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Northcote Energy Ltd / Index: AIM / Epic: NCT / ISIN: VGG6622A1057 / Sector: Oil & Gas 27 February 2014 Northcote Energy Ltd (`Northcote' or `the Company') Increase in interest at Zink Ranch and commencement of 2014 work programme Northcote (AIM: NCT) announces that it has increased its working/net revenueinterest (`WI'/`NRI') in its producing Zink Ranch Project. Northcote is alsopleased to announce the commencement of its 2014 development programme and theinitial issue of £1,200,000 zero coupon secured loan notes (`the Note') withconversion right initially set at 1.1p per share. Overview * Northcote will increase its WI in Zink Ranch (formerly called North Cleveland) to 85% (66.3% NRI) for cash consideration of $850,000. + The relative increase in WI is 9% but the increase in net revenue interest is 22.8%, which results in a higher return on future development capital spent on that property * A continuous 2014 development programme will commence next week, across the entire Northcote portfolio, including Zink Ranch and Horizon. The programme is designed to increase production beyond the 250BOEPD target and substantially increase P1 producing reserves. It will involve: + The drilling of 4 to 5 new wells; + The workover or recompletion of up to 31 existing well bores; + The fracture stimulation of at least 2 to 3 existing horizontal wells; and * Northcote to initially issue £1,200,000 zero coupon secured convertible loan notes with an exercise price initially set at 1.1pence (45% premium to the share price as at close of business on 26 February 2014). The proceeds from the initial issue will be applied as follows: + Funding the acquisition of the additional interest in Zink Ranch; and + Funding the initial development programmes across our portfolio. Northcote's Chief Executive Officer Randall Connally said, "The work programmewe are launching next week is the result of actions taken in 2013 to increasethe leasehold footprint of Northcote in our core operating areas in Osage andKay Counties, Oklahoma. This development programme will drive production growthin 2014 as aggressively as we grew our lease position in 2013 through a broadfront of activities on multiple projects at the same time. Additionally, theenhanced pace of activities will allow us to realise better access to necessaryequipment and suppliers as well as to realize cost efficiencies in theexecution of the programme. The 2014 development programme will be a continuousand ongoing programme intended to exceed our previously set target of 250BOEPD. "The additional interest in Zink Ranch increases the return on developmentcapital at that property by increasing the net revenue interest per point ofWI. The purchase increases the relative amount of cost (WI) that we areresponsible for by 9% but importantly our net revenue interest in the projecthas increased by 22.8%, resulting in a higher return on every dollar of futuredevelopment capital spend starting with the forthcoming 2014 work programme. "The Darwin financing allows us to extend the 2014 development programme andsecure the Zink Ranch acquisition during this important phase of Northcote'sdevelopment as a company. As 2014 progresses, Northcote intends to pursuenon-dilutive commercial bank financing as well as partnerships and jointventures with industry participants to accelerate development of ourproperties. As Northcote's operating capabilities continue to develop,partnerships with industry participants offer the opportunity to enhanceprofitability of Northcote's properties and realize cost and revenueefficiencies and will be an important and ongoing part of our strategy." Interview with Randall Connally An interview with Northcote Energy Managing Director Randy Connally regardingtoday's announcement can be viewed through the following link: http://www.brrmedia.co.uk/event/121021?popup=true. The video will also be available onthe Company's website. Zink Ranch Project (formerly North Cleveland) As announced on 14 October 2013, Northcote originally acquired a 78% WI and 54%NRI in Zink Ranch, covering an area of 1,520 gross acres in Osage County,Oklahoma. The Company has agreed to acquire an additional 7% WI and 12.3% NRIfor a cash consideration of US$850,000 bringing its total interest at ZinkRanch to 85% WI and 66.3% NRI, which increases the return on development spendat that property. Completion remains subject to remittance of funds which isexpected to be on or before 28 February 2014. The Board is very pleased to have increased its interest in the project onfavourable terms prior to the commencement next week of important developmentwork at Zink Ranch, which it views as one of its key properties. The Boardbelieves that this asset alone is capable of generating multiple increases inproduction from its current level of circa 30BOEPD gross (20BOEPD net). Furthermore by increasing its interest in the field, the Company has removed apartner that was not 100% committed to its plans for the field and Northcote isnow able to execute its planned programme at a pace that it controls. Commencement of 2014 Work Programme The Company is pleased to announce that it will commence its 2014 developmentprogramme across all of Northcote's core Oklahoma properties, including ZinkRanch, Horizon, Mathis, East Blackwell and the Oklahoma Energy leases, nextweek. The programme will include: * The drilling of 4 to 5 new wells; * The workover or recompletion of up to 31 existing well bores; and * The fracture stimulation of 2 to 3 existing horizontal wells. The fourth fracture stimulation of the 2013 work programme and the Mathis well,both delayed by severe winter weather, have been incorporated into the 2014work programme. The 2014 work programme will be the first continuous programme that Northcotehas executed highlighting its evolution since listing in 2013. The programmewill start in the first week of March 2014 and continue until its completionexpected to be in Q3 2014. The continuous pace of development will allow forimproved access to equipment and services and result in more timely executionof projects and cost efficiencies. Regular updates on completion of activitiesand realised production growth will be provided on an ongoing basis throughoutthe execution of the programme. Northcote's share of the capital expenditures for the forthcoming workprogramme will be fully funded from the proceeds of the convertible loanfinancing, existing cash resources and the cash flow from operations as well asother non-dilutive capital. Secured convertible Loan Note The Company has signed an agreement for up to £1,500,000 (gross) zero couponsecured convertible bond (`Note') with Darwin Strategic Limited (`Darwin'). TheNote will be divided into 30 individual bonds with a par value of £50,000 each.24 of these bonds (£1,200,000) will be issued on 26 February 2014 and will beused to fund the acquisition of the additional interest in Zink Ranch plus thecommencement of the Company's work programme. The remaining six bonds (£300,000) can be issued during May 2014, at theelection of the Company, subject to the achievement of certain conditions. Thefunds will be used against the 2014 work programme in Osage and Kay Counties,Oklahoma. For each £50,000 bond issued, Northcote will receive 85% of the par value,equivalent to £42,500 per bond. The issued bonds will redeem after a period of18 months from the date of issue and will be settled in cash at 100% par value,equivalent to £50,000. From the issue date up to and including 31 July 2014,the bonds are convertible into Ordinary Shares in Northcote at the conversionprice of 1.1p per share, a 5 month period during which the Company expects tosubstantially increase production and internally generated cash flows. Northcote, at its election, has the right to redeem one or all of theoutstanding bonds in cash at 105% of the par value. From August 2014 theCompany is committed to redeem one unit of £50,000 per month until 31 August2015 (the redemption date) and furthermore from 1 August 2014 the bonds shallbe convertible into Ordinary Shares of Northcote at 1.1p per share or if lower94% of the market share price at the relevant conversion date. In addition Darwin has been issued with warrants over 54,545,455 shares at aprice of 1.1pence per share. The warrants can be exercised over a 3 yearperiod. Under the terms of the agreement, Darwin has the right to convert any number ofthe bonds into Ordinary Shares at any time subject to the above date andconversion stipulations. **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 Notes: All of the technical information, including information in relation to reservesand resources that is contained in this announcement has been reviewedinternally by the Company's Technical Director, Mr. Kevin Green. Mr. KevinGreen is a Petroleum Geologist who is a suitably qualified person with over 30years' experience in assessing hydrocarbon reserves and has reviewed therelease and consents to the inclusion of the technical information. 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, workover andfracking campaign in 2014.