North Energy quits NCS efforts

North Energy has decided to divest the last of its Norwegian Continental Shelf (NCS) assets in order to recover from offshore tax losses amid low activity levels in the area, and the drop in oil prices.

Map of PL 805, from North Energy.

The company’s subsidiary, North E&P, signed a deal with Lundin Norway to sell its 40% stake in production license (PL) 805.

The agreement, which is conditional upon the approval by the Norwegian authorities, will leave North E&P with no further licenses on the NCS.

Lundin is operator of PL 805 with 40% stake. Should the deal be approved, Lundin will hold 80% stake in the license, with partner Petoro (20%). PL 805 consists of Blocks 7120/2, 7120/3, and 7121/1, at a total area of about 350sq km.

The decision came today (7 July), following a North Energy board meeting in which members decided to discontinue the petroleum activities in its subsidiary North E&P and to seek cash reimbursement of the company's offshore tax losses, says North Energy.

"The business model for small exploration companies has in recent years been challenged by the significant drop in the oil price. The activity level on the NCS has come down, and many players have withdrawn from exploration. With no clear signs of improved market fundamentals, the Board of North Energy believes that it is now in the best interest of the company's shareholders that North E&P exits its petroleum activities on the NCS," says Chairman of the Board Anders Onarheim. 

As of Q1 2017, the net cash position of North E&P was approximately US$29.3 million (NOK 245 million).

According to North Energy, the final proceeds received from the liquidation of North E&P will depend on closing costs, as well as a final assessment by the Norwegian Oil Taxation Office.

In addition to the activities being conducted from North E&P, North Energy also includes a number of investments outside exploration on the NCS, which in the consolidated accounts per Q1 2017 were valued to $13.6 million (NOK 114 million). These investments will not be affected by the discontinuation of the petroleum activities of North E&P, says the company.