Northern Petroleum Exercises Option on NAM Assets


Location of the Papekop
(Click to Enlarge)
Northern Petroleum Plc's wholly owned Netherlands subsidiary, NP Netherlands B.V. has, following due diligence, exercised its option under the HOA signed in June with Nederlandse Aardolie Maatschappij B.V. ("NAM"), a company jointly owned by Shell and ExxonMobil, on an initial package of undeveloped oil and gas discoveries.

NPN has selected to develop those discoveries which it considers to be commercially the most attractive and therefore, under the Agreements, has initially committed to the development of two discoveries and has the option, prior to 31st December 2005, to commit to a further three. NAM will assign its participating interest in the committed discoveries to NPN who will immediately assume operating responsibility after receipt of government approvals. The discoveries are in two onshore part-areas in the Drenthe License and the Andell II License, which is close to the Papekop discovery for which NPN has filed an application. The NPN interests upon transfer will be:

License

Discovery

Status

NPN Interest

Drenthe

Geesbrug

Committed

60%

Drenthe

Grolloo

Optional

60%

Andel II

Ottoland

Committed

100%

Andel II

Brakel

Optional

100%

Andel II

Andel

Optional

100%

NPN estimates the gross expected in-place volumes of the committed discoveries to be 102 billion cubic feet of gas and 20 million barrels of oil. The gross expected in-place volumes of the optional discoveries is estimated at 33.5 billion cubic feet of gas and 6.3 million barrels of oil. Accounting for other partners and the NAM commercial interests gives a net to NPN of 31-33 billion cubic feet of gas and 5.9-9.8 million barrels oil for the committed discoveries; 10-16 billion cubic feet of gas and 1.9 to 3.1 million barrels oil for the optional discoveries, with the range depending upon whether the Minister of Economic Affairs designates Energie Beheer Nederland B.V. ("EBN"), a State owned company, as a 40% participant in the Andel II field developments in return for a pro-rata share of sunk exploration costs and a pro-rata share of all future costs of the joint venture. NPN will, in respect of discoveries to which it commits, receive 100% pay-back of its costs plus an uplift of 30%, thereafter splitting all future profits equally with NAM.

Under the current Agreements and a previous farm-out agreement signed on 13th June 2005, NPN will also farm-in to the Steenwijk prospect and an onshore exploration part-area, in the Drenthe License. NPN will earn these interests by drilling and covering the combined NAM and NPN expenses of three exploration wells and will subject to Government consent assume operatorship of the 2 wells and activities in the Drenthe exploration part-area. The Agreements provide for NPN to recover all dry hole costs out of the pre-tax revenues from future discoveries and share the profits from the jointly held stakes with NAM on an equal basis. NPN estimates the unrisked gross in-place volumes of the identified gas prospects to be between 0.5 and 0.85 trillion cubic feet. This is 200bcf to 330bcf net to NPN, allowing for partners, other than NAM, where applicable.

The Agreements further provide a farm-in option for NPN to acquire, prior to 31st December 2005, 50% of NAM's interests in three additional onshore exploration areas where NAM has identified gas prospects. NPN estimates unrisked gross in-place volumes between 0.36 and 0.53 trillion cubic feet. NPN will have the right to earn these interests by drilling and covering the combined NAM and NPN expenses of one well per exploration area.

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