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Northcote Energy Ltd / Index: AIM / Epic: NCT / ISIN: VGG6622A1057 / Sector:Oil & Gas 30 September 2013 Northcote Energy Ltd (`Northcote Energy' or `the Company') Interim Results Northcote Energy (AIM: NCT), an onshore US oil and gas exploration andproduction company, is pleased to announce its interim results for the sixmonth period ended June 30 2013. Highlights: - Rapidly advancing strategy of building an extensive low-riskonshore oil and gas production company - Quadrupled production since January 2013 to 100boepd - Increased net acreage by 500% to 2,895 net mineral acres sincelisting - Current P1 reserves with an NPV of US$61.9m based onapproximately half of acreage held- upgrade expected in the coming months - Development programme in place to rapidly increase production andreserves - Targeting in excess of 250 boepd by mid 2014 - Partnership agreement to provide non dilutive capital on anattractive risk basis to participate in field development - Evaluating additional opportunities to consolidate our positionin Oklahoma and to expand into other prospective US onshore locations Northcote Energy Managing Director Randall Connally said, "In our first 6months since listing we have made dramatic progress in increasing our netacres, reserves and production. Our current focus is in the state of Oklahomawhere we have built an excellent platform for further rapid growth in theright address. With already increased production and a steep development curveprojected, we expect a re-rating of our stock which is currently trading at a66% discount to P1 reserves for only half of our portfolio. With reserveupgrades targeted in the second half and with a production target of in excessof 250 boepd next year, we expect to build on the rapid progress made to dateand generate considerable value for shareholders." CHAIRMAN'S STATEMENT Since our Admission to AIM in January 2013 we have quadrupled our dailyproduction, in the process hitting our 100 BOEPD 12 month target five monthsahead of schedule, increased our net leasehold position by 500% to over 3,000net mineral acres, and almost doubled our proven reserves to US$61.9million.Achieving all this during our first six months as a listed entity demonstratesour ability to rapidly and significantly increase net production, reserves andacreage in the Mississippi Lime formation, our focus area in Oklahoma, as welook to build Northcote into a leading producer of oil and gas in the region. The Board believes that this growth has been impressive and is especiallypleased that the Company's net attributable reserves have increased from0.94million barrels of oil equivalent ("BOE") at IPO to 1.699million BOE. Thisdoes not include any reserves from our interests in the new projects, such asOklahoma Energy and Mathis. We expect to announce additional reserves and P1PV10 later this year after reserve reports have been prepared for theseadditional projects. This will significantly add to our reserves per share anddemonstrates the potential within our current asset portfolio. Thissignificant growth results from the successful implementation of operationalinitiatives such as hydraulic fracture stimulation programmes, new wells andworkover campaigns, and the acquisition of additional assets which consolidateand leverage our position in Osage County, where we believe our managementteam provides a significant competitive advantage to the Company. Our reservesare detailed in the table below: (Grand Total) As of November 1, 2012 Gross Reserves Net Reserves Net Cash Flow Oil & Natural Oil & Natural Future Future Future Future NPV Condensate Gas Gas Net Net Net Net Disc @ Condensate Reserve OPEX & Capital Cash 10% Taxes FlowReserve Class / (MbbI) (MMcf) (MbbI) (MMcf) ($000) ($000) ($000) ($000) ($000)CategoryProved Developed 418 1,413 40 192 4,314 2,530 - 1,784 1,178ProducingProved Developed 2,491 6,571 1,030 2,714 102,920 13,777 1,854 87,290 56,372Behind PipeProved Shut in 300 944 1 2 57 8 - 48 33Proved Undeveloped 3,464 9,830 111 199 10,625 1,587 949 8,089 4,359 Total Proved 6,672 18,758 1,181 3,107 117,916 17,902 2,803 97,211 61,942 Probable Behind Pipe - - - - - - - - -Probable Undeveloped 1,800 5,366 3 8 259 38 41 179 102 Total Probable 1,800 5,366 3 8 259 38 41 179 102 Total 2P 8,472 24,124 1,184 3,115 118,175 17,940 2,844 97,390 62,044 Possible Behind Pipe - - - - - - - - -Possible Undeveloped 2,100 6,210 3 9 300 44 48 208 117 Total Possible 2,100 6,210 3 9 300 44 48 208 117 Total 3P 10,572 30,335 1,187 3,124 118,475 17,984 2,892 97,598 62,161 We are focused on the Mississippi Lime formation, a proven and producinghydrocarbon formation, due to both the highly attractive economics it offersand