Norwegian oil company Noreco might lose its stake in the Huntington offshore oil field. The company has been served a notice of default under the Joint Operating Agreement (JOA) governing the Huntington licence in the UK North Sea.
The default relates to non-payment of a cash call under the JOA, and implies that Noreco will no longer receive revenues from production on the Huntington field.
Furthermore, as Noreco is not planning on remedying the default, the JOA specifies that the remaining partners are entitled to exercise forfeiture rights in respect of Noreco Oil UK’s 20% interest in the licence on a pro-rata basis at the end of a 45 day period.
“Noreco is working constructively with its licence partners to determine next steps in relation to its licence interest in a consensual manner,” the company said in a statement on Monday.
The accounting effect of the expected forfeiture compared to the Q2 report, is an additional loss of an estimated NOK 60 million, Noreco said. The total loss for Noreco related to the investment in Huntington will after this amount to approximately NOK 590 million.
Following the completed restructuring in April 2015, Noreco retained Stellar Energy Advisors to sell its 20% participating interests in the Huntington licence. The process has now been terminated as no acceptable offers were received, Noreco said.
Huntington field started producing oil in 2013. Partners in the field are Premier oil (40%), E.ON Exploration and Production (25 per cent, Operator), Noreco (20 per cent) and Iona Energy (15 per cent).
In a separate statement issued today, Iona, a partner in the field has shed more light on the Joint Operating Agreement, and what Noreco’s failure to remedy the default would entail.
According to Iona, under the terms of the joint operating agreement that governs the Huntington field, Noreco has until November 27, 2015 to remedy the default.
Until this date the remaining field partners will be obliged to pay their increased pro rata share of operating costs and also receive their increased pro rata share of field revenues.
If the default is not remedied by November 27, 2015 then the remaining field partners may, within 30 days, request that Noreco’s share in the Huntington field be forfeited to them. If this were to occur then the pro forma working interests in the field would be as follows: – E.ON E&P UK Limited: 31.25% (operator) – Premier Oil UK Limited: 50.00% – Iona UK Huntington Limited: 18.75%
The article has been amended to include an update by Iona, a partner in the Huntington oil field.
Offshore Energy Today Staff