Operations

Mexico

Northcote Energy has substantial exposure to opportunities in the de-regulated Mexican oil and gas market having entered into a Participation Agreement with MX Oil plc, the AIM listed, Mexican focussed oil and gas company. While the Company remains focussed on the development of its core onshore US asset base, this agreement provides Northcote shareholders with access to the sector without having to absorb certain capital expenditure requirements.

The Participation Agreement was put in place in July 2014 following the provision of consultancy services, including strategy formulation and introductions, by Northcote Energy, which has a strong network in Mexico. This led to the formation of a Joint Venture between MX Oil and Geo Estratos S.A. de C.V., an established oil services business in Mexico, which has existing strong working relationships with operators in the Mexican energy sector. Accordingly, both MX Oil and Geo Estratos will evaluate, explore, develop, and produce hydrocarbons in Mexico.

Pursuant to the terms of the Participation Agreement, Northcote Energy will, for an initial period of three years, continue to provide advice, introductions and support MX Oil towards the execution of its stated business plan. In consideration of the services provided, Northcote Energy 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, upon having available share authorities, 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:
    • 4,000,000 once the 60 day average mid-market price of trades at 0.06 GBP per share;
    • 4,000,000 once the 60 day average mid-market price of MXO trades at 0.12 GBP per share;
    • 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.

  • Mexico is estimated to have 13 billion barrels of recoverable oil resources.
  • Onshore Gulf of Mexico substantially underexplored compared with the United States. Several of Mexico's largest oil field are onshore Gulf of Mexico.
  • Potentially significant deep water resources in the Gulf of Mexico
    • Very little activity in Mexico's portion of the Gulf compared to the US, partly due to lack of technical capacity to effectively explore or produce from deep water areas
  • Prolific Eagle Ford Shale formation extends into Mexico - produces natural gas, condensate, oil, and natural gas liquids, with margins more favourable than other shale plays