Third Quarter Report 2011
Norse Energy Corp. ASA ("NEC" ticker code OSE - NEC, Oslo, Norway, U.S. OTCQX symbol "NSEEY") and its subsidiaries ("Norse Energy" or "the Company") report revenue of USD 4,181 million and EBITDA of USD -2,090 million for the quarter.
Third Quarter Highlights
The draft Supplemental Generic Environmental Impact Statement (SGEIS) was issued on 7 September 2011 by the New York State Department of Environmental Conservation (DEC). A public comment period is being conducted through 12 December 2011, followed by a review of comments before issuance of the final SGEIS.
The Company appointed J. Chris Steinhauser as Chief Financial Officer, S. Dennis Holbrook as Chief Legal Officer, and Nazir Ali as Executive Vice President of Operations and Reservoir Management during the quarter, all of whom have extensive experience in the Company and the oil and gas industry.
In anticipation that rules allowing the use of high volume hydraulic fracturing to develop natural gas resources in the state of New York will soon be in place, the Company elected to suspend Herkimer drilling on 5 August 2011. The suspension of drilling will allow the Company to focus on potentially more profitable Marcellus and Utica Shale planning, permitting and development.
The Company completed staff reductions of approximately thirty percent of its work force on 20 September 2011 to reduce its overhead costs, while awaiting the opportunity to drill into the Marcellus and Utica shale formations in New York. As a result, the Company expects to experience reduced overhead costs commencing in the fourth quarter.
Several wells that had been shut-in were brought back on line in late September. Consequently, as of 15 November, average daily gross production was approximately 7,000 Mcf/d (1,247 Boe/d). One new well was brought into production during the quarter.
The Company announced a prospective bond covenant non-compliance as early as September, 2011 which was remedied when the Company purchased USD 8.0 million nominal value of the Company's NEC 02 bonds in open market purchases at a discount from par on 23 August 2011. The Company recorded an approximately USD 2.4 million gain on the early extinguishment of debt as a result of the transactions.
As of 30 September, the Company’s cash balance was USD 12.3 million. The cash position is sufficient to fund the Company through the fourth quarter of 2011. The Company is aggressively pursuing asset sales to improve the balance sheet and liquidity.
The Company received a request for an Extraordinary General Meeting (EGM) from a shareholders’ group representing more than five percent of outstanding Norse shares. The purpose of the EGM is to vote on replacing board members Dag Erik Rasmussen and Katherine Stovring with Cecilie Amdahl and former Norse CEO Oivind Risberg, respectively. The Company on 21 November received letters from Mr. Rasmussen and Ms. Støvring that both will resign from the board of NEC with effect from the extraordinary general meeting to be held on 22 November 2011 at 11.00.
The shareholders will also vote on various capital raising initiatives including a proposed increase in the authorized share capital, a proposed reduction in the par value of the Company's common stock, authorization to issue convertible debt securities, authorization to issue warrants, and a revised authorization to execute a reverse stock split of the Company's shares. Visit www.NorseEnergy.com for the full summons and related information.
E&P gross production was 6,489 Mcf/d (1,157 Boe/d) in Q3-11, down 1% from 6,540 Mcf/d (1,166 Boe/d) in Q3-10 because of several shut-in wells, and the natural decline of the existing production that was only partially offset by contributions from the new wells.
Natural gas sales volume was 432,044 Mcf (77,013 BOE) in the quarter compared to 506,994 Mcf (90,373 BOE) in the same period last year, a 74,950 Mcf decrease, or 15%. Net production volume was down from the third quarter of 2010 due to the suspension of drilling in August 2011, wells which were temporarily shut-in, and natural field decline.
EBITDA for the third quarter was USD -2.1 million compared with USD -4.2 million in Q3 2010. Impairment in the quarter was USD 6.8 million largely attributable to low market prices.
Please find attached the third quarter report.
For further information, please contact:
J. Chris Steinhauser, Chief Financial Officer
Direct: +1 716 218 2048
S. Dennis Holbrook, Chief Legal Officer
Direct: +1 716 218 4210