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Acquisition of NAP USA, Inc unconditional, Placing, further issue of new Shares and settlement of Darwin Loan Note
Northcote (LSE:NCT), an onshore US oil and gas exploration and production company, has said that the acquisition of NAP USA Inc. is now unconditional with all conditions precedent having been met. This follows the issue of 1,730,725,004 new nil par value ordinary shares at 0.09 pence, constituting 1,555,725,004 Placing Shares to raise £1,430,531 of new money through new and existing investors and 175,000,000 Placing Shares in settlement of £157,500 of a debt. In addition, the Company has agreed to issue 236,564,735 new Ordinary Shares at the Placing Price to certain Directors and consultants in settlement of amounts owed and owing to them.
Highlights:
· Acquisition enhances Northcote’s field level cash flow, lease acreage and net production, providing the enlarged Company with a robust platform for future production and cash flow growth even during times of oil price weakness:
o Provides increased exposure to low cost core Shoats Creek field in Louisiana (70% working interest), the focus of the planned development programme in 2015, and additional interests in Oklahoma including the producing Zink Ranch project (85% working interest)
o The enlarged group will be majority working interest owner or operator of its core projects and as a result will control the speed of development across the portfolio
· The proceeds of the Placing will be used for operational initiatives across its core assets and also to settle in full the outstanding loan note with Darwin Strategic Limited:
o Near term plans to drill new conventional vertical wells at Shoats Creek, targeting the Frio Formation, which have compelling economics at circa US$20 per barrel oil
o Success at Frio locations will unlock significant field level cash flow, prove up the reserves and lead to further development of Shoats Creek
· Divestment programme of the Enlarged Group’s non-core assets, which has already seen one of four packages already sold, will provide additional development capital as well as streamline the Company’s portfolio
· Agreement with certain Directors and third parties to settle amounts outstanding, and future amounts to be accrued, in new Ordinary Shares at the Placing Price, frees up additional funds for investment in operations
Northcote Managing Director Randall Connally said, “This acquisition and Placing significantly strengthens Northcote and enables the Company to take full advantage of the multiple low cost development opportunities in our portfolio in the near term. Thanks to a focus on low cost conventional US onshore fields, Northcote is well positioned to increase production and reserves even during the current oil price environment.
“This has also been recognised by investors who have participated in our fundraising. Thanks to the support shown, we can now settle in full the outstanding loan note with Darwin and in the process considerably strengthen our balance sheet. In addition, we are now ideally placed to unlock significant value within our core Shoats Creek Project in Louisiana by drilling new low cost conventional wells. Our near term focus is to hit the ground running and with drill targets prioritised, we plan to capitalise on the exciting opportunities within this field through the near term development of one or two of these initially. We will provide updates in respect to these initiatives, and look forward to the year ahead with excitement.”
Details of the Placing:
The Company has raised approximately £1,558,000 (before expenses and including settlement of the £157,500 debt) in new equity to meet the final condition precedent for the acquisition of NAP, USA Inc and to apply these funds to fully settle Darwin Strategic Limited and to advance its strategy of developing its portfolio of low-cost conventional oil & gas assets.
The Placing Shares represent approximately 51 per cent. of the Company’s issued share capital as enlarged by the Placing Shares, the Settlement and Consulting Shares. The Placing Price is at a discount of approximately 20 per cent. to the closing middle market price on 11 February 2015, being the last practicable date prior to the publication of the announcement. The Placing is conditional, inter alia, on admission of the Placing Shares to trading on AIM. It is expected that admission of the Placing Shares to trading on AIM will be admitted to trading at 8.00 a.m. on 18 February 2015. The Placing Shares will rank pari passu in all respects with the Company’s existing Ordinary Shares.
The Company has issued 62,980,695 warrants to its brokers to subscribe for new shares in the Company exercisable during three years from Admission, at the Placing Price.
Settlement Shares:
In conjunction with the Placing, the Directors have agreed to subscribe for a total of 192,963,335 new Ordinary Shares in exchange for converting (a) existing indebtedness from the Company being £55,000 due to Randall Connally in respect of an unsecured short-term loan, £50,000 to Daniel Jorgensen in respect of accrued director’s fees and £16,667 to Ross Warner in respect of accrued director’s fees; and (b) the first quarterly tranche of their 2015 contracted remuneration in shares at the Placing Price, being 22,222,222 (£20,000) in respect of Randall Connally, 22,222,222 (£20,000) in respect of Ross Warner and (c) a proportion of their 2015 contracted remuneration in shares at the Placing Price, being 13,333,333 (£12,000) in respect of Charles Wood. The Company has agreed to issue the director’s 2015 remuneration in full for Ross Warner and Randall Connally and, in part for Charles Wood, in Shares at the Placing Price. These Shares will be issued quarterly in advance with the first tranche being issued in conjunction with the Placing.