the excellent access to infrastructure, making it an ideal environment forrapid expansion. At between US$2.5million and US$4.0million, drilling costsare relatively low in the Mississippi Lime and third party commentatorsbelieve it has one of the lowest breakeven oil prices among onshore US plays.In recent years, US independents such as Chesapeake Energy, Devon Energy Corp.and SandRidge Energy have successfully built a strong presence in theMississippi Lime. Northcote also actively seeks to take advantage of themultiple pay zones that exist in its focus area and as such is activelydeveloping other objectives including the Layton and Bartlesville sands. Our core portfolio currently consists of the Horizon Project (51% workinginterest ("WI")), the contiguous Mathis Project (100% WI), and the OKE Project(100% WI), where our 100% acquisition conferred Northcote with operator statusin the region. We also have smaller working interests in the Bird CreekProject, Osage County (3.125% WI), the De Agua Project, Woods County (0.125%WI) and the South Weslaco Gas Unit, Hidalgo County, Texas (up to 25% WI). Withthis in mind, we have set a new production target of reaching 250 BOEPD by theend of July 2014 to be met through an aggressive work programme on existingproperties that will consist of continuation of the fracture stimulationprogramme, new drilling and exploitation of existing well bores. We have a highly experienced team on the ground, led by our CEO RandyConnally, who was involved in the successful formation of Eagle Energy Companyof Oklahoma ("Eagle"). In less than 3 years Eagle was transformed from asmall, gas focused E&P company to a significant player, which was acquired byMidstates Petroleum for US$650 million in October 2012. The Board plans toutilise Randy's experience to build Northcote in the mid term. Horizon Project, Osage County (51% WI) The Horizon Project currently produces from 10 wells with one further wellpending completion. The project has excellent infrastructure for continued lowcost development in the area. The significant and on-going progress we havemade at this asset reflects our multi-faceted approach to increasing ourexposure to the proven substantial reserves. Since listing we have increased our WI in Horizon from 28% to 51% through theexercise of options at minimal cost to the Company, which automaticallyenhanced our P1 PV10 and proven reserves considerably. We initiated our operational campaign through a workover programme at Horizonwhich centred on four wells not scheduled for fracture stimulation in the nearterm. This involved increasing water disposal capacity through a pipelineproject, re-acidizing, pumping down fluid levels and in some cases installinglarger submersible pumps. This low cost work had a positive impact on overallproduction. The pipeline project in particular has provided significantproduction gains and we continue to see additional production gains as thewater is pumped down. We elected to participate in the deepening of the Burkhart#1 well, which wasoriginally drilled to and produced from the Mississippi Chat formation, and ithas successfully reached its target depth of 4,226 feet. This well will becompleted in the Mississippi Lime formation and plans are currently beingdiscussed with our working interest partners in the well. Initially we plan to complete our hydraulic fracturing campaign at Horizon. Wehave completed fracks at Big Hill #1 and Big Hill #2, which were deemed ourworst two performing wells when we acquired our interest in the project. Wechose to frack these two wells first to gain an understanding of the variablesassociated with fracking in this area; optimization of a frac depends on anumber of variables associated with the well, but also the characteristics ofthe formation in a particular region. Big Hill #1 returned positive resultsfrom the frack which contributed towards hitting our 100 BOEPD target. Wereported an open flow rate of up to 1,210 Mcf/day of natural gas (215.5 boepdgross, 88.4 net to Northcote). These numbers are highly encouraging and havedemonstrated that the fracture stimulation has enabled the well bore to openup unexploited reservoir. We experienced significant technical issues with the frack at Big Hill #2.Remedial action has been taken and the well is back on test and is currentlyproducing approximately 120 thousand cubic feet per day of natural gas.However, management believes that given the issues associated with the well,specifically split casing and a damaged submersible pump that were discoveredimmediately after the frac, there is a significant likelihood that the fracdid not adequately stimulate the well and the reservoir remains, in effect,unfracked. The performance of