2 Apr 2008 07:00
Embargoed for release: 0700 on 02 April 2008 Northern Petroleum Plc ("Northern" or "the Company")
Northern (AIM:NOP) is an oil and gas production, development, exploration and asset trading company with a political exposure limited to countries in the European Union.
Operations Update
Following completion of the profitable sale of reserves, proprietary data and know-how to Dyas B.V. for a consideration of ¢â€š¬41million whilst still achieving a 26.5% increase year on year in independently assessed proven and probable reserves to the level of 76.5 million barrels of oil equivalence, Northern has continued to develop its operations throughout Italy, The Netherlands and the UK, where as Operator it is planning eight appraisal and exploration wells and planning to develop eight oil and gas fields.
Northern's 2007 year end reserve statement is detailed at the foot of this announcement.
THE NETHERLANDS
Front End Engineering Design ("FEED") studies for all six oil and gas field developments have been completed with the tender packages issued for long lead items.
Sites are being negotiated and planning permission sought to drill exploration wells on the Nieuwendijk prospect (Andel III licence), with a mean estimated of 56 million barrels of oil in place, and the Tiendeveen prospect (Drenthe III licence), with a mean estimated of 67 bcf of gas plus condensates in place.
Negotiations for a rig slots for drilling at Papekop, Nieuwendijk and Tiendeveen are advanced and await final planning consents for the sites. The other five oil and gas field developments will not require the use of a drilling rig.
ITALY
A drilling application has been submitted for an exploration well targeting a mean estimated 220 bcf of gas in place on the Savio licence and subject to governmental consents an exploration well is expected to be drilled in Q3 2008 with the drilling rig and critical long lead items now sourced.
Sites are being sought for exploration wells targeting a mean estimated 65 bcf and 73 bcf of gas in place on the Longastrino and Cerasa licences respectively for drilling in 2008 or 2009.
Negotiations are ongoing with potential downstream parties to progress the appraisal and development of the Rovesti and Giove oil fields in the southern Adriatic and the projects in the Po Valley.
Partners are being sought for exploration wells on the C.R146.NP and C.R147.NP licences offshore Sicily.
UK
At Avington the Planning Application for the Field Development Plan is with Hampshire County Council. It is expected that a decision will be received in Q2 or Q3 2008. Long term production could commence shortly after receipt of the approvals.
The application for the Markwell's Wood drilling location to appraise a mapped extension of the Horndean oil field in PEDL 126 is currently with the West Sussex planning department and a decision is expected in Q2 2008.
Sites are being sought for wells to appraise the Hedge End-1 oil discovery in PEDL 125 and for an exploration well in PEDL 099 or PEDL 155 on a structure that straddles the boundary of the two blocks.
GUYANE (Non Operator)
The Operator, Tullow Oil PLC, is targeting drilling the Matamata prospect during the second half of 2008.
COMMENTARY
For the six Netherlands field developments Northern has finished all works required for all planning consents, completed all the FEED studies, sourced, gone out to tender and is in the process of purchasing critical long lead time items, and examined the cost reduction potential for high value items.
In recent months time has permitted further evaluation of some project development alternatives, some of these in conjunction with partners and operators of nearby installations. This has allowed us to develop an alternative development scheme for Geesbrug, the largest of the gas field developments that we are undertaking, to examine the potential to utilise another operators facilities, at least until the Tiendeveen exploration well is drilled and tested within the next twelve months. This could add greatly to the gross gas reserve to be produced in the immediate area and some much welcomed savings of capital costs could meet a large part of the new well costs.
The transactions with Dyas B.V., which substantially augmented the cash available, have meant that developing new production revenues in Italy could be accommodated without prejudice to pursuance of field development and the wider activities in Netherlands and the UK. This has allowed Northern to plan the drilling of three wells onshore Italy, three wells in the UK and two exploration wells in the Netherlands within the strictures of self imposed financial prudence.
The potential of Northern's core area in the southern Adriatic Sea has continued to grow and is justifiably the subject of negotiations with third parties with an emphasis on the progressing towards the appraisal and development of the 53.2 million barrels, (Northern: 36.5 million barrels net beneficial interest) of probable reserves at Rovesti and Giove and drilling of the first of several of the large paleo-slope margin structures positioned between the proven Aquila and Giove oil trends.
The Company also anticipates with eagerness the results from drilling of the first well on the Savio licence in the Po Valley testing a structure in the same formation as the nearby ENI and Grove Energy gas field discovery.
Back in the UK in the oil producing Weald Basin in West Sussex and Hampshire, Northern is targeting the long awaited appraisal drilling of the mapped extension of the producing Horndean oilfield in which it is already a participant and the drilling of a long established prospect that was first mapped under a local town in 1985 and now can be reached well within the range of modern deviated drilling practices.
