady cash flow over a long life to support further development and expansion of working and revenue interests.

The fracture stimulation of the Mississippian Lime wells in Oklahoma is expected to yield wells that have high initial oil production rates allowing for a relatively significant early cash flow from newly fracced wells and a quick payout cycle. When combined with the cash flow from existing production, this provides the funds necessary, at the current NYMEX strip pricing, for the Company's plans to use fracture stimulation in relation to nine horizontal wells, and to participate in the drilling of up to a further 26 wells.

In closing the Company's Oklahoma leasehold position has the potential for significant upside to what is included in this report through expansion and continuation of the drilling program as well as through the Osage County options and through Northcote's plans to increase its ownership percentage in Woods County.

Geology

Mississippian Lime Horizontal Play

The Mississippian Lime Horizontal Drilling Play is a re-activation of the development of the Mississippian Lime formation in northern Oklahoma and southern Kansas. The Mississippian oil and gas bearing system is a proven commercial trend producing from several thousand vertical wells for more than 50 years. The play area includes multiple counties of the Northwest Shelf of the Anadarko Basin and the Nemaha Uplift in North Central Oklahoma and Southern Kansas.

The core of the play involves drilling horizontal laterals in existing vertical wells or new horizontal wells in the vicinity of historical Mississippian producers or dry holes. These liquid-rich zones were once thought to have been extinguished by vertical, conventional drilling many years ago. Now, with the technological advancements made with horizontal drilling and fracing, operators are able to unlock vast amounts of hydrocarbons. Active companies in the play include Chesapeake, SandRidge, Range Resources Corporation, EOG Resources, Inc, Midstates, and Red Fork Energy Ltd. There are currently approximately 40-50 rigs actively drilling in the play. Since the beginning of 2009, there have been over 600 horizontal wells drilled in the play and approximately 56 wells have a meaningful production history that can be used to estimate their ultimate recovery. Range Resources Corporation, Red Fork Energy Ltd, and SandRidge are the larger active companies in the area of the Northcote area of interest.

The Mississippian Oil trend is an expansive carbonate stratigraphic trap producing at shallow depths ranging from 4,500 to 7,000 feet below the surface. The reservoirs lie at the regional Pennsylvanian/Mississippian unconformity, as a result of uplift, alteration and erosion of shallow marine Mississippian carbonates.

The uppermost Mississippian member is a widespread debris-flow deposit formed through a combination of uplift and erosion of the Mississippian Limestone, consisting of varying amounts of weathered chert, limestone and dolomite called the "Mississippi Chat". The "Mississippian Lime" underlies the chat and also exhibits good reservoir characteristics. The formation was subject to weathering and digenesis and erosion at the regional unconformity. This results in greatly varying reservoir properties both horizontally and vertically. Where the digenesis and weathering have enhanced the reservoir properties, the porosity is generally 15 to 20 per cent. and can be more than 100 feet thick. Where it has not been enhanced, the porosity is only 4-6 per cent. and has low permeability. This results in laterally discontinuous reservoirs that are ideally developed with horizontal drilling technology. The formation's geology is well understood as a result of the thousands of vertical wells drilled and produced there since the 1940s.

The horizontal wells drilled in the play have lateral lengths of between 2,500 ft and 5,000 ft and are fracture stimulated in 6-12 stages. The fracture stimulation treatments are not as large as those in the Bakken play or the other unconventional resource play such as the Eagle Ford. Because of the shallow depths and smaller fracture stimulation treatments the typical completed well cost ranges from US$2.4-US$4.0 million. Current drilling times are approximately 17-28 days from spud to rig release.

Reserves

As of 1 November, 2012, Northcote's net reserves, future net cash flow, and present worth discounted at 10 per cent. per annum have been estimated to be as follows:

All reserves estimates have been prepared by Moyes & Co, using standard engineering practices generally accepted by the petroleum industry and conform to the guidelines adopted by the Society of Petroleum Engineers.

The Future:

The Directors are committed to creating an international oil and gas exploration and production group focused on the acquisition, exploitation and development of oil and gas properties primarily located onshore in the United States. The current proposed strategy is to:

·; invest in, and develop, the producing wells in Osage County. The Company's current interest in Osage County comprises an average 28.33 per cent. working interest (21.25 per cent. NRI) in 9 Mississippian horizontal wells and a 29.7 per cent. working interest (22.275 per cent. NRI) in one Layton vertical well. The development of these assets will be through a programme of fraccing and additional drilling

·; participate in the 2013 12 well drilling programme in Woods County and also additional drilling opportunities as they arise in 2014 and beyond;

·; exercise the options held by Northcote whereby the Enlarged Group can increase its working interests in the nine horizontal wells in Osage County to an average of between 36.67 per cent and 46.67 per cent.;

·; exercise the option to acquire a royalty interest of an average of 2.2 per cent. on the nine horizontal wells within Osage County;

·; acquire and develop other interests in proven, producing formations in the United States, initially this focus will be on Oklahoma;

·; at the appropriate time, gain 'approved Operator' status in Texas, Oklahoma and Osage County whereby the Enlarged Group can act as operator on its lease interests;

·; pursue other joint venture opportunities on new and existing acreage with established operators in Texas and Oklahoma;

·; leverage management's expertise to access new opportunities which, will include partnering in, or acquiring interests in, producing or undeveloped leases;

·; acquire further royalty interests to secure cashflows; and

·; acquire undercapitalised projects and/or companies with potential to enhance earnings, reserves and revenues.