this well will be closely scrutinised but, atthis stage, it seems likely that it will be a candidate for furtherstimulation at a future date. We have also advanced our share of the funds to secure the frack of the nexttwo wells, both of which are fully funded. The third frack is anticipated tocommence in early October subject to completion of certain work, which isunderway, on the surface location as required by regulatory authorities, withthe fourth frack following shortly thereafter. We plan to frack 4 wells totalin 2013, and will continue our programme across all the wells in our portfolioin 2014. Mathis Project (100% WI) In June 2013 we completed the acquisition of a 100% working interest in leasescovering an additional 960 acres (`Mathis') contiguous to the our HorizonProject for a relatively small payment of US$325,000. The Mathis Acquisition comprises 1,280 gross acres, inclusive of 320 grossacres previously acquired via farm-in. This acquisition adds 960 acrescontiguous to two of the Company's existing wells acquired as part of theHorizon Project in Osage County, Oklahoma. The approximate 320 acres held bythe Steele and Steinberger producing wells were held by Northcote in theMississippian only, but with this acquisition Northcote acquires rights todrill to all formations on those leases. The acquisition is therefore highlystrategic, allowing us to consolidate our regional position and also furtherleverage our existing field infrastructure at Horizon going forward. Twenty Two vertical well bores exist on the property and its productiondirectly offsets the Steele and Steinberger, which are two of the bestperforming wells on the Horizon Project. 3-D seismic exists covering a portionof the leasehold and the Company has already identified two potentialhorizontal well locations with two additional locations possible, subject tofurther geologic analysis. Significantly, all of the leases are part of a"unit" and as such, production on any part of the unit holds the entire leaseby production. Oklahoma Energy Project ("OKE") (100% owned) We completed the acquisition of a 100% working interest in the 1,040 acre OKEProject in April 2013 for a total sum of US$700,000, of which US$250,000 wassettled in equity and a further US$200,000 earn-out to be paid fromproduction. On completion of the acquisition of OKE, Northcote gained operator status andcapacity to operate projects in Osage County, Oklahoma. This project has hugepotential and we have already commenced work to unlock this potential. Thefirst stage of our work programme has been completed and was highly successfulincreasing production by 150% since acquisition to 37 BOPD. The second stage of the workover programme is now underway and targeting anincrease in gross production at OKE to 50 bopd by the end of 2013. Inconjunction, we are evaluating additional Mississippian opportunities on theacreage to significantly enhance production and reserves with at least onewell scheduled to be drilled within the next twelve months. Importantly, theproject has the required infrastructure in place to support increasedproduction. These initiatives to increase production will be highly beneficial toNorthcote as we aim to accelerate the pay-out of the 41.5% BlueRock termroyalty inherited on acquisition. BlueRock's royalty will expire when it hasreceived US$1.23 million and an internal rate of return on that amount of 15%from its share of the Project's revenues. On expiry of BlueRock's royalty, ournet revenue interest will increase to 80% and leave us well positioned todevelop all zones within our tenure. Bird Creek Prospect, Osage County: (average 3.125% working interest) We acquired a 3.125% working interest in the Bird Creek Prospect shortly afterlisting. We have already elected to participate in the drilling of two wells,one of which, the Bray #1, has been drilled to target depth of 1,820 feet andencountered good oil shows across 10 feet of pay from 1,704 to 1,714 feet.While the results from the well, together with well data from nearby wellssuggested we were on the outer edge of a structure, the porosity was less thandesired. We next participated in drilling the Keese #1 well which is completeand a second Keese well (third overall), the Keese #2, is currently beingcompleted. On completion of the second well, work will begin to install thenecessary production facilities in order to permit production from the wells,at which point production data will be announced. The Bray #1 will becompleted as a salt water disposal well. DeAgua Project, Woods County: (average 0.348 % working interest) This smaller working interest in the DeAgua Project enables us to participatein wells alongside Chesapeake and Midstates, two of the leading