20 Feb 2012 07:30
Northern Petroleum Plc ("Northern" or "the Company" (AIM:NOP) ) 2011 UPDATE
Northern Petroleum is pleased to announce that in 2011 it produced at a daily production rate of 1582 boepd, up 31% upon 2010 and delivering upon the forecast of 1550-1650 boepd announced in the 2010 Annual Report. The average unit gas price received during 2011 in The Netherlands was €0.264 per normal cubic metre (approximately $9.2 per mcf using the end 2011 exchange rate). The cash on hand at 31st December 2011 was €29.6 million, an increase of €8.2 (38%) over the prior year.
OUTLINE OF STRATEGY FOR 2012
2012 activities will be directed towards
• Production increasing activities in The Netherlands
• Rapid follow up drilling and extension of seismic coverage after the 2011 oil discovery offshore Guyane
• Reaching agreement with new partners to provide the finance for drilling offshore Italy and conduct exploration operations in the southern part of the Adriatic Sea now that Eni are moving to produce oil in the area
• Moving forward on the shale oil project in the West Netherlands Basin after encouragement from initial evaluation reports
• Portfolio restructuring
2012 PROVISIONAL FORECAST
Activities are being planned to counter the natural decline in production from existing wells and then to increase production across the Company's licences in The Netherlands. The Company will act to achieve this through a comprehensive programme of intervention including installing compression, lifting assistance and possible re-perforation. Additionally, plans are currently being finalised for drilling of a second production well at Geesbrug and possible sidetracks at Brakel and Wijk en Aalburg. The costs of all of these activities net to the Company are estimated at less than €10 million.
The Group's guidance on first half of 2012 production is a forecasted base line production before those interventions of approximately 1040 boepd, (almost all from the six producing gas fields in The Netherlands). The effects of the anticipated new work programmes will mainly show results in the second half of the year. As Shareholders will be aware, those activities are always subject to partner and State Department of Mines approvals which will largely determine the timing and therefore the second half 2012 production forecast.
THE NETHERLANDS
In late 2011 a successful production test was conducted at the Ottoland oil field after approval had been received for utilisation of a jet pump. The Company is in the process of assessing the test data with a view to progressing rapidly with the design, approval and enactment of a scheme of field development.
In 2011 Northern commissioned NuTech Energy Alliance ("NuTech"), a consultancy based in Houston, Texas, to undertake studies as to the unconventional potential of a shale present across the areas licensed by Northern in the West Netherlands Basin. This initial study was highly encouraging as has been a further study completed in January 2012 advising that there is a gross resources oil potential of 20-30 billion barrels. There is as yet considerable uncertainty as to estimates of recovery rates from this formation and can only be addressed through tentative analogies with shale formations under extraction in the USA even though, at this stage of investigation, the NuTech studies reached a conclusion that the shale in the Company's licensed area had better productivity potential. Northern anticipates that further works will be carried out on the quality of this shale and to determine a more certain assessment of the economic potential.
Planning to undertake further exploration and development drilling activities is ongoing. These potential projects include development drilling at Papekop for oil and gas production and exploration wells in the Utrecht licence and in the Drenthe III licence.
GUYANE
2011 saw the widely reported success of the Zaedyus exploration well, the first deepwater well offshore Guyane. Northern holds a 1.25% interest, (via its 50% interest in Northpet Investments Ltd), alongside Shell, Total and Tullow. In rapid response to the Zaedyus oil discovery the drilling of further wells in this new highly prospective area in 2012 and extending into 2013 is being planned. Further 3D seismic acquisition programmes have been planned for 2012 in order that more fan systems whose presence within this 24,100 km² licence has been projected to the North West and South East of the Zaedyus well area, may be mapped and potentially drilled.
ITALY
Preparations are being made to spud the La Tosca well in the eastern Po Valley region of northern Italy. The La Tosca prospect is in the Longastrino permit and Northern has used modern 3D seismic to define a prospect with 40-45 billion cubic feet attributed gross mean prospective gas resources. The prospect at its closest is less than 2km from the large but now depleted Alfonsine gas field which is being redeveloped for use as an underground gas storage facility. A rig contractor has been selected and the well is scheduled to spud in April 2012.
