Noreco Rides High on Record Revenue, Production Levels in 3Q
Noreco reached record levels both in revenue, oil production and results in 3Q 2008. EBITDA was NOK 580 million. Net result after finance and tax was NOK 135 million, which is more than triple the net results of 2Q.
"We are very pleased with the Company's development. Our oil production has reached record levels and is increasing, eight out of nine exploration wells have been successful and our operating revenues have more than doubled in the past 12 months. The EBITDA and net results in the 3rd quarter were the strongest in the Company's history," said CEO Scott Kerr.
Increased Production Guidance
Noreco is the second largest oil producer listed on the Oslo Stock Exchange. The Company's average daily production in the third quarter of 2008 was 15,400 barrels of oil equivalents per day (boed). The production in the fourth quarter is expected to be in excess of 14,000 boed, and as a consequence Noreco is increasing the production guidance for the full year 2008 to 12,750 boed.
Strong Cash Flow
Noreco has had a strong cash flow the past few months due to high production combined with stable performance and oil prices still at a high level. The Company had more than a billion NOK in cash by the start of 3Q. The cash balance has increased during 3Q, despite the fact that Noreco has financed all exploration activity with equity, reduced the reserve based debt with NOK 223 million, made semi-annual bond coupon payments and made significant investments on the fields.
Solid Financial Position
Noreco has a solid financial position. The Company has secured a major part of the after tax expected production volume against oil prices below US $75 until 2011. Cash, existing borrowing facilities and the high cash flow from Noreco's production will finance all operations, investments and developments through to 2010.
"In addition we believe that significant value can be generated through inorganic activities. We will continue to manage our portfolio, and are in the process of selling some of the development projects in our portfolio. Our balance sheet is improving every day, and the planned asset sales will further enhance our flexibility," said Kerr.
Noreco has implemented several measures to reduce financial leverage and interest cost in 2008. Yesterday, Noreco yesterday announced a proposal for an early redemption of NOK 560 million of bonds. The Company will continue to enhance the capital structure of the Group.
Operations on Track
Noreco's operational activities are progressing well. On the Huntington field, the partners are adjusting the plans due to two wells being drilled on the neighbouring block 22/14A. There is a high probability that these wells will prove the Huntington field to be larger than assumed. The partners still expect production to start in 2010, but selection of development solution will be moved to 1Q 2009 so that all important facts are available before the final decision is made.
"We will soon know if the Huntington field extends into the 22/14A block and we are planning for that scenario. In fact, we think that any discovery of oil in the Huntington area is great news for the Huntington development as it will make for a even more economic development, longer field life and give lower cost per produced barrel of oil," concluded Scott Kerr.
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