operators inthe Mississippi Lime.The pace of drilling on this project has been adisappointment as the operator has been focused on other acreage in theirportfolio. However, one well, the Cook 1H-12, in which Northcote has anapproximate 1.0% working interest, is being completed and results will beannounced in due course. Partnerships In July 2013 we were pleased to announce the formation of our firstpartnership vehicle, Northcote Drilling Partners LLP (`the Partnership'). Thisenables U.S. investors to participate with Northcote in the development of oiland gas assets located onshore US, initially in Oklahoma. Full details of thepartnership can be found in the announcement dated 4 July 2013, but inessence, the Partnership will de-risk Northcote's development programme byproviding it with a non-dilutive source of capital that offers direct upsideparticipation in additional assets, whilst also providing opportunities tooptimize our portfolio by sharing the costs associated with higher risk, butalso high reward. Importantly, our subsidiary, Northcote Energy Development,is managing general partner of the Partnership and receives a participation inthe revenues generated by the partnership for this role. Financial Review Gross production at Horizon during the period averaged over 100 BOEPD,significantly less than the full potential of the project. During the periodunder review, production was affected by the work programme across theproject, which resulted in production at a number of the wells at our Big Hilland Little Drum units being temporarily suspended whilst work was completed.We look forward to reporting substantially increased revenues in our year endaccounts, as the full year effects of our work programme are shown throughincreased production. During the period the Group reported a loss of $2,183,000 of which $1,273,000(2012: $Nil) related to a one-off goodwill impairment related to the reverseacquisition completed in January 2013. In addition the loss includes IPO costsof $366,000 and non-cash share based payments of $64,000 (2012: $Nil). During the period, Northcote raised a total of $5.2million via placing. Thefunds raised, both on admission and post admission, are being used toaccelerate our work programmes across both our original and expanded portfolioof projects. As part of the placings we were delighted to welcome Cape BouvardEquities Pty Ltd, one of Australia's largest private investment companies, toour shareholder register. Outlook We have significantly grown Northcote during the first six months of the year,our first as a public entity. We now have a strong core portfolio withexcellent upside potential, operator status in Osage County and an excitingand de-risked development campaign to considerably bolster our production to250 BOEPD and build on our already sizeable reserves by the end of July 2014.In tandem with this, our experience and network in Osage County will help ussecure further value accretive opportunities to consolidate our position, aproven strategy which will substantially enhance Northcote's value, and buildthe Company into a leading oil and gas company in the State of Oklahoma. We have set, and are confident of meeting, the following operating targets: - 5,000 net acres by 31 December 2013; and - 250 boepd production by 31 July2014. I would like to take this opportunity to thank our Board, management andadvisers for their hard work during this exciting period, which has seen usachieve the first of our annual production targets, 5 months early, and welook forward to the next 12 months as we continue to deliver our growth plansby the execution of our ongoing work programme. Ross Warner CHAIRMAN For further information visit www.northcoteenergy.com or contact thefollowing: 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 8391Roland Cornish 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 fracing, 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. Consolidated statement of comprehensive loss (unaudited) Six months Nine months Six months ended ended 31 Dec 2012 ended 30 June 2013 (unaudited and 30 June 2012 (unaudited) restated) (unaudited) US$'000s US$'000s US$'000s Revenue 360 113 -Cost of sales (234) (53) -Gross profit 126 60 -Administrative expenses- Impairment of goodwill 1,273 - -- Other administrative expenses 1,133 241 -Total administrative expenses (2,406) (241) -Operating loss (2,280) (181) -Finance income 125 - -Finance costs (28) - -Loss before tax (2,183) (181) -Income tax expense - - -Loss after tax attributable to (2,183) (181) -equity holders of the parent Exchange differences arising on (166) 3 12translating foreign operations Total comprehensive loss for the (2,349) (178) 12period attributable to equityholders of the parent Weighted average number of shares 874,756,198 102,870,880 14,950,001 0. 