Appraisal drilling of the 1988 Hedge End oil discovery is again being planned. The first effort met strong local environmental resistance on a site that has subsequently been put forward for new housing. A new location is under discussion with a local enterprise and the use of reservoir temperature liquids to provide long term renewable heating considered.
In accordance with the AIM Rules - Guidance for Mining and Oil & Gas Companies, the information contained in this announcement has been reviewed and signed off by the Exploration and Technical Director of Northern, Mr Graham Heard CGeol FGS, who has over 30 years experience as a petroleum geologist.
For further information please contact:
Northern Petroleum Plc
Derek Musgrove, Managing DirectorChris Foss, Finance DirectorGraham Heard, Exploration and Technical DirectorTel: +44 (0)20 7469 2900
Investec
Michael Ansell / Patrick RobbTel: +44 (0) 20 7597 5000PanmureGordon & CoKatherine Roe / Ashton ClanfieldTel: +44 (0)20 7459 3600BishopsgateCommunications LimitedMaxine Barnes/ Nick RomeTel: +44 (0) 20 7562 3350 Notes to Editors:
Unaudited Statement of Net Commercial Oil and Gas Reserve Quantities - Proven and Probable Reserves for the year ended 31 December 2007
Volumes - Group Total Oil Gas Petroleum Million Million bbl bcf boe At 31 December 2006 18.70 242.60 60.53 Changes during the year: Acquisitions (note 4,5) - 20.21 3.48 Extensions, discoveries and other additions 26.61 - 26.61 (note 6) Production (0.01) (0.88) (0.16) Disposals (3.45) (60.65) (13.91) At 31 December 2007 41.85 201.28 76.55
Volumes and categorisation by location - Group
Total Oil Gas Petroleum Million Million bbl bcf boe At 31 December 2007: Proven reserves 7.44 114.85 27.14 Probable reserves 34.41 86.43 49.41 41.85 201.28 76.55 At 31 December 2006: Proven reserves 9.27 146.10 34.46 Probable reserves 9.43 96.50 26.07 18.70 242.60 60.53 United Kingdom Netherlands Italy Oil Gas Petroleum Oil Gas Petroleum Oil Gas Petroleum Million Million Million Million Million Million bbl bcf boe bbl bcf boe bbl bcf boe At 31 December 2007: Proven reserves 1.56 - 1.56 5.78 114.85 25.58 - - - Probable reserves 2.93 - 2.93 4.97 86.43 19.87 26.61 - 26.61 4.49 - 4.49 10.75 201.28 45.45 26.61 - 26.61 At 31 December 2006: Proven reserves 1.57 - 1.57 7.70 146.10 32.89 - - - Probable reserves 2.93 - 2.93 6.50 96.50 23.14 - - - 4.50 - 4.50 14.20 242.60 56.03 - - - Notes
1. The Reserve estimates shown in this report are based upon the joint reserve and resource definitions of the Society of Petroleum Engineers, the World Petroleum Congress, and the American Association of Petroleum Geologists.
2. Proven and probable reserves in the UK represent the Group's reserves as previously determined by ECL in April 2005, and subsequently reconfirmed in June 2006, in an independent valuation of some of the Group's oil and gas assets in the Weald Basin. Further information is given in note 12 to the 2006 Report & Accounts.
3. Proven and probable reserves in the Netherlands represent the Group's reserves as determined by RPS Energy in an independent valuation of some of the Group's oil and gas assets in that country in March 2006. Further information is given in notes 13 and 29 to the 2006 Report & Accounts. These reserves were originally acquired as a result of the Group's agreements with NAM and through its application for the Papekop production licence, which was awarded on 7 June 2006. Net reserves make the assumption of Dutch State participation of 40% in all the NAM projects. The reserves in the Netherlands which are held as a result of the Group's agreements with NAM are subject to a 50% net profit interest after payback of 130% of the Group's capital costs. The Papekop production licence is subject to a 1% gross overriding royalty over the Group's interest.
4. Waalwijk proven reserves as determined by previous operator. Probable reserves are Northern Petroleum estimates.
5. P12 reserves as determined by current operator's estimates.
6. Proven and probable reserves in Italy represent the Group's reserves as determined by Blackwatch Petroleum Services in independent valuations of some of the Group's oil and gas assets in that country during the fourth quarter of 2007.
7. Quantities of oil equivalent are calculated using a gas-to-oil conversion factor of 5,800 scf of gas per boe.
NORTHERN PETROLEUM PLC