Strategic Agreement Provides Exposure to Mexico

Source: www.gulfoilandgas.com 8/1/2014, Location: South America

Northcote has entered into an Agreement with MX Oil plc (formerly Astar Minerals plc), the AIM listed company focused on opportunities in the upstream oil and gas sector in Mexico. Northcote became aware of the potential reform of the Mexican Oil and Gas market in the late autumn of 2013 and while the Company remains focussed on the development of its core onshore US asset base, this agreement provides Northcote shareholders with substantial exposure to potentially value accretive opportunities in the de-regulated Mexican oil and gas market, without having to absorb certain overheads and other costs associated with the pursuit of opportunities.

Utilising its strong network of influential contacts within the Mexican oil and gas industry, Northcote has been and will continue to provide consultancy services to MX Oil, such services to include strategy formulation and introductions. Northcote effected the introductions of MX Oil Directors, Mr. Pat Mendoza and Mr. Sergio Lopez, which were central to the formation of the joint venture ('JV') between MX Oil and Geo Estratos S.A. de C.V ('Geo') which was announced today. GEO and MX Oil shall together evaluate, explore, develop, and produce hydrocarbons in Mexico.

Under the terms of the agreement with MX Oil, Northcote will, for an initial period of three years, continue to provide advice, introductions and support to MX Oil towards the execution of its stated business plan. In consideration of the services provided, Northcote will be compensated and have the right to participate in potential business activities in Mexico with MX Oil as follows:

- For a period of ten years Northcote shall have the right to participate with MX Oil, on an unpromoted basis, as a partner in the exploration, drilling, development or production of any of its oil and gas projects in Mexico. Pursuant to this right, Northcote shall be permitted to participate at a level of up to 20% of the interest of MX Oil (prior to giving effect to Northcote's election to participate) in any project for the drilling, exploration, development or production of oil and gas in Mexico.

- Northcote shall be awarded, subject to MX Oil shareholder approval, warrants exercisable over 30,000,000 ordinary shares of MX Oil at an exercise price of GBP 0.02 per share. The warrants vest on the date ('the Award date') that MX Oil receives or enters into any agreement allowing it or its affiliates to explore for, develop or produce oil and gas in Mexico ('the Award Condition'). The warrants shall have a term of five years from the Award Date and provide upside for Northcote shareholders subject to successful value creation by MX Oil;

- Northcote shall be awarded, subject to shareholder approval, further warrants over 12,000,000 ordinary shares of MX Oil at an exercise price of GBP 0.03 per share. Vesting of these warrants will be conditional upon the Company securing an interest in a concession or asset and will vest in three equal tranches as follows:

- 4,000,000 once the 60 day average mid-market price of trades at 0.06 GBP per share;

- 4,000,000 once the 60 day average mid-market price of MXO trades at 0.12 GBP per share;

- 4,000,000 once the 60 day average mid-market price of trades at 0.18 GBP per share.

- Northcote will have the right to appoint a Director to the MX Oil board to represent Northcote's interests and serve as a liaison between Northcote and MX Oil. The appointment will be announced in due course. Furthermore upon appointment the Northcote representative Director will receive warrants over 3,000,000 ordinary shares at an exercise price of 0.03 GBP per share, subject to performance conditions.

Randall J. Connally said "Northcote's management team has a strong network of contacts in Mexico, and while our predominant focus in terms of our resources and capital is to increase production across our onshore US oil and gas assets, we are pleased to be able to exploit our links through this Agreement. This provides us with de-risked exposure to the exciting value potential inherent within the Mexican oil and gas industry now that energy reform is underway. In particular, we are excited about the value upside potential provided by our right to participate, on an unpromoted basis, directly in projects in Mexico.

"As capable, motivated and entrepreneurial business persons, the principals of MX Oil have recognised that reform in Mexico, which has similar oil and gas credentials to parts of the US, has significantly opened up the opportunity for foreign investment in the near future. By providing introductions to Messrs. Mendoza and Lopez, we are delighted to have played a part in the formation of a joint venture between MX Oil and established oil services company GEO which provides MX Oil with a well-connected and highly knowledgeable local partner to jointly evaluate, explore, develop, and produce hydrocarbons in Mexico.

"I firmly believe that we have put together a formidable and exciting team of business and energy professionals. This team boasts a tremendous oil and gas track record; business experience in Latin America in general and Mexico in particular. In addition, MX Oil's team has the strong financial and industry relationships to successfully realise and implement our objective of securing a substantial oil and gas concession or other development opportunity in Mexico and exploring, developing and producing that concession longer term."


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Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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