--Northern Petroleum Nederland B.V. ('NPN') will be the Operator of The License and any underground gas storage projects on it; --The gas production is at an average rate, year 2007 to the end of February, of 1.8 mmscfd (330boepd) net the interest from the Bunter sandstone formation; --The License contains tested oil discoveries of 200 bopd in the Bunter and 100 bopd in the Delftland formation which NPN intends to evaluate in the context of today's higher oil prices; and --The agreement places NPN immediately in production as of 1 January 2007, with a core operating crew near to four of NPN's six proposed developments.
--The production will bring NPN 2007 estimated revenue of Euro2.5 million and pre-tax cashflow of Euro1.7 million at current gas prices, on the basis of the proven no further investment forecast; --NPN to pay a consideration on completion of Euro500,000 to WINZ for the acquisition of its oil and gas interests within The License; and --Northern will pay a further Euro4.5 million ('the Contingent Consideration') to WINZ contingent upon a final investment decision ('FID') being made on an underground gas storage project on The License within five years of completion of this Agreement.
Waalwijk Production License
The Waalwijk gas fields are situated some 16 km from the projected extension of the Zeebrugge gas pipeline, which provides a connection from Belgium through to the United Kingdom and Irish markets. The Waalwijk License is also near to NPN's Papekop, Andel 3 license and the Utrecht License Application.
NPN will hold a 16.67% interest in all the wells on The License save at the Loon op Zand South well in which it will hold a 50% interest.
The Waalwijk fields commenced production in 1991 and have a discovered gas initially in place of an estimated 215Bcf of which 55% has been recovered. Gross production is currently an average of 7.5mmscfd (WINZ share of 1.8mmscfd). The gross proven reserve on the basis of no further investment is 2Bcf (WINZ share 0.5bcf). Modest further investment (WINZ share ca. Euro2mln) is required to increase the gross proven reserves to up to 22Bcf (WINZ share 3.8Bcf). A further 15Bcf of possible reserves (WINZ share 7Bcf) are estimated in undrained areas of the fields.
Oil has been tested in two formations, the Delftland (Lower Cretaceous) and the Lower Bunter Sandstone (Triassic) at rates varying from 100 bopd in the Delftland to 200 bopd in the Lower Bunter.
In 1999 a study of the commercial potential for development of the Delftland was undertaken. In that year an average oil price of $17 per barrel, even though up from a previous year average of $13, was still considered not to warrant proceeding to development. This will now be re-examined.
NPN intends to evaluate the commercial potential for oil production from the Delftland through new completions, probably through lateral drilling from existing wells in the main field. The potential for isolating the Bunter Sandstone gas production zone to achieve oil production from the Bunter Sandstone will also be examined.
A gas storage license application for Waalwijk North field has been made by WINZ and Essent Energy Gas Storage BV ('Essent').
The interests in the potential underground gas storage projects within the Waalwijk North reservoir will be held 33.33% by Northern and 66.67% Essent. The interests in all other potential underground gas storage projects within the rest of The License will be held 50% by Northern and 50% by Essent, on the assumption that Energie Beheer Nederland B.V. will not hold any underground gas storage project interests.
Derek Musgrove, Managing Director of Northern, stated:
"In a core area where we have six gas and oil fields, this is a low cost acquisition of conventional gas production with real upside potential through reconfiguring the production plant and wells to effect a lower final pressure and a realistic potential underground gas storage project in the vicinity of the Zeebrugge inter-connector trunk gas pipeline.
"It places NPN immediately into production, with a core operations crew in the neighborhood of the proposed developments on the Papekop, Ottoland, Brakel and Andel VI fields as well as the applied for Utrecht exploration license.
"I am also pleased that we have gained as a partner, Essent, one of the larger utility companies in The Netherlands. Essent has valuable experience in gas marketing and salt cavern gas storage.
"Finally, there is a potential oil project on an operational production site on an existing production license."
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