Northern Updates Financial, Operational Status
Northern Petroleum Plc is pleased to provide an update on its activities.
Revenues from the Group's rising gas production levels are being further enhanced by a continuing improvement in Dutch gas prices, between €0.221 to €0.240 per normal cubic metre, or approximately $7.94-$8.62 per thousand cubic feet ("mscf") being achieved in November 2010.
The Board of Northern Petroleum Nederland B.V. ("NPN") has temporarily put on hold discussion of a reserve based loan with its preferred lead arranger, a major European bank. It is anticipated that discussions on a production based facility better suited to both NPN and the Group's needs will re-commence in the New Year following start up of production at Wijk en Aalburg.
The Group remains debt free and had a cash balance of approximately €22.5 million as of 1st December 2010. The bulk of expenditure since mid year, when the Group's cash balance was €25.8m, has been spent towards bringing Brakel and Wijk en Aalburg into production.
The development of the Wijk en Aalburg (NPN 45%) gas field is on schedule to commence production in Q1 2011. A gross initial production rate of 150,000nm³/day (5.58 million standard cubic feet "mmscfd") is projected (433 barrel of oil equivalence ("boepd") net to Northern). Wijk en Aalburg will be the fourth gas field developed by Northern as part of the 2005 deal with NAM, the joint Shell-ExxonMobil company. When production from Wijk en Aalburg is on-stream, and is added to the four operated and one non-operated gas fields already in production, The Netherlands' daily production rate net to Northern is forecast to be 2,200-2,300 boepd. This will be augmented by condensates produced at the Waalwijk, Brakel (NPN 45%) and Geesbrug (NPN 45%) fields.
The operations for the hydraulic fracturing and testing of the Tiendeveen-1 exploration well have commenced.
The Grolloo-1 (NPN 45%) well work-over has been completed and the field came back on stream on 17th November 2010.
Planning for the proposed multi-well development of the Geesbrug gas field has commenced for the first of the new higher angle wells that will have multiple hydraulic fractures, and is planned to be drilled from the existing drill site in 2011. The remainder would be completed as planning issues permit over the next 3-4 years.
Northern is proceeding with regulatory and planning applications required to drill in 2011the North Ottoland prospect in the Utrecht (NPN 60%) licence, which will test and potentially develop a contingent gas resource of 1268 million Nm³ (47 billion normal cubic metre ("bcf").
The production test of the Ottoland (NPN 45%) oil well awaits planning approvals but is scheduled for 2011. Development design will be initiated following the test results.
It is expected that the drilling and testing of a new development well in the Papekop (NPN 45%) oil field will also take place in 2011. Preparatory work continues as planning aspects related to traffic and road construction issues are being resolved.
Reprocessing and then re-interpreting of the 3D seismic data over the Andel III (45%), Drenthe III (45%), Oosterwolde (60%), Engelen (60%), Utrecht and Papekop licences is underway. This work is necessary to confirm future development well locations and exploration prospects for drilling in 2012 and beyond.
As previously reported, the legislation banning most of the drilling within up to 12 nautical miles off the coast, and not deepwater drilling as has been incorrectly reported elsewhere, has had only a small effect on the Company's assets. Most of Northern's permits and applications are in deeper water and further offshore. Unlike several other companies Northern does not expect this new legislation to impact upon its reported reserves or materially affect its two key core areas of the Southern Adriatic and Thrust and Fold Belt offshore west of Sicily.
In the Thrust and Fold Belt core area offshore Sicily, alongside joint venture partner Shell Italia, the (1520km²) 3D seismic evaluation continues with a decision to drill required before the end of Q1 2011.
The farm-out of the La Tosca Prospect (Longastrino licence) in 2011 with Orca Exploration Group Inc. has been announced and the well is scheduled to drill in 2011. The La Tosca prospect is estimated by Northern to have 45 billion cubic feet ("bcf") of gross mean prospective resource and will target an upside of 85 billion cubic feet gross prospective resource of gas.
The Markwells Wood -1 (Northern 50%) well was spudded on the 21st November 2010. As at on 13th December the directional drilling of the 12 1/4" hole and the electric logging programme had been successfully completed. The rig is currently preparing to run the 9 5/8" casing.
As advised by the Operator Tullow, the anticipated timing for drilling of the first well, Zaedyus, remains the first quarter of 2011. Ensco plc (NYSE: ESV) announced on 1st December that one of its subsidiaries had sublet the ENSCO 8503 to the Tullow led joint venture, a new ultra-deepwater semisubmersible drilling rig that recently mobilised to the U.S. Gulf of Mexico. ENSCO 8503 is scheduled to begin sea trials shortly.
Shell France has taken up an option to increase its interest in the licence to 45%, with Tullow consequently reducing its interest to 27.5%. Total remains at a 25% interest with Northern having a net beneficial 1.25% interest.
Derek Musgrove, Managing Director, commented:
"The Company is establishing higher gas production levels in The Netherlands at a time of higher gas prices being realised. This supports our strong balance sheet. It is clear that the Company has improved in strength during 2010. We must now build upon this base.
One important challenge is to drill and realise the very large potential of some of our projects offshore Italy. In the short term those are the Thrust and Fold Belt permits where we are operating with Shell Italia, CR146 with an internally estimated billion barrels plus sized prospect and CR147 which our exploration team consider has been made more attractive by the Lambouka discovery recently announced by ADX Energy in nearby Tunisian waters. The farmout processes for both CR146 and CR147 continue."