OKE Project

Northcote has a 100% working interest in the 1,040 acre Oklahoma Energy project in Osage County, Oklahoma. The acquisition of this project in April 2013 provided the Company with accredited operator status in the county.

The project area currently produces in excess of 30 boepd gross from the shallow Bartlesville formation. An ongoing workover programme initiated on the existing wells has already successfully increased gross production from the 12 boepd at the time of the acquisition. Northcote is targeting production of 50 boepd by year end through continuation of the workover programme.

The area has strong Mississippian potential which has been underpinned by Encana Corporation and Chaparral Energy’s recent successes to the north and the south of the OKE Project. Northcote Energy plans to undertake a 3D seismic programme in 2013 to assess future drilling targets in the Mississippi Lime. Importantly, the project benefits from excellent infrastructure which will support increased production both from the Bartlesville and from other formations including the Mississippi Lime and Cleveland Sands.

Prior to Northcote agreeing to purchase the Project, OKE had sold a term overriding royalty interest to BlueRock Capital, LLC. This royalty provides BlueRock with a direct 41.5% Net Revenue Interest in the project’s assets. The royalty expires after BlueRock has received an agreed amount and an internal rate of return of 15% per annum out of its share of the project’s gross revenues. After payout of the Production Payment, the Royalty expires and OKE’s NRI reverts to 78 per cent. The Production Payment is not a debt payable by OKE and, as such, the arrangement is non-recourse to OKE, is unsecured and does not appear on OKE’s balance sheet.