Springer Oil & Gas has struck a deal to acquire 100% of Shoats Creek, and concurrently Northcote will acquire from Springer 70% of the project before farming-down half of its interest to ISDX-listed peer and partner North American Petroleum (ISDX:NAP).
For Aminex the transaction fits its strategy to focus on assets in Africa. Through the transaction the company will receive US$5mln, comprising US$150,000 of cash, US$350,000 of Northcote shares and a revenue share capped at US$4.5mln.
Northcote will receive US$175,000 of cash from NAP as part of the deal.
Once the dust settles on the transaction Northcote will be the operator of the project, with a 35% stake. NAP will own 35% and Springer will retain 30%.
Springer’s participation will help fund the early development of the Shoats Creek, said Northcote chief executive Randy Connally.
Connally also pointed to the success of New York listed Midstates Petroleum, on a contiguous field, as an encouraging factor for the partner’s high expectations for the Shoats Creek project.
"The Shoats Creek transaction provides Northcote with an opportunity to expand into a new, highly prolific US onshore oil and gas region with partners equally focused on exploiting an oilfield with great potential and a production history estimated at over 2 million barrels,” he said.
“Our partnership with Springer Oil & Gas, LLC and NAP provides the substantial portion of initial capital expenditures to facilitate early development of the project, ensuring that the addition of this property to our portfolio will not divert Northcote's financial resources from our ongoing 2014 work programme in Oklahoma.
Connally adds: “This property is attractive due to the multiple pay zone opportunities present, as well as the exploitation potential from existing well bores.
“Following our extensive due diligence on the project, Northcote and its partners believe that a systematic development programme will offer substantial production upside from near term exploitation of existing well bores and longer term from the multiple drilling locations remaining in the Frio, Cockfield and the deeper Wilcox formations.”
Shoats Creek was first discovered back in the 1960s, and though various periods of development 22 wells have been drilled on the property. It currently produces oil from one well.
The partners plan to commit US$1mln of development capital to the project within the first twelve months.
Initially US$600,000 will be invested to start operations. Northcote and NAP will each provide US$75,000, whilst Springer will put in US$450,000, and a further US$400,000 of funding will be split between Northcote and NAP.
Subsequently, Northcote will be responsible for funding 50% of the next US$900,000 that will be invested in the projects. Funding thereafter will be on a pro-rata basis.
Investments in Shoats Creek are not expected to be made until 2015, allowing Northcote to concentrate its resources on its ongoing plans in Oklahoma.