Northern Signs Finance Deal with ATI
Northern announces that it has signed a Heads of Agreement with ATI Oil Plc ('ATI') such that Northern shall provide a finance facility of up to £1,750,000 to ATI, secured over certain of ATI's assets. All funds drawn down under the terms of the facility will be repayable to Northern in full on 30 November 2007 in the event that they are not repaid before that date.
In return for providing this facility, Northern, in addition to receiving fees and interest, has been granted options to farm into, and thereby earn an additional interest in up to seven offshore blocks in which ATI has an interest. These options expire three months after the cancellation of the facility by either party.
This facility has been put in place to provide ATI with additional working capital and sufficient funds to further exploit the significant potential of its Italian oil and gas assets.
The facility will enable an offshore seismic survey to commence in November 2006. This survey is essential to advance ATI's exploration efforts in a timely manner and enhance the value of Northern's joint interest in five licenses:
G.R17.NP, G.R18.NP and G.R19.NP (2156 km²)
These licenses cover an exploration play comprising the projected extension of the highly productive Southern Apennine thrust belt through to the west of Sicily and extending onwards into Tunisian waters where Shell has recently farmed into a large license position held by Anadarko and Petro-Canada and thereafter into Algeria.
In the main the area was previously licensed in the period 1984-1989, a time of declining oil prices, since when seismic, drilling and field development technologies have improved dramatically as has the price of oil. The previous licensees, Agip/Shell and Gulf, mapped over twenty prospects or leads of significant magnitude as to warrant follow-up using the technologies of today.
Seismic reprocessing has improved the image quality of the older data covering the west of Sicily thrust belt on the G.R17.NP, G.R18.NP and G.R19.NP licenses. We are therefore confident that the acquisition of a new seismic survey treated with modern processing methods will clarify the structural complexity of this area, and we are hoping to uncover oil prospects not dissimilar in size and nature to Agip and Shell's Val d'Agri complex on trend in southern Italy.
The new 540km 2D survey is to be acquired across the three north-westernmost permits to infill the existing seismic grid and upgrade the leads and prospects already identified. Once acquisition and processing of these data are complete, they will be interpreted and integrated into a regional geological model prior to selection of drilling locations being planned for 2008.
LICENSE C.R146.NP (620 km²)
Reprocessed seismic data on C.R146.NP has together with petrophysical interpretation of well data confirmed the previously recognized significant prospect potential of the license. Of particular interest is the presence of the carbonate platform edge extending from the Vega field into the permit. One prospect and three leads have been identified. Three were previously assessed in the 1980s as having potential recoverable oil contents of 100 million, 70 million and 30 million barrels.
We are confident that new seismic acquisition and processing with modern techniques will result in the clearer structural images that have in the past eluded previous campaigns in this area. 500km 2D seismic data is to be acquired. This will be interpreted and integrated with all existing well and seismic data to mature one or more locations for drilling starting in late 2007.
LICENSE C.R147.NP (637 km²)
Whilst the prospectivity has been enhanced by reprocessing of the existing seismic data, it is expected that the prospects previously recognized will be better defined by new seismic of a modern quality. A 200km 2D acquisition program is planned as part of the seismic survey, which we expect will enable us to clarify prospects within the Miocene sand/carbonate fairway, on trend with producing fields in the Tunisian Gulf of Hammamet beyond the area where Grove Energy have announced intentions to drill two wells on their licenses in Italian waters.
Once acquired and processed, these data will be interpreted and integrated with all existing well and seismic data to mature a location for possible drilling in 2008.
Richard Latham, Chairman of Northern, commented,
"This facility provides ATI with the ammunition to advance our joint projects in Italy where we feel that there are great opportunities to enhance the value of our assets. Italy is the third largest producer of oil and gas in Europe and, as the country's second largest license holder by area, it represents an important part Northern Petroleum's European prospects."
Relationship between Northern and ATI
Northern has a 38% shareholding in ATI and Derek Musgrove and Chris Foss,
directors of Northern, are also directors of ATI. The Directors of Northern who
are independent of ATI, having consulted with Northern's nominated adviser,
Investec, consider the provision and terms of the facility are fair and
reasonable insofar as Northern's shareholders are concerned.
Operates 30 Offshore Rigs
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