2 cents - Basic and diluted loss per share 0.2 cents Consolidated statement of financial position (unaudited) 30 June 31 Dec 2012 30 June 2013 2012 (unaudited (unaudited and and (unaudited) restated) restated) US$'000s US$'000s US$'000sAssetsNon-current assetsIntangible Oil & Gas assets 1,575 400 -Tangible Oil & Gas assets 4,055 978 -Total non-current assets 5,630 1,378 - Current assetsReceivables 241 111 -Cash and cash equivalents 1,420 11 31Total current assets 1,661 122 31Total assets 7,291 1,500 31 LiabilitiesNon-current liabilitiesPromissory notes 50 476 -Provisions 72 - -Total non-current liabilities (122) (476) - Current liabilitiesTrade and other payables 323 80 62Other loans 343 250 -Provisions 128 - -Total current liabilities (794) (330) (62)Total liabilities (916) (806) (62)Net assets 6,375 694 (31) Capital and reservesShare capital - 38 15Share premium 15,588 1,421 529Shares to be issued 1,888 - -Foreign currency translation reserve (189) (23) (14)Reverse acquisition reserve (8,202) - -Accumulated loss (2,710) (742) (561)Total equity attributable to the parent entity 6,375 694 (31) Consolidated statement of changes in equity (unaudited) Foreign currency translation Reverse reserve acquisition Share capital Share premium Shares to reserve Accumulated loss Total equity be issued US$'000s US$'000s US$'000s US$'000s US$'000s US$'000s US$'000sBalance at 1 15 529 - (26) - (561) (43)January 2012Total comprehensive - - - 12 - - 12loss for the periodBalance at 30 15 529 - (14) - (561) (31)June 2012Total comprehensive - - - (9) - (181) (190)loss for the periodIssue of share capital 22 880 - - - - 902Share-based payments 1 12 - - - - 13Balance at 31 38 1,421 - (23) - (742) 694December 2012Total comprehensive - - - (166) - (2,183) (2,349)loss for the periodIssue of shares - 15,014 1,888 - - - 16,902Conversion of - 250 - - - - 250debt to equityShare issue costs - (443) - - - - (443)Reverse acquisition (38) (503) - - (8,202) - (8,743)adjustmentShare options - - - - - 60 60issuedShare warrants - (151) - - - 155 4issuedBalance at 30 June 2013 - 15,588 1,888 (189) (8,202) (2,710) 6,375 Consolidated statement of cash flows (unaudited) Six months ended 30 Jun 2012 Six months ended 30 Jun 2013 Nine months ended 31 Dec 2012 (unaudited and (unaudited) (unaudited and restated) restated) US$'000s US$'000s US$'000sCash flows fromoperating activities:Net loss for -the period (2,183) (181)Items not involving cash:Depreciation of -property, plant andequipment 24 -Impairment of -goodwill 1,273 -Share-based -payment expense 64 -Net interest -expense 28 -Net foreign -exchange (125) -Change in workingcapital items:(Increase)/Decrease -in receivables (90) (107)Increase/(Decrease) in -trade and other payables 1 5Net cash used in -operations (1,008) (283)Cash flows frominvesting activitiesAcquisition of -subsidiary (450) -Purchases of property, -plant and equipment (1,826) -Payments to acquire -intangible assets (325) -Interest received 3 - -Net Cash acquired -on reverse acquisition/acquisitions 577 -Net cash used in -investing activities (2,021) -Cash flows fromfinancing activitiesProceeds from -issue of convertibleloans - 250Proceeds from -issue of share capital 5,243 13Share issue costs (442) - -Proceeds from -borrowing 363 -Repayments of -loans (696) -Loan and bank -interest paid (30) -Net cash generated -by financingactivities 4,438 263Net increase/(decrease) in cashand cash -equivalents 1,409 (20)Cash and cashequivalents, beginningof period 11 31 31Effect of foreign -exchange rate changes - -Cash and cashequivalents, endof period 1,420 11 31 Significant non-cash transactions relate to the issue of shares on reverseacquisition of Northcote Energy and issue of shares as consideration for Oil &Gas acquisitions during the period. Notes to the consolidated financial statements (unaudited) For the six months ended 30 June 2013 (Stated in U.S. dollars) 1. Basis of preparation The condensed consolidated interim financial statements have beenprepared in accordance with the requirements of the AIM Rules for Companies.As permitted, the Company has chosen not to adopt IAS 34 "Interim FinancialStatements" in preparing this interim financial information. The condensedinterim financial statements should be read in conjunction with the annualfinancial statements for the period ended 31 December 2012, which have beenprepared in accordance with International Financial Reporting Standards (IFRS)as adopted by the European Union. The interim financial information set out above does not constitutestatutory accounts. They have been prepared on a going concern basis inaccordance with the recognition and measurement