Noreco provides market update

At the end of first quarter 2011, Noreco had NOK 490 million in cash and cash equivalents. In April the company issued a new NOK 600 million bond. In May the company entered an agreement to sell its shares in the oil fields Brage and Hyme for a consideration of USD 85 million. This transaction is expected to be completed this summer. Combined with expected earnings from the oil production, this provides the company with sufficient liquidity to meet its commitments and complete its ongoing investment program in field developments and exploration wells.

The company had a book equity ratio of 26.7 percent at the end of the first quarter.  One of the covenants in the bond loan agreements requires the company to keep this equity ratio above 25 percent. It would require a breach in two consecutive quarters before a potential default may be declared. There are no current indications that Noreco will breach the covenant as the company's liquidity gives flexibility to reduce debt if necessary. Over time the company intends to strengthen the equity ratio, a.o. by considering further asset sales.

Noreco has a 20 percent interest in the Huntington field in U.K. which is currently under development. The field will be produced with the floating production unit Sevan Voyageur, which is now being upgraded for the Huntington assignment. The Voyageur is owned by Sevan Marine, which has announced cost overruns for the upgrade of the Voyageur. The Huntington partnership has an extensive system of agreements with Sevan Marine and other relevant stakeholders. These agreements imply that the Huntington partnership does not carry the risk of cost overruns, and secure the partnership rights to access the Voyageur and to exercise control over the upgrade project in the event that Sevan breaches certain conditions. Noreco has previously assumed production start from Huntington during first quarter 2012. In light of the recent developments there is now some risk of a moderate delay to this schedule.

At the Siri field in Denmark, work is still ongoing regarding a permanent repair of the platform. Different solutions have been proposed, with substantial variation in scope and cost. Dong Energy and Noreco each own 50 percent of Siri and the final investment decision will therefore require unanimity. The parties have a constructive dialogue and are actively working to find a safe and cost efficient solution.

Noreco is currently producing around 10,000 barrels oil equivalents (boe) per day from eight fields in Denmark and Norway. After the sale of Brage, the estimated production for this year is around 7,000 boe per day. Next year the company will start production from the new fields Huntington and Oselvar, which will contribute to significant earnings growth and a stronger financial position. Noreco also has an extensive exploration programme with a substantial value creation potential, and will participate in up to eight exploration wells in the second half of 2011, pending rig schedules.

Contacts:
Einar Gjelsvik, CEO (+47 992 83 856)
Kjetil Bakken, VP Strategy & Investor Relations (+47 91 889 889)