NEC announces discussions with key bondholders

Buffalo, New York 15 August 2011

Norse Energy Corp. ASA ("NEC" ticker code OSE - NEC, Oslo, Norway, U.S OTCQX symbol "NSEEY") announces that the Company is in discussions with its bondholders regarding an equity covenant waiver in its bond agreements and/or the conversion of some or all of its bond debt into new equity.

NEC is borrower under the Loan Agreements with ISIN NO 001 031750.6 (“NEC02”), ISIN NO 001 0481542 (“NEC03”), ISIN NO 001 046035.5 (“NEC04”) and ISIN NO 001 047907.4 (“NEC05”) with Norsk Tillitsmann ASA as Loan Trustee, hereinafter referred to as the “Bond Loans”. Norse Energy Holdings Inc. (“NEHI”), a 100% owned subsidiary of NEC, is the guarantor for NEC’s obligations under the Loan Agreements. The Loan Agreements for NEC03, NEC04 and NEC05 bonds include covenants whereby NEHI is to maintain equity of minimum USD 36 million and “Equity to Capital Employed Ratio” of at least 30%.

NEC has approached the Loan Trustee and key bondholders on an informal basis to seek a waiver from these covenants for a period of up to 180 days to allow time to continue to pursue asset sales as previously communicated in the Company’s shareholder reports. The key bondholders have made a counter proposal to recapitalize the Company with a combination of securities that may include new equity, a conversion of bond debt to equity and, potentially, a lesser amount of new debt with a more accommodating covenant package. The package of new money and securities has not been decided or agreed. The discussions are in preliminary stages. The Company has retained Pareto Securities to advise on these matters.

The Bond Loans and bank debt have the following principal amounts outstanding:

Outstanding debt                  USDm              NOKm

NEC02                                         63.8 

NEC03                                           3.7

NEC04                                                                   23.0

NEC05                                         15.1

Bank debt                                    14.2

Sum                                             96.8                  23.0

The background for the waiver request is that NEC’s current business results do not support the equity covenants in the Company’s bond agreements. The Company likely will not to be in compliance with the equity covenants as soon as September unless it carries out an asset sale and/or equity capital financing. NEC has previously announced its intention to pursue asset sales to address its liquidity and covenant issues and has engaged US financial advisors to assist in the process.

On 5 August 2011 the Company announced that, 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, it has elected to immediately suspend Herkimer drilling to preserve cash for potentially more profitable Marcellus and Utica Shale planning, permitting and development. The Company’s current liquidity position is expected to be adequate to fund operations into the fourth quarter at the present time. The Company’s liquidity position will be discussed more fully in the Company’s 2Q Shareholder Report which will be released on 31 August 2011.

In New York, the draft Supplemental Environmental Impact Statement (the “dSGEIS’), issued by the Department of Environmental Conservation (the “DEC”) on 8 July 2011, is expected to improve market sentiment for asset sales. The SGEIS is expected to be finalized in the second half of 2011. The Company expects shale well drilling with high volume hydraulic fracturing to begin in 2012 by mid-year. The purpose of the initial waiver proposal was to ensure that NEC can continue to focus on pursing asset sales, or capital markets alternatives if needed, while New York shale regulations are finalized.

“Norse’s management and board of directors strongly believe in the large value potential of its New York State acreage position. Following a potential SGEIS finalization in the second half of 2011, we expect shale well drilling with high volume hydraulic fracturing will begin by mid-year 2012,” according to Mark Dice, Chief Executive Officer.

Any conversion of bond debt into equity will require the consent of 2/3 of the bondholders represented in a bondholder’s meeting. Any conversion of debt to equity or other placement of shares in NEC will require 2/3 majority in a general meeting of NEC. Accordingly, any decision by the board of directors to seek conversion of debt will be formalized by summons for bondholders’ meetings and a call for an extraordinary general meeting in NEC.  

The information herein is subject to the disclosure duty under the Norwegian Securities Trading Act Section 5-2 and the disclosure obligations in listing rules of the Oslo Stock Exchange pertaining to shares and bonds.

The market will be duly informed on any development on the above matter.

Norse Energy has total contingent resources of 3.9 TCF (~700 MMBOE) at the end of 2010. The Company has a significant land position of 180,000 net acres in New York State.

For further information, please contact:

Richard Boughrum, Chief Financial Officer

Cell: +1 714 520 1702

Email: rboughrum@norseenergy.com

S. Dennis Holbrook, Executive Vice President
Cell: +1 716 713-2489

Phone   +1 716 713-2489      

Email: dholbrook@norseenergy.com