criteria of InternationalFinancial Reporting Standards (IFRS) as adopted by the European Union.Statutory financial statements for the year ended 31 December 2012 wereapproved by the Board of Directors on 27 March 2013. The report of theauditors on those financial statements was unqualified. The 2013 interim financial report of the Company has not beenaudited or reviewed by the Company's auditor, PKF Littlejohn LLP. Going concern The Directors, having made appropriate enquiries,consider that adequate resources exist for the Group to continue inoperational existence for the foreseeable future and that, therefore, it isappropriate to adopt the going concern basis in preparing the condensedinterim financial statements for the period ended 30 June 2013. Risks and uncertainties The Board continuously assesses and monitors thekey risks of the business. The key risks that could affect the Group's mediumterm performance and the factors that mitigate those risks have notsubstantially changed from those set out in the Group's 2012 Annual Report andFinancial Statements, a copy of which is available on the Group's website:www.northcoteenergy.com. The key financial risks are liquidity risk, foreignexchange risk, credit risk, price risk and interest rate risk. Critical accounting estimates The preparation of condensed interim financialstatements requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the end of the reporting period. Significant itemssubject to such estimates are set out in the notes of the Group's 2012 AnnualReport and Financial Statements. The nature and amounts of such estimates havenot changed significantly during the interim period. Presentation currency Upon completion of the RTO the presentationalcurrency of the Group and its comparatives was made US $. This change was madeas the Directors considered the US$ to most faithfully represent the economiceffects of the underlying transactions, events and conditions in the Company.As a consequence of this change in presentational currency the financialinformation for the period ended 30 June 2012 and the period ended 31 December2012 has been presented in US$ and has been described as "unaudited andrestated". 2. Accounting Policies The same accounting policies, presentation andmethods of computation have been followed in these condensed interim financialstatements as were applied in the preparation of the Group's annual financialstatements for the period ended 31 December 2012 except for the impact of theadoption of the Standards and interpretations described below. Changes in accounting policy and disclosures (a) New and amended standards, andinterpretations mandatory for the first time for the financial year beginning1 January 2013 but not currently relevant to the Group. Standard Impact on initial application Effective date Deferred tax: recovery of underlyingIAS 12 (Amendment) assets 1 January 2013IFRS 13 Fair value measurement 1 January 2013 (b) New standards, amendments and interpretations issued butnot effective for the financial year beginning 1 January 2013 and not earlyadopted Standard Effective date 1 JanuaryIFRS 10 Consolidated financial statements 2013*1 1 JanuaryIFRS 11 Joint arrangements 2013*1 1 JanuaryIFRS 12 Disclosure of interest in other entities 2013*1IAS 19 (Amendment 1 January2011) Employee benefits 2013*2IAS 27 (Amendment2011) Separate financial statements 1 January 2013IAS 28 (Amendment Investments in associates and joint 1 January2011) ventures 2013*1IAS 32 (Amendment Offsetting financial assets and2011) financial liabilities 1 January 2014 1 JanuaryIFRS 9 Financial instruments 2015*2 Financial Instruments: Disclosures Offsetting Financial Assets and 1 JanuaryIFRS 7 Financial Liabilities 2013*2 1 Effective date 1 January 2014 for the EU. 2. Not yet endorsed by the EU 3. Reverse acquisition of Northcote Energy Limited On 14 January 2013 the Company acquired 100% of the issued sharecapital of Northcote Energy Limited, Cayman Islands ("Northcote CI"), a USfocused on-shore oil and gas company, for a consideration of US$10.4 millionto be satisfied by the issue of 645,084,519 new Shares to the Sellers.Northcote Energy Limited was incorporated as an investment vehicle focused onthe completion of a natural resources acquisition. The Directors identifiedand completed the acquisition of Northcote CI in line with this strategy andto further the business interests of the Company. In accordance with IFRS 3 (Revised) the acquisition represents areverse acquisition and the details of the reverse acquisition are below: Total consideration $000'sEquity instruments in issue (5,995,841 ordinary 1,645shares at 17.012p each)Recognised amounts of identifiable assetsacquired and liabilities