Directors and Advisers

Ross Warner (Executive Chairman) - aged 45

Ross Warner is an experienced director of public and private resource companies. He established Northcote to pursue oil and gas opportunities in the US. He is currently Chairman of AIM traded, Uranium Resources PLC, and a non-executive director of the Company, Moonlake Natural Resources Limited and Morano Resources Limited. Prior to commencing his career in the resource industry, Mr Warner practiced as a lawyer in the corporate finance departments of Mallesons Stephen Jaques in Perth and Melbourne, Australia and Clifford Chance in London. He graduated in law from the University of Western Australia and holds an LLM from the University of Melbourne.

Randall ("Randy") Connally (Chief Executive Officer) - aged 40

Prior to founding Northcote, Mr Connally participated as a strategic adviser and shareholder of Eagle Energy Company of Oklahoma, LLC, an oil and gas company with operations in the Hunton and Mississippi Chat plays in central and northwestern Oklahoma. Eagle, having been set up in 2009 was sold to Midstates Petroleum Company Inc. in October 2012 for $650 million Mr Connally has, between 1996 and 2005, held positions with Bank of America, N.A., Bank of America Securities, LLC, Donaldson, Lufkin & Jenrette Securities, Inc, and Credit Suisse First Boston. While at these finance groups, Mr Connally worked in the Energy Finance and Investment Banking Groups and focussed, on commercial lending, high yield bond offerings for mid and large capitalisation exploration and production companies in the US, public bond (investment grade and high yield) and equity underwriting as well as mergers and acquisitions for exploration, production and oil field service companies in the United States. Mr Connally received his BBA degree in Finance from Texas A&M University.

Daniel ("Dan") Jorgensen A.C.A (Finance Director) - aged 32

Daniel Jorgensen holds a Bachelor of Arts in Economics and is a Chartered Accountant, having qualified with BDO LLP in 2005. Following this, he was a senior audit manager, until 2011, within BDO's natural resources department where he worked exclusively with quoted oil & gas and natural resources companies and was involved in a wide variety of corporate transactions. He is currently the Finance Director of Northcote and Chief Financial Officer at Altona Energy PLC and Uranium Resources PLC, both AIM traded companies.

Charles ("Charlie") Wood (Non-Executive Director) - aged 37

Charles Wood holds a Bachelor of Commerce, a postgraduate degree in corporate finance and is a fellow of the Securities Institute of Australia. He has 10 years experience working in corporate positions in agribusiness, mining and corporate finance. He has worked in numerous jurisdictions in Africa, South America and Australia and has extensive experience in independent experts' reports, due diligence, capital raisings and mergers. Mr Wood is also a Director of AIM traded Ortac Resources Limited.

Kevin Green (Non-Executive Director and Technical Consultant) - aged 53

Mr Green has 31 years of experience as a Petroleum Geologist having worked across many areas of the oil and gas business, including well site work, prospect generation for both exploration and development programs and project analysis. His skills include geological evaluation by log analysis and correlation to create cross sections and maps used to evaluate the economic viability of varied oil & gas investments. He started his career with Terra Resources where he was part of a team that developed the Burnett Ranch of King County, Texas. He has since worked on projects in the Oklahoma, Kansas, North Texas and Permian Basin. Between 1994 and 2004, Mr Green was part of a Merrill Lynch/Morgan Stanley team that raised and managed a US$55 million portfolio of investments focused on the Oil and Gas industry. In recent years, he has focused on projects in central Oklahoma, particularly in relation to the greater Mississippian play in Osage and Woods Counties. Mr Green holds memberships of the American Association of Petroleum Geologists, the Dallas Geological Society and Oklahoma City Geological Society and is active in their communities.

Advisory Committee

On Admission, the Directors propose to establish an informal committee of advisers who will advise the Board from time to time in respect of the acquisitions or investment opportunities to complement the Enlarged Group's portfolio of assets and interests following Admission. The Directors are considering a number of proposed members of the committee of advisers and have initially invited Mr Stewart Reid to join the committee. Brief details of Mr Reid are as follows:

Stewart Reid

Stewart Reid has 30 years of experience in the oil and gas business and is highly experienced in the financial as well as the drilling, acquisition and production aspects of the industry. Mr Reid is Chairman and Chief Executive Officer of Millbrae Energy LLC, an investment adviser which he founded in 2001. Mr Reid and Millbrae Energy have managed seven investment partnerships with over $400 million in capital. He was involved in the development of the Paradigm field in central Oklahoma and been intimately involved in the development of the Mount Vernon/Central Dolomite fields with peak production of over 40 MMcf equivalent of gas per day. Previously, Mr Reid founded SMR Energy, a private oil and gas acquisition purchaser, which completed over $100 million of producing property acquisitions and, at its peak, operated 500 wells. Prior to entering the energy business, Mr Reid practiced law at Simpson Thacher & Bartlett. Mr Reid graduated from Wesleyan University and Columbia University Law School.

**ENDS**