Denmark: Noreco Sells its Interests in Siri Field to DONG Energy

Norwegian Energy Company (Noreco) has entered into an agreement to sell its interests in the Siri field in Denmark to DONG Energy.

The agreement involves Noreco’s 50 percent interest in license 6/95 in Denmark, and the price is USD 13 million with effective date 1 July 2011. Noreco’s ownership in Siri’s satellite fields Nini East, Nini and Cecilie remains unchanged and unaffected. As part of the agreement Noreco will not carry any historical or future costs related to the permanent repair solution for the Siri field. These costs have been estimated to be DKK 2 billion in total.

Noreco retains until 30 August the right to sell its interests in Siri to other parties at a higher price. Noreco also retains all existing and future insurance claims relating to the damage to the caisson support structure of the Siri platform, as well as tax balances in Altinex Oil Denmark of USD 26 million. The transaction is subject to customary approval by Danish authorities.

“This agreement is positive for Noreco because it removes the inherent uncertainty around the Siri situation. We now know that Noreco will not take part in the future investments on Siri. We also know that the operator DONG Energy will take all necessary steps to secure continued operations on Siri, which will benefit Noreco as a partner in the satellite fields Nini East, Nini and Cecilie,” says Einar Gjelsvik, CEO in Noreco.

If Noreco does not sell its interests in Siri to other parties, the transaction is expected to be completed in the third quarter 2011, and is then expected to have a negative impact on the third quarter 2011 result in the order of USD 60 million after tax.

Noreco currently has a strong cash position. Following this transaction and its impact on Noreco’s covenants and borrowing base, the company will continue to improve its long-term financing, and will as part of this also consider further asset sales.

The Siri field is located in the Danish part of the North Sea, and oil production started in 1999. The Siri platform is also processing and exporting oil from the satellite fields Nini East, Nini and Cecilie. DONG Energy is the operator for all four fields. Noreco’s share of remaining oil reserves in the Siri field was 5.8 million barrels at the end of last year. During the first half of 2011, Noreco’s share of production from the Siri field has been 1,764 barrels per day on average.

2 billion Danish kroner = 386.35400 million U.S. dollars

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Source: Noreco, July 25, 2011; Image: DONG Energy;