Northcote Energy Limited (LON:NCT OTCMKTS:NRHCF)) expects to increase production from its Shoats Creek operation in Louisiana by 450% through a new gas sales deal.
The agreement, with Enerfin Field Services, runs for three years and will see the Lutcher Moore#14 well tied into new gas lines.
Following the tie-in, Northcote’s net production at Shoats Creek is expected to increase to 110 barrels of oil equivalent (calculated on a revenue equivalent barrel basis) from net 20 barrels of oil per day currently.
Northcote has a 70% working interest and 52.8% net revenue interest in LM#14, which has potential revenues worth US$7.1 mln gross and undiscounted or US$3.8 mln net to Northcote.
Ross Warner, Northcote’s chairman said: “As the LM #14 demonstrates, there are multiple existing well bores with tremendous potential for low cost near term revenue generation that could not be previously exploited without having the ability to monetise natural gas.
“With natural gas prices in the US having increased by over 30% during the last few months to $2.75 per thousand cubic feet, the revenue potential from natural gas is well worth exploiting in addition to oil.”
Setting up the gas lines is expected to cost a maximum US$450,000 with sales to start after completion of this work. Payments will be based on metered monthly sales of natural gas into the pipeline and indexed to the Henry Hub natural gas price.
The agreement also covers LM #20, which will be tied in using the same infrastructure as LM#14.
Northcote shares were unchanged at 0.03p.