assumedASSETSReceivables 40Cash and cash equivalents 574Total identified net assets 614LIABILITIESTrade and other payables (242)Total identified liabilities (242)Total identified net assets 372Goodwill 1,273 In a reverse acquisition the acquisition date fair value of theconsideration transferred by Northcote Energy Limited is based on the numberof equity instruments that Northcote CI would have had to issue to the ownersof Northcote Energy Limited to give the owners of Northcote Energy Limited thesame percentage of equity interests that results from the reverse acquisition.The cost of the combination was calculated using the fair value of all thepre-acquisition issued equity instruments of Northcote Energy Limited at thedate of acquisition. The fair value of the share consideration was based onthe latest share transaction of Northcote Energy CI from October 2012 of �0.17immediately prior to the acquisition. Goodwill of $1,273,000 was be expensedimmediately on acquisition and all the acquisition related costs will also beexpensed in accordance with IFRS 3 (Revised). The costs of the reverse acquisition of Northcote CI totalled$690,000; of this amount $366,000 was charged to the income statement in theperiod under review, with the remaining amount being recorded in the priorperiod ended 31 December 2012 4. Acquisition of Oklahoma Energy Effective 1 April 2013 the Group acquired a 100% interest inOklahoma Energy LLC ("OKE") , a US company with Oil & Gas assets in Oklahomain exchange for consideration totaling $900,000 comprising $500,000 payable tothe vendor and a $400,000 payment to BlueRock Capital LLC, a third party. Prior to Northcote agreeing to purchase OKE, OKE had sold a termoverriding royalty interest (`Royalty') to BlueRock Capital, LLC (`BlueRock').The Royalty confers a direct NRI on BlueRock in the project assets. Northcotehas agreed to pay BlueRock US$400,000 at completion to reduce the outstandingbalance of the Production Payment to US$1.23 million. The consideration for the acquisition is as follows: 1) US$50,000 in cash (`OKE Cash Consideration'); 2) US$250,000 to be settled by the issue of 9,523,809 new Ordinary Shares at1.75 pence per new Ordinary Share (`OKE Consideration Shares'); and 3) up to a maximum payment of US$200,000 in cash payable at the rate of US$10per boed produced up until 4 March 2020. 4) payment to BlueRock $400,000 In accordance with IFRS 3 (Revised) the details of the acquisition are below: Total consideration $000'sEquity instruments in issue (9,523,809 ordinary shares 250at 1.75p each)Earn-out provision ($10 per barrel of production to a 200maximum of $200,000)Cash (including $400,000 BlueRock facility 450payment)Total consideration 900 Recognised amounts of identifiable assets acquired and $000'sliabilities assumedASSETSTangible Oil & Gas assets 87Intangible Oil & Gas assets 850Cash and cash equivalents 3Total identified net assets 940LIABILITIESTrade and other payables (40)Fair value of total net assets 900 5. Segmental analysis In the opinion of the Directors, the operations of the Groupcomprise one single operating segment comprising production, development andsale of hydrocarbons and related activities. The Group operates in onegeographic area, USA. The Group has head office operations in the UK but thequantitative thresholds of IFRS 8 are only met for the USA, which is thereforethe Group's one reportable segment and the Directors consider that the primaryfinancial statements presented substantially reflect all the activities ofthis single operating segment. 6. Oil & Gas Assets Intangible Tangible assets assets Total $'000s $'000s $'000sCostAt 1 January 2012 and 30 June2012 - - -Additions 400 978 1,378At 31 December 2012 400 978 1,378Additions 325 3,014 3,339Acquired through businesscombination 850 87 937At 30 June 2013 1,575 4,079 5,654 Depletion chargeAt 1 January 2012 and 30 June2012 - - -Charge for the period - - -At 31 December 2012 - - -Charge for the period - 24 24At 30 June 2013 - 24 24 Net book valueAt 30 June 2013 1,575 4,055 5,630At 31 December and 30 June2012 400 978 1,378 Analysis of NBV by project:Oklahoma Energy 850 186 1,036Other projects 725 - 725Horizon Project - 3,869 3,869At 30 June 2013 1,575 4,055 5,630 On 13 February 2013 the Group acquired an additional 10% workinginterest in the Horizon project for US$800,000 satisfied by the payment of$107,500 cash and the issue of 18,083,183 fully paid Shares in Northcote withthe issue of a US$192,500 promissory note. On 13 February 2013 On 13 February 2013 the Group acquired anadditional 2.2% royalty interest in the the Horizon Project for US$300,000satisfied by cash of US$101,000, the issue of 5,424,955 fully paid Shares inNorthcote and the issue of a US$49,000 promissory note. On 22 March 2013 the group agreed to acquire an average 7.25%working interest in 10 wells at the Company's Horizon Project forconsideration of US$600,000 to be satisfied by the issue of 22,857,143 newOrdinary Shares at a price of 1.75 pence per new share. Additionally on 22 March 2013 the Company entered into an agreementwith Horizon to acquire a further 6% working interest in the Horizon Projectfor US$480,000 payable in cash. Acquisition of Oklahoma Energy ("OKE") is described in more detailin note 3. 