Noreco in Dispute with Dong over $400MM Siri Repairs
(Dow Jones Newswires), June 15, 2011
Norwegian Energy Co., known as Noreco, said Wednesday it is in dispute with Danish power firm Dong Energy over a DKK2 billion ($400 million) repair bill for a jointly owned oil rig in the Danish North Sea.
Noreco said it won't participate in, nor finance, the project proposed by Dong.
"Dong sent out (a press release) without informing us," Noreco spokesman Jan Petter Stiff said.
"We are not obliged to participate."
Noreco says their license agreement with Dong requires Noreco's consent for projects of this kind. Dong's solution to the damaged rig is "technically immature," it said.
The Norwegian firm said it has an alternative solution for the rig and will be talking to Dong about the matter.
Noreco and Dong each have a 50% ownership of the rig in the Siri license area of the North Sea, with Dong as the operator. Oil production was halted there in August 2009 after cracks were discovered in part of the sub-sea structure. Production resumed in January 2010 after temporary safety measures were put in place.
Dong said in a statement earlier Wednesday that it would make full and permanent repairs to the platform and estimated the costs at DKK2 billion. The firm said the work should be completed in 2012.
An Oslo-based analyst noted Noreco is short of cash after posting a NOK295 million ($54 million) net loss for the first quarter. As its share price plummeted, the company was forced to reassure markets last week that it has enough working cash to keep afloat.
"There is a large risk of an equity issue. They don't have a lot of money," the analyst said.
Dong Energy wasn't immediately able to comment.
Copyright (c) 2011 Dow Jones & Company, Inc.
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