Norwegian Energy Company (Noreco) may have to write down upwards of $124.2 million as an unplanned shutdown at the Huntington field and up to a 75 percent reserve write down at its Oselvar field hit the company’s books.
Huntington, the company’s largest producing field, will not be exporting gas until the end of October and 2015 production outlooks are markedly lower than the company’s initial estimates.
Huntington is a light oil field in the UK North Sea about 155 miles east of Aberdeen, Scotland.
The field was initially scheduled to be shut down for planned maintenance until October 5 but an undisclosed problem with a third party field exporting gas in the same pipeline network extended the shut down.
Noreco will also have to write down expected 2015 production levels from the field after estimates by the field’s operator, E.ON, showed a “significant reduction compared to Noreco’s current estimates.”
Huntington produces about 23,070 barrels of oil equivalent per day gross of wet barrels of oil and wet gas.
E.ON E&P UK, an upstream company owned by Germany-based E.ON, operates Huntington with a 25 percent stake.
Noreco holds a 20 percent stake.
UK-based Premier Oil holds a 40 percent stake and Canada-based Iona Energy holds a 20 percent stake.
Noreco will also be booking a write down of its Oselvar field reserves located in offshore Norway.
The company is currently expecting a 50 percent to 75 percent write down due to lower in-place volumes than expected along with more complex reservoir, less connectivity and poorer reservoir quality.
In light of the news, Noreco’s chairman Morten Garman and fellow board member Erik Henriksen resigned Wednesday.
Noreco said that the extended shutdown of Huntington will make it difficult for the company to meet its financial commitments and will affect cash balances in 2015 and beyond.
“This new information regarding an extended production shutdown on Huntington creates uncertainty about the company’s ability to meet its financial commitments and covenants towards the end of 2014,” the company said.
Noreco said it is working with Norway based firms Arctic Securities and Pareto Securities to investigate “mitigating measures” and devise a plan for sustainable financing.
The company is also collaborating with partners at its oil field to try to boost production.