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Fourth Quarter Report 2011

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28 February 2012

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 13.9 million and EBITDA of USD 3.6 million for the quarter.

Fourth Quarter Highlights

  •       On 28 February 2012, the Company reached a refinancing agreement with its bondholders constituting a majority in each of the NEC 02, 04 and 05 bond issues. The NEC03 bonds (par value USD 3.74 million) are being called and replaced by a new bond loan ("NEC06") with approximately 1 year longer duration (2013). The bondholders have agreed to waive financial covenants to give the Company time to implement and finance the restructuring proposal.
  •       On 31 December 2011, the Company entered into a definitive agreement to sell acreage and overriding royalty interests for cash consideration of USD 26.7 million to undisclosed and unrelated buyers. Upon closing, Norse and its bank lender received USD 21.7 million as the first installment. The remaining cash consideration of USD 5 million is being held in escrow to allow the buyers adequate time to conclude confirmatory due diligence, whereupon the remaining funds, if any, will be disbursed to Norse no later than March 31, 2012.
  •       The Company’s Certified 1P Proved Reserves as of 31 December 2011, prepared by Schlumberger, increased by 26% due to the certification of 24 new proved undeveloped drilling locations. The Company now has a total of 78 proved undeveloped seismically determined drilling locations.
  •       The Company’s Certified 2P Reserves as of 31 December 2011, prepared by Schlumberger, increased by 47% due to the certification of 32 new probable drilling locations. The Company now has a total of 40 probable seismically determined drilling locations.
  •       The Company’s Certified Contingent 2C gas resource in New York increased to 4.9 Tcf compared to 3.9 Tcf at the end of 2010 despite the year end divestiture.
  •       The Company’s Certified Contingent 2C Resources as of 31 December 2011 now include 164 MMBOE in Western New York of which 48 MMBBLS is oil. The Company’s newly added certified contingent resources in Western New York include both oil and gas resources.
  •       Norse shareholders approved several resolutions at an Extraordinary General Meeting held on 22 November 2011. This included the replacement of two board members, including the Chairman, authorization to increase the Company’s share capital by 50%, to issue convertible bonds, a 50-1 reverse share split and to issue warrants in connection with share issues and/or convertible loans.

Operational

  •       The Company reported gross production at its field meter stations, of 6,934 Mcf/d (1,236 Boe/d) in Q4-11, an increase of 7% from 6,489 Mcf/d (1,157 Boe/d) in Q3-11. Net volume for Q4-11 was 5,133 Mcf/d (915 Boe/d) an increase of 9% from 4,696 Mcf/d (837 Boe/d) in Q3-11.
  •       All of the wells that had been shut in during the second and third quarters of 2011 were fully restored and on line during the fourth quarter of 2011.
  •       The Company decommissioned and removed the smaller of two compressors at the Bradley Brook compressor station on 14 December 2011 and shut in the larger of the two compressors at Diehl on 7 February 2011.
  • The Company has received acknowledgement from the New York DEC that all seven of its submitted shale drilling permits have been accepted and are in the queue awaiting final resolution of the SGEIS regulations. These wells are part of an aggressive development plan targeting early expiring leased acreage.
    Subsequent Events
  •       The New York Department of Environmental Conservation (DEC) concluded the public comment period for the Supplemental Generic Environmental Impact Statement (“SGEIS”) on 11 January 2012. The DEC is currently reviewing comments received. The governor of New York was quoted in early February as saying, "we’re going to have a decision in a couple of months," regarding whether or not to allow high volume hydraulic fracturing to move forward in the state.
  •       On 9 January 2012, the Company acquired from DCF Capital bonds in NEC 04 at nominal value NOK 6,800,000 and bonds in NEC 02 at nominal value USD 2,400,000 in exchange for 53,120,000 new ordinary shares in Norse. Norse paid DCF Capital accrued interest of NOK 35,064 in cash. The new shares have a nominal value of NOK 0.3688 per share and are subscribed at a subscription price of NOK 0.40 per share giving a total subscription price of NOK 21,248,000. The subscription price represented a 21% premium to the closing price for the Norse shares at the Oslo Stock Exchange on 6 January 2012. The New Shares were registered on 13 January 2012.
  •       On 30 January 2012, the Company announced that USD 18.5 million of bonds had been tendered in a conversion offer including a pre-subscription announced by Pioneer Funds. On 24 February 2012, Norse registered 290,401,379 consideration shares at NOK 0.37 per share to the subscribers in settlement upon approval of a prospectus.

Key Figures

  •       As of 31 December 2011, the Company’s cash balance was USD 4.0 million. This does not include approximately USD 8 million of net cash received from the 31 December 2011 asset sale. The current cash position is sufficient to fund the Company into the second quarter of 2012.
  •       Natural gas sales net volume was 472,204 Mcf (84,172 BOE) in the quarter compared to 475,866 Mcf (84,825 BOE) in the same period last year, a 3,662 Mcf decrease, or 1%. Net sales volume decreased from the fourth quarter of 2010 due to the net revenue interest of joint venture partners in the 2010-2011 Herkimer drilling program.
  •       EBITDA for the fourth quarter was USD 3.6 million compared with USD -4.7 million in Q4 2010.
  •       Impairment in the quarter was USD 19.5 million and was largely attributable to low market prices.

Please find attached the fourth quarter report and presentation materials.

(Go to www.NorseEnergy.com for a link to the live webcast.)

For further information, please contact:

J. Chris Steinhauser, Chief Financial Officer
Direct: +1 716 218 2048
Email: csteinhauser@norseenergy.com

S. Dennis Holbrook, Chief Legal Officer
Direct: +1 716 218 4210
Email: dholbrook@norseenergy.com

 

 

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