Stavanger, 7 October, 2009: Norwegian Energy Company ASA (Noreco - OSE:NOR), Noreco's production in September 2009 was 6,625 barrels of oil equivalents per day, and production in the third quarter was 9,725 barrels of oil per day. Production is expected to increase significantly in the fourth quarter as new wells start up on Nini and Brage, the new field Nini East starts production and the Siri and Lulita fields are brought back on stream.
On Brage the production has been high in September primarily due to good response from pressure support on the A-28 Bowmore producer and high gas export. The field production has been exceeding 38,000 boepd in average in September, up 28 % from August. Drilling of a new producer to the Fensfjord Fm has been finalized, and the well is now being completed and will start production in October. The Enoch field has produced higher than expectation in September caused primarily by very good production regularity.
The South Arne field has produced in accordance with expectations for September after successful completion of additional well workover operations. The average production rate was approximately 22,500 boepd in September.
The Lulita field remained shut-in during September as part of the planned maintenance campaign at the Harald field. Lulita is expected back on production in the middle of October.
The Nini East field is scheduled to start production in the fourth quarter of 2009, and the first of two planned producers is currently drilling in the reservoir and will be completed in October.
The production from the Siri area fields (Siri, Nini, Cecilie) has been shut in during September due to the Siri platform shutdown. The Siri platform was shut down on 31 August as a routine inspection revealed cracks in steel plates on a subsea water buffer tank connected to the main storage tank. No discharge of oil or other pollution has been detected as a result of the cracks. Through extensive inspection and analysis of the Siri facilities a good understanding of the cause and impact of the cracks has been developed. Based on this understanding a plan has been established to restart production from the Siri, Nini and Cecilie field. The plan includes support from a jack-up rig for a limited period and fabrication and installation of some additional equipment on Siri. Noreco expects production to restart in the first half of November, with timing dependening mainly on operational risk related to fabrication and installation of additional equipment on Siri and weather conditions.
Prior to the production shutdown at Siri, the field was producing 10,000 barrels per day gross, while the total production over the Siri platform was in the order of 13,500 barrels per day gross. The shutdown is not expected to have any adverse effect on the reservoir or field reserves and Noreco expects an initial production from the Siri area fields in the period after production startup to be at or above the rate at the time the field was shutdown.
Under its group energy insurance package Noreco has cover for inter alia business interruption, subject to a retention period of 60 days and an overall limit of 12 months. Thus, provided there is found to be cover under its policy Noreco will for any period of resulting production loss in excess of 60 days receive an insurance payment of USD 50 per barrel of crude not produced. In addition, the business interruption cover also provides coverage for costs associated with acts aimed at mitigating a production loss, such as temporary/provisional measures to restart production. The loss adjuster is currently processing the claim. Although Noreco is hopeful of cover, it is at this stage premature to attempt to draw any definite conclusion until the investigations into the cause of the damage has been completed.
As a consequence of the temporary shut down at Siri, Noreco will as per previous releases reduce the production guidance for 2009. A revision will be made when the exact timing of the start-up of the Siri field is known.
The net realized price was 61 US$/barrel in September and 64US$/barrel in Q3 2009, and reflects Noreco's oil price put options at US$50 and US$75 per barrel as well as adjustments for inventory and NGL and gas prices. The production volumes and prices are preliminary and are subject to adjustments, including final allocations between fields, quality adjustments and prices.
Scott Kerr ,CEO (+47 99 28 38 90)
Einar Gjelsvik, Vice President Strategy & Investor Relations (+47 99 28 38 56)
Jan Nagell, CFO (+47 99 49 72 71)