Corporate Review and New Assets

NORTHERN PETROLEUM PLC - Corporate Review and New Assets

PR Newswire

London, March 18

Northern Petroleum Plc (AIM: NOP) has for some time recognised the continuedimpact of the European regulatory environment and its effect in slowingcorporate growth for operators in the oil and gas sector. In 2012 Northern tookthe decision to identify a low entry-cost production or redevelopment projectwith sufficient material upside to yield production revenues with a short leadtime and provide the conditions for more active operations and faster growth.

Accordingly, Northern is pleased to announce that it has initiated a new lightoil production redevelopment project in northern Alberta. To date over 5,300acres have been acquired with the estimated potential to yield in excess of afurther one million barrels of extra production from an estimated original 36million barrels of oil in place. The leased area contains 22 abandoned wells,with 11 candidates currently identified as being capable of re-entry forfurther production. All the leases are concentrated in one area and have beenacquired as the result of successful bidding at Alberta Crown lands sales. Itis expected that further leases will be added in the near future, after whichgreater detail will be provided on Northern's plans for the development of theproject. Once Canada was determined as an attractive new country entry for thistype of asset an experienced team was contracted.

Northern initiated an internal review of its Netherlands asset portfolio at thestart of 2012, involving reprocessing existing seismic and remodelling ofproduction from existing fields and the larger exploration prospects. This workis ongoing and completion expected by the end of the first half of the year sothere is still uncertainty around the final results from this review. Thecritical factors are the relatively low porosity and permeability aspects ofthe reservoir formations, the uncertainties in projection of gas to watercontacts and the potential lower efficiencies of extraction of gas from smallfields in such rocks. The result is that the new estimates of certain keyparameters indicate that some recoverable gas volumes should be moved from thereserve category into the contingent resource category, to prudently reflectthis uncertainty. Accordingly the Company has reduced its proven and probablereserves in the Netherlands, as calculated at the end of 2012, to 12.2 millionbarrels of oil equivalent. The reduction in reserves is approximately 30 percent.

It is known that the Company's business strategy centres upon adding value anda willingness to trade. This means that the future of production anddevelopment operations in The Netherlands and the UK has always been underreview. In the past year a number of expressions of interest have been made topurchase these assets. The Company has held extensive negotiations with twoparties in exploring ways to achieve the greatest value for shareholders fromthe Company's Netherlands position. Substantial technical analysis has beenundertaken by both of those parties and these discussions have now led to twonon-binding indicative offers for the UK holding company of the Netherlandssubsidiary and one such offer includes the UK assets. The party with the moreattractive offer has requested that at this stage prices in the package not bedisclosed until a binding agreement is reached. The offers are not directlycomparable and while they both contain an initial substantial cash payment,they involve different packages of assets. The Company must stress that theseoffers are indicative at this stage and the Board hopes to draw the discussionsto a conclusion to the best possible outcome for shareholders within the secondquarter of this year.

The Board continues to recognise that the Netherlands assets maintain asignificant net present value to the Company. The third party approachessupport this view. This is partly driven by a strong price obtained for gassales (average price achieved in 2012 was approximately US$10 per thousandstandard cubic feet) and the now steady production levels. The 2012 averageattributable production rate for Northern, including the UK contribution, was886 barrels of oil equivalent per day, which is currently projected to be at asimilar level in 2013.

Turning to exploration; in Italy, Northern is today announcing the upgrading ofthe Cygnus prospect and that following their supportive technical work,independent consultants have been asked to estimate a monetary value for theproject. The decision has been taken by the Company to concentrate offshorewith its potential for quicker operations than onshore. Furthermore, the Boardare much encouraged by the news that a National Energy Strategy was signed inItaly by the Ministers of Economic Development and Environment on 8th March2013. This strategy outlines the steps that Italy should take over the next fewdecades in order to secure energy supply whilst improving environmentalstandards. The strategy is divided into seven sections and Northern areparticularly pleased that one of these sections focuses on the doubling ofdomestic hydrocarbon production.

The late 2011 drilling success offshore of French Guiana and the rapiddeployment of the current four well follow-up exploration drilling programme in2012 has been noted. Northern, with appropriate extra professional expertise,initiated a wide review process to identify analogous explorationopportunities, attainable at low entry cost and in suitable countries to followup on our exploration success. After a screening process based on both geologyand conformity to Northern's strategy, three new areas are currently beingpursued with active or prospective applications, each in countries seeminglyoffering a fast deployment capability. Together with Italy and French Guiana itis expected that these areas will allow Northern to undertake an activeexploration programme of several wells every year, each with the potentialimpact to materially increase the value of the company.

Northern has also received expressions of interest in its reportedly highquality shale oil potential in the southwest of The Netherlands. Based upon thepreviously announced NuTech report, discussions of a preliminary nature havebeen initiated by a number of companies with experience in US shale gas andshale oil operations. Northern's understanding of such operations has beengreatly enhanced and an application for a licence covering a shale oil projecthas been initiated within the normal parameters of entry cost, controlledcommitments and country risks.

Derek Musgrove, Managing Director of Northern, stated:

"These new moves are part of the continued implementation of the basic strategyof the Company. They conform to the requirements of a low acquisition cost, thepotential addition of material value and consideration of full or partialdisposals to finance growth and continuance of activities over the longer term.The Company's record has been one of successful deployment of that strategy.Flexibility, openness to trading and change are fundamental to our businessplan within our chosen niche in the oil sector.

It is a simple understanding that the faster the cycle of investment andreturn, the greater the corporate growth rate. I know that the Board and allShareholders have been disappointed by the pace of progress caused bybureaucracy and restrictions of process. However, I am sure that these newmoves will increase activity and aid growth in a timely manner to the benefitof shareholder value."

In accordance with the AIM Rules - Guidance for Mining and Oil & Gas Companies,the information contained in this announcement has been reviewed and signed offby the Exploration and Technical Director of Northern, Mr. Graham Heard CGeol.FGS, who has over 35 years experience as a petroleum geologist. He hascompiled, read and approved the technical disclosure in this regulatoryannouncement. The technical disclosure in this announcement complies with theSPE/WPC standard.

For further information please contact:

Northern Petroleum Plc Tel: +44 (0)20 7469 2900

Derek Musgrove, Managing Director

Graham Heard, Exploration and Technical Director

Westhouse Securities (Nomad and Broker) Tel: +44 (0)20 7601 6100

Richard Baty/Petre Norton - Corporate Finance

Ian Napier - Corporate Broking

FTI Consulting Tel: +44 (0)20 7831 3113

Billy Clegg/ Victoria Huxster

Bishopsgate Communications Tel: +44 (0)20 7562 3350

Nick Rome

Notes to Editors:

Northern is a full cycle oil and gas company currently holding numerouslicences in a number of low risk areas and is continuing with its strategy ofadding and securing value for shareholders as it engages with projects at allstages of the E&P value chain.

Comprehensive information on Northern and its oil and gas operations, includingall press releases, annual reports and interim reports are available from theCompany's website at www.northpet.com.