7. Share options and warrants The following is a summary of the share options outstanding and exercisable asat 30 June 2013, 31 December 2012 and 30 June 2012 changes during the period: 30 June 2013 30 June 2012 and 31 December 2012 Weighted Weighted average average exercise exercise price price Number (Pence) Number of (Pence) options of optionsOutstanding at beginning of period - - - -Warrants in Northcote Energy Ltd atacquisition 1,000,000 1.00 - -Warrants granted post acquisition 20,669,046 1.15 - -Options granted to Directors 49,000,000 2.46 - -Outstanding and exercisable, end of period 70,669,046 2.06 - - At 30 June 2013 the following share options were outstanding in respect of theordinary shares: Grant Date Expiry Date Number of Acquired/ Number of Exercise Exercisable at Options Issued Options Price b/fwd Outstanding per 30 June 13 Option 14.01.13 14.01.16 - 1,000,000 1,000,000 1.00p 1,000,00014.01.13 14.01.16 - 14,669,046 14,669,046 1.00p 14,669,04622.03.13 22.03.16 - 6,000,000 6,000,000 1.50p 6,000,00005.04.13 05.04.18 - 14,000,000 14,000,000 1.75p1 -05.04.13 05.04.18 - 17,500,000 17,500,000 2.25p2 -05.04.13 05.04.18 - 17,500,000 17,500,000 3.25p3 - - 70,669,046 70,669,046 21,669,046 1) Vests after 31.12.13 on condition that the Director is employed at thatdate and that net production is greater than 100 boepd; 2) Vests after 31.12.13 on condition that the Director is employed at thatdate and that net production is greater than 250 boepd; 3) Vests after 30.06.13 on condition that the Director is employed at thatdate and that net production is greater than 400 boepd; The new options have been valued using Black-Scholes and the assumptions usedare detailed below: Grant date Share price Exercise Volatility Option life Dividend Risk-free investment Fair value per at grant price yield rate option14-01-13 1.00p 1.00p 60% 3 years 0% 1% 0.655cents22-03-13 1.50p 1.50p 60% 3 years 0% 1% 0.922cents05-04-13 1.48p 1.75p 40% 5 years 0% 1% 0.694cents05-04-13 1.48p 2.25p 40% 5 years 0% 1% 0.523cents05-04-13 1.48p 3.25p 40% 5 years 0% 1% 0.208cents The Group recognised $215,000 (2012: $Nil) related toequity-settled share based payment transactions during the year, of which$151,000 was charged to share premium and $64,000 was expensed. There is afurther $184,000 (2012: $Nil) to be recognised in the subsequent financialperiod, in relation to the above issue of options. 8. Loans and borrowings 6% Bank 4.5% 6% 30 31 30 Debt Promissory Promissory notes notes June Dec June $'000s $'000s $'000s 2013 2012 2012 $'000s $'000s $'000s Brought forward - - - - - -Initial drawdown 350 49 669 1,068 - -Interest 3 1 29 33 - -Repayments (10) (50) (648) (708) - -Carried at period end 343 - 50 393 - - Principal terms and the debt repayment schedule of the Group'sloans and borrowings are as follows for 30 June 2013 and 31 December 2012 Currency Interest rate Year of maturityBank loans US$ 6% 2014Promissory notes US$ 4.5% 2016Promissory notes US$ 6% 2016 The promissory notes are unsecured and shall be payable betweenissue and a maximum of five years from the date of issue. In the event thatthe loan hasn't been paid down by maturity the outstanding principal andinterest will be fully payable at maturity. 9. Provisions 30 June 31 Dec 30 June 2013 2012 2012 $'000s $'000s $'000s Due within one year or less 128 - -Due after more than one year 72 - -Total provision 200 - -The provision is in respect of an earn-out provision payable to thevendor of Oklahoma Energy LLC. Up to a maximum payment of US$200,000 in cashpayable at the rate of US$10 per boed produced up until 4 March 2020. 10. Events after the balance sheet date Northcote Energy has entered into an agreement to acquire up to a25% working interest (`WI') in certain producing leases at the South WeslacoField, Hidalgo County, Texas. The effective date for the Acquisition will be 1September 2013 and the consideration being paid consists of US$150,000 in cashand 12,348,372 new ordinary shares of no par value in the Company. Thecompletion is pending and is contingent on the assignment of oil and gasleases to the Group but is expected to complete in the next few weeks.

There were no other events to report after the balance sheet date