Norwegian oil company North Energy is putting a stop to petroleum activities on the Norwegian Continental Shelf (NCS) with the sale of its last license, located in the Barents Sea, to the Swedish oil company, Lundin.
North Energy said on Friday that its subsidiary North E&P has signed an agreement with Lundin Norway to sell its 40% working interest in production license (PL) 805.
North E&P was an exploration company looking for oil and gas exclusively on the NCS. It was formed in 2016 when North Energy bought Explora Petroleum and later merged its petroleum businesses with Explora into one new company called North E&P.
After the sale of PL 805, North E&P has no further licenses on the NCS. Consequently, the board of directors of North Energy has in a board meeting on Friday, July 7 decided to discontinue the petroleum activities in its subsidiary North E&P and to seek cash reimbursement of the company’s offshore tax losses.
Chairman of the Board, Anders Onarheim, commented: “The business model for small exploration companies has in recent years been challenged by the significant drop in the oil price. The activity level on the NCS has come down, and many players have withdrawn from exploration. With no clear signs of improved market fundamentals, the board of North Energy believes that it is now in the best interest of the company’s shareholders that North E&P exits its petroleum activities on the NCS.”
According to the company, the net cash position of North E&P, including the value of tax losses carried forward, was approximately NOK 245 million ($29.2M) as of 1Q 2017. The final proceeds received from the liquidation of North E&P will depend on closing costs, as well as a final assessment by the Norwegian Oil Taxation Office.
In addition to the activities being conducted from North E&P, North Energy also includes a number of investments outside exploration on the NCS, which in the consolidated accounts per 1Q 2017 were valued to NOK 114 million ($13.6M). These investments will not be affected by the discontinuation of the petroleum activities of North E&P.
Earlier this year, North Energy became a major shareholder of the Norwegian subsea service provider, Reach Subsea, controlling a stake of 30 percent.