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UPDATE: Northcote Energy's first frack delivers significant boost to output

Published: 11:31 28 May 2013 BST

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--Adds broker comments--

Northcote Energy (LON:NCT) chief executive (CEO) Randy Connally said he was “delighted” by the results of fracture stimulation of the company’s already-producing Big Hill #1 well in Oklahoma.

The initial flow rate was 1,210 mcf of gas a day and 16 barrels of oil (where previously there had been none).

This equates to 231.5 barrels of oil equivalent a day, or 95 barrels net based on the AIM-listed group’s share of production from the Horizon Project in Osage County.

Northcote revealed testing of the Big Hill #2 well has been suspended following a leak in the tubing, with the operator working to correct the problem. However results prior to hold up were described as “positive”.

Plans are in train to frack a further two producing wells.

The results of this first, fracked well will contribute significantly to Northcote’s aim of producing 100 barrels of oil equivalent per day (boepd) by the year-end.

The company has 51.75% working interest, or a 41% net revenue interest in Horizon, which is part of the Oklahoma’s emerging Mississippi Lime play.

Connally said: “We are delighted by the initial performance of the Big Hill #1 well which has the potential, once the choke is increased, to significantly increase production above the pre-frack levels.

“The success of the Big Hill #1 represents a big step towards meeting our 100 barrels of oil equivalent a day 2013 target.”

Northcote’s CEO said the Big Hill #1 well was internally ranked as its “most gassy and worst performing well” of nine assessed prior to stimulation.

He said he believes the success of this first attempt, with an open flow rate potential over 12 times higher than the pre-frack levels, is a “positive indicator” as the group moves to stimulate the remaining seven historically better performing wells in its portfolio.

Connally pointed out the well had historically produced minimal oil volumes, but post-frack is “consistently producing good levels” of crude along with the higher natural gas production.

He added: "We look forward to updating the market on the performance of Big Hill #2, where results were positive until we discovered a leak in the tubing earlier this week, which is now being rectified.

“We are also continuing to plan the stimulation of two additional wells, to complete our initial four-well frack programme and will announce expected timing as we get a firm date scheduled.

“Our technical team on this project deserve recognition and thanks for a job well done and I am looking forward to continued success on this programme."

Stockbroker Shore Capital believes that Northcote has now demonstrated the potential of the fracture stimulation programme, with results from Big Hill 1.

“Big Hill 1 was internally ranked as the most gassy and worst performing of Northcote’s nine Mississippian wells prior to stimulation, so we are very impressed by the twelve fold increase in flow rates versus pre-frack levels, and oil production from a well which had not previously been an oil producer,” analyst Craig Howie said in a note.

Howie expects Big Hill will make a significant contribution towards Northcote’s year-end production target of 100 boepd net.

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