1 Aug 2014 07:00
Northcote Energy Ltd / Index: AIM / Epic: NCT / ISIN: VGG6622A1057 / Sector: Oil & Gas
1 August 2014
Northcote Energy Ltd ('Northcote' or 'the Company')
Strategic relationship with MX Oil Provides Exposure to Mexico Oil and Gas Opportunities
Northcote (AIM: NCT) is pleased to announce that it has entered into an Agreement with MX Oil plc ('MX Oil'; AIM: MXO) (formerly Astar Minerals plc), the AIM listed company focused on opportunities in the upstream oil and gas sector in Mexico. Northcote became aware of the potential reform of the Mexican Oil and Gas market in the late autumn of 2013 and while the Company remains focussed on the development of its core onshore US asset base, this agreement provides Northcote shareholders with substantial exposure to potentially value accretive opportunities in the de-regulated Mexican oil and gas market, without having to absorb certain overheads and other costs associated with the pursuit of opportunities.
Utilising its strong network of influential contacts within the Mexican oil and gas industry, Northcote has been and will continue to provide consultancy services to MX Oil, such services to include strategy formulation and introductions. Northcote effected the introductions of MX Oil Directors, Mr. Pat Mendoza and Mr. Sergio Lopez, which were central to the formation of the joint venture ('JV') between MX Oil and Geo Estratos S.A. de C.V ('Geo') which was announced today. GEO and MX Oil shall together evaluate, explore, develop, and produce hydrocarbons in Mexico. For full details please see today's press release by MX Oil available on their website (www.mxoil.com)
Under the terms of the agreement with MX Oil, Northcote will, for an initial period of three years, continue to provide advice, introductions and support to MX Oil towards the execution of its stated business plan. In consideration of the services provided, Northcote will be compensated and have the right to participate in potential business activities in Mexico with MX Oil as follows:
· For a period of ten years Northcote shall have the right to participate with MX Oil, on an unpromoted basis, as a partner in the exploration, drilling, development or production of any of its oil and gas projects in Mexico. Pursuant to this right, Northcote shall be permitted to participate at a level of up to 20% of the interest of MX Oil (prior to giving effect to Northcote's election to participate) in any project for the drilling, exploration, development or production of oil and gas in Mexico.
· Northcote shall be awarded, subject to MX Oil shareholder approval, warrants exercisable over 30,000,000 ordinary shares of MX Oil at an exercise price of GBP 0.02 per share. The warrants vest on the date ('the Award date') that MX Oil receives or enters into any agreement allowing it or its affiliates to explore for, develop or produce oil and gas in Mexico ('the Award Condition'). The warrants shall have a term of five years from the Award Date and provide upside for Northcote shareholders subject to successful value creation by MX Oil;
· Northcote shall be awarded, subject to shareholder approval, further warrants over 12,000,000 ordinary shares of MX Oil at an exercise price of GBP 0.03 per share. Vesting of these warrants will be conditional upon the Company securing an interest in a concession or asset and will vest in three equal tranches as follows:
o 4,000,000 once the 60 day average mid-market price of trades at 0.06 GBP per share;
o 4,000,000 once the 60 day average mid-market price of MXO trades at 0.12 GBP per share;
o 4,000,000 once the 60 day average mid-market price of trades at 0.18 GBP per share.
· Northcote will have the right to appoint a Director to the MX Oil board to represent Northcote's interests and serve as a liaison between Northcote and MX Oil. The appointment will be announced in due course. Furthermore upon appointment the Northcote representative Director will receive warrants over 3,000,000 ordinary shares at an exercise price of 0.03 GBP per share, subject to performance conditions.
An interview with Randall Connally will be posted on the website today and can be viewed at the following web address: www.brrmedia.co.uk/event/preview/vpf4c5vbs0/124852.
Randall J. Connally said "Northcote's management team has a strong network of contacts in Mexico, and while our predominant focus in terms of our resources and capital is to increase production across our onshore US oil and gas assets, we are pleased to be able to exploit our links through this Agreement. This provides us with de-risked exposure to the exciting value potential inherent within the Mexican oil and gas industry now that energy reform is underway. In particular, we are excited about the value upside potential provided by our right to participate, on an unpromoted basis, directly in projects in Mexico.
"As capable, motivated and entrepreneurial business persons, the principals of MX Oil have recognised that reform in Mexico, which has similar oil and gas credentials to parts of the US, has significantly opened up the opportunity for foreign investment in the near future. By providing introductions to Messrs. Mendoza and Lopez, we are delighted to have played a part in the formation of a joint venture between MX Oil and established oil services company GEO which provides MX Oil with a well-connected and highly knowledgeable local partner to jointly evaluate, explore, develop, and produce hydrocarbons in Mexico.
"I firmly believe that we have put together a formidable and exciting team of business and energy professionals. This team boasts a tremendous oil and gas track record; business experience in Latin America in general and Mexico in particular. In addition, MX Oil's team has the strong financial and industry relationships to successfully realise and implement our objective of securing a substantial oil and gas concession or other development opportunity in Mexico and exploring, developing and producing that concession longer term."
**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.
About MX Oil
MX Oil is an AIM quoted resources company focused on the vast Mexican energy sector following recent dynamic regulatory reforms. Mexico, the world's 9th largest oil producer with significant underdeveloped resources, has reopened its energy sector, allowing greater foreign investment with which to develop its reserves and increase production.
MX Oil's strategy is to partner with established oil and gas operators to jointly evaluate, acquire and develop licences in Mexico. The Company will leverage its extensive in-country network and experience of the Board to participate in the development of oil and gas resources in Mexico.
About Geo
Geo has a track record spanning two decades of providing services including subsoil drilling, geological and geophysical studies to operators in the Mexican energy sector such as Pemex, Mexico's national oil company, and FTSE 100 listed Petrofac. Geo provides a broad range of technology based services and solutions to the Mexican energy sector and has a number of patents granted and pending in both Mexico and the US. Being a local business with a long track record of working in the Mexican energy industry, Geo is well placed to secure and develop contracts and concessions in country via formal bid rounds and through its existing commercial relationships.
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.