Information  X 
Enter a valid email address

Northern Petroleum PLC (CAB)

  Print   

Tuesday 19 March, 2013

Northern Petroleum PLC

Corporate Review and New Assets


                            Northern Petroleum Plc                             

                         ("Northern" or "the Company")                         

                        Corporate Review and New Assets                        

Northern Petroleum Plc (AIM: NOP) has for some time recognised the continued
impact of the European regulatory environment and its effect in slowing
corporate growth for operators in the oil and gas sector. In 2012 Northern took
the decision to identify a low entry-cost production or redevelopment project
with sufficient material upside to yield production revenues with a short lead
time and provide the conditions for more active operations and faster growth.

Accordingly, Northern is pleased to announce that it has initiated a new light
oil production redevelopment project in northern Alberta. To date over 5,300
acres have been acquired with the estimated potential to yield in excess of a
further one million barrels of extra production from an estimated original 36
million barrels of oil in place. The leased area contains 22 abandoned wells,
with 11 candidates currently identified as being capable of re-entry for
further production. All the leases are concentrated in one area and have been
acquired as the result of successful bidding at Alberta Crown lands sales. It
is expected that further leases will be added in the near future, after which
greater detail will be provided on Northern's plans for the development of the
project. Once Canada was determined as an attractive new country entry for this
type of asset an experienced team was contracted.

Northern initiated an internal review of its Netherlands asset portfolio at the
start of 2012, involving reprocessing existing seismic and remodelling of
production from existing fields and the larger exploration prospects. This work
is ongoing and completion expected by the end of the first half of the year so
there is still uncertainty around the final results from this review. The
critical factors are the relatively low porosity and permeability aspects of
the reservoir formations, the uncertainties in projection of gas to water
contacts and the potential lower efficiencies of extraction of gas from small
fields in such rocks. The result is that the new estimates of certain key
parameters indicate that some recoverable gas volumes should be moved from the
reserve category into the contingent resource category, to prudently reflect
this uncertainty. Accordingly the Company has reduced its proven and probable
reserves in the Netherlands, as calculated at the end of 2012, to 12.2 million
barrels of oil equivalent. The reduction in reserves is approximately 30 per
cent.

It is known that the Company's business strategy centres upon adding value and
a willingness to trade. This means that the future of production and
development operations in The Netherlands and the UK has always been under
review. In the past year a number of expressions of interest have been made to
purchase these assets. The Company has held extensive negotiations with two
parties in exploring ways to achieve the greatest value for shareholders from
the Company's Netherlands position. Substantial technical analysis has been
undertaken by both of those parties and these discussions have now led to two
non-binding indicative offers for the UK holding company of the Netherlands
subsidiary and one such offer includes the UK assets. The party with the more
attractive offer has requested that at this stage prices in the package not be
disclosed until a binding agreement is reached. The offers are not directly
comparable and while they both contain an initial substantial cash payment,
they involve different packages of assets. The Company must stress that these
offers are indicative at this stage and the Board hopes to draw the discussions
to a conclusion to the best possible outcome for shareholders within the second
quarter of this year.

The Board continues to recognise that the Netherlands assets maintain a
significant net present value to the Company. The third party approaches
support this view. This is partly driven by a strong price obtained for gas
sales (average price achieved in 2012 was approximately US$10 per thousand
standard cubic feet) and the now steady production levels. The 2012 average
attributable production rate for Northern, including the UK contribution, was
886 barrels of oil equivalent per day, which is currently projected to be at a
similar level in 2013.

Turning to exploration; in Italy, Northern is today announcing the upgrading of
the Cygnus prospect and that following their supportive technical work,
independent consultants have been asked to estimate a monetary value for the
project. The decision has been taken by the Company to concentrate offshore
with its potential for quicker operations than onshore. Furthermore, the Board
are much encouraged by the news that a National Energy Strategy was signed in
Italy by the Ministers of Economic Development and Environment on 8th March
2013. This strategy outlines the steps that Italy should take over the next few
decades in order to secure energy supply whilst improving environmental
standards. The strategy is divided into seven sections and Northern are
particularly pleased that one of these sections focuses on the doubling of
domestic hydrocarbon production.

The late 2011 drilling success offshore of French Guiana and the rapid
deployment of the current four well follow-up exploration drilling programme in
2012 has been noted. Northern, with appropriate extra professional expertise,
initiated a wide review process to identify analogous exploration
opportunities, attainable at low entry cost and in suitable countries to follow
up on our exploration success. After a screening process based on both geology
and conformity to Northern's strategy, three new areas are currently being
pursued with active or prospective applications, each in countries seemingly
offering a fast deployment capability. Together with Italy and French Guiana it
is expected that these areas will allow Northern to undertake an active
exploration programme of several wells every year, each with the potential
impact to materially increase the value of the company.

Northern has also received expressions of interest in its reportedly high
quality shale oil potential in the southwest of The Netherlands. Based upon the
previously announced NuTech report, discussions of a preliminary nature have
been initiated by a number of companies with experience in US shale gas and
shale oil operations. Northern's understanding of such operations has been
greatly enhanced and an application for a licence covering a shale oil project
has been initiated within the normal parameters of entry cost, controlled
commitments and country risks.

Derek Musgrove, Managing Director of Northern, stated:

"These new moves are part of the continued implementation of the basic strategy
of the Company. They conform to the requirements of a low acquisition cost, the
potential addition of material value and consideration of full or partial
disposals to finance growth and continuance of activities over the longer term.
The Company's record has been one of successful deployment of that strategy.
Flexibility, openness to trading and change are fundamental to our business
plan within our chosen niche in the oil sector.

It is a simple understanding that the faster the cycle of investment and
return, the greater the corporate growth rate. I know that the Board and all
Shareholders have been disappointed by the pace of progress caused by
bureaucracy and restrictions of process. However, I am sure that these new
moves will increase activity and aid growth in a timely manner to the benefit
of shareholder value."

In accordance with the AIM Rules - Guidance for Mining and Oil & Gas Companies,
the information contained in this announcement has been reviewed and signed off
by the Exploration and Technical Director of Northern, Mr. Graham Heard CGeol.
FGS, who has over 35 years experience as a petroleum geologist. He has
compiled, read and approved the technical disclosure in this regulatory
announcement. The technical disclosure in this announcement complies with the
SPE/WPC standard.

For further information please contact:

Northern Petroleum Plc Tel: +44 (0)20 7469 2900

Derek Musgrove, Managing Director

Graham Heard, Exploration and Technical Director

Westhouse Securities (Nomad and Broker) Tel: +44 (0)20 7601 6100

Richard Baty/Petre Norton - Corporate Finance

Ian Napier - Corporate Broking

FTI Consulting Tel: +44 (0)20 7831 3113

Billy Clegg/ Victoria Huxster

Bishopsgate Communications Tel: +44 (0)20 7562 3350

Nick Rome

Notes to Editors:

Northern is a full cycle oil and gas company currently holding numerous
licences in a number of low risk areas and is continuing with its strategy of
adding and securing value for shareholders as it engages with projects at all
stages of the E&P value chain.

Comprehensive information on Northern and its oil and gas operations, including
all press releases, annual reports and interim reports are available from the
Company's website at www.northpet.com.

a d v e r t i s e m e n t