Works are continuing to prepare for drilling our substantial position offshore of Italy in four core areas. The licences are at different stages of progression and several are the subject of current farmout discussions to finance seismic and drilling activities.
In the southern Adriatic Sea the Company completed a 2D seismic survey in late 2011 and has contracted to acquire two 3D seismic surveys on permits F.R39.NP and F.R40.NP, subject to environmental consents. The area is recognised by Northern to be of high potential for the production of both oil and gas with 2P reserves having been independently attributed to the Giove and Rovesti oil discoveries. This view is perhaps reinforced by the recent on-site activities to place the nearby Aquila oil field back into production using a newly converted Floating Production and Storage Offloading vessels (F.P.S.O) facility.
UK
In the UK, the Company will continue to receive revenue from its interests in the Horndean (10%) and Avington (5%) fields operated by IGas Energy Plc. Northern's forecasted share of production in 2012 from these oil fields is 15 bopd.
Long term oil production testing is ongoing at the Markwells Wood site. In the event of a successful test and subject to planning consents Northern will install simple production facilities, increasing Northern's production profile in the region. In addition, the Company is currently awaiting proposals from Providence Resources plc for the new drilling of the Baxters Copse oil discovery, potentially from the Singleton oil field production site. If successful the well could be placed rapidly on production utilising the existing production facilities.
Recently, the Energy Minister, Charles Henry, announced the long awaited award of part blocks 98/3 and 98/4 off the southwest coast of the Isle of Wight. A significant size gas prospect has been identified and is ready for drilling, which would be from an onshore location within licence PEDL 240 which is held by the same joint venture group of companies. The Company is assessing options for future exploration in this area.
Derek Musgrove, Managing Director of Northern Petroleum, stated:
"Northern is embarking upon a busy year across our portfolio and activities are expanding newer arenas of deepwater drilling offshore Guyane in following up the new basin oil discovery of 2011 and a rapid and fuller examination of the very encouraging shale oil potential on our licences in the Netherlands. We continue to work on our existing production wells and are looking to drill new wells on a number of discoveries and prospects in order to realise some of the large upside potential in the Company's portfolio. In the UK, long term testing continues at the Markwells Wood well to determine the potential production profile to complement existing UK production rates."
"In Italy we are drilling the La Tosca well in the Po Valley, targeting a gas accumulation of which we should have results from during the second half of the year. Following the success of the Zaedyus well offshore Guyane, we look forward to more exploratory work during 2012 as the partnership seeks to continue to de-risk the licence area."
"The management of the Company are hoping to achieve a new material farmout to move the activities forward to drilling important wells. Staff are being recruited towards those ends."
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 35 years experience as a petroleum geologist. He has compiled, read and approved the technical disclosure in this regulatory announcement. The technical disclosure in this announcement complies with the SPE/WPC standard.
For further information please contact:
Northern Petroleum Plc Tel: +44 (0)20 7469 2900
Derek Musgrove, Managing Director
Chris Foss, Finance Director
Graham Heard, Exploration and Technical Director Tel: +44 (0)20 7469 2900
Cenkos Securities (NOMAD and Joint Broker)
Jon Fitzpatrick Tel: +44 (0) 20 7397 8900
Ken Fleming / Beth McKiernan Tel: +44 (0) 131 220 6939
Westhouse Securities (Joint Broker) Tel: +44 (0) 20 7601 6100
Richard Baty / Petre Norton - Corporate Finance
Sanjiv Pandya - Corporate Broking
FTI Consulting Tel: +44 (0) 20 7831 3113
Billy Clegg / Edward Westropp
Bishopsgate Communications Tel: +44 (0) 20 7562 3350
Nick Rome / Shabnam Bashir
Notes to Editors:
Northern is a full cycle oil and gas company, currently holds over 50 licences in a number of low risk areas and continues with its strategy of adding and securing value for shareholders as it engages with projects at all stages of the E&P value chain.
Comprehensive information on Northern and its oil and gas operations, including all press releases, annual reports and interim reports are available from Northern's website at www.northpet.com.
XLON