DONG Energy to Take Stake in Siri Field

- DONG Energy to Take Stake in Siri Field

Monday, July 25, 2011
DONG Energy

DONG Energy, the Operator of the Siri field in the Danish sector of the North Sea, and its license partner Noreco have settled on an agreement for DONG Energy to acquire Noreco's 50 percent interest in the Siri field with an acquisition cost of approximately 70 DKK million (13 million USD) with effect from July 1st 2011. DONG Energy will be sole owner of the Siri field. The agreement is subject to customary regulatory approvals, and all conditions of the agreement are expected to be finally resolved before the year-end.

The agreement means that DONG Energy in agreement with Noreco can continue and fully implement the repair work on the cracks that were revealed in parts of the platform's subsea structure in 2009, so the platform can continue to be operated safely and responsibly.

The price reflects the fact that DONG Energy will take over revenues and expenses related to Noreco's share of the Siri license - including the repair costs of the subsea structure. As previously announced, the total estimated repair costs are approximately DKK 2 billion.

The agreement will have effect from July 1st 2011, but Noreco has the right to sell its interest or a part of it to a third party before August 30th 2011, provided that the buyer takes over all of Noreco's rights and obligations, including being required to meet its share's cost of the repair work.

"We are pleased to have a constructive agreement in place so we can carry out the repair work, which we regard as necessary in order to continue safe production from the Siri field and its associated satellite fields for many years to come," said Søren Gath Hansen, Executive Vice President of DONG Energy.

The agreement to acquire Noreco's interest in the Siri field does not comprise the satellite fields outside the Siri license. In 2010, the Siri field produced 1.8 million barrels of oil, including the Stine field, which is a satellite of Siri within the Siri license.

The costs for the permanent solution will be operating costs for DONG Energy and will, as previously announced, be spread over 2011 and 2012. The increased operating costs are expected in 2011 to be only partially offset by an increased share of production from the Siri field.

However, the information provided in this announcement does not change DONG Energy's previous financial guidance for the 2011 financial year or the expected investment level announced.

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Noreco In Dispute with Dong over $400MM Rig Repairs

- Noreco In Dispute with Dong over $400MM Rig Repairs

Wednesday, June 15, 2011
Dow Jones Newswires
by Katarina Gustafsson

Norwegian Energy Co., known as Noreco, said Wednesday it is in dispute with Danish power firm Dong Energy over a DKK2 billion ($400 million) repair bill for a jointly owned oil rig in the Danish North Sea.

Noreco said it won't participate in, nor finance, the project proposed by Dong.

"Dong sent out (a press release) without informing us," Noreco spokesman Jan Petter Stiff said.

"We are not obliged to participate."

Noreco says their license agreement with Dong requires Noreco's consent for projects of this kind. Dong's solution to the damaged rig is "technically immature," it said.

The Norwegian firm said it has an alternative solution for the rig and will be talking to Dong about the matter.

Noreco and Dong each have a 50% ownership of the rig in the Siri license area of the North Sea, with Dong as the operator. Oil production was halted there in August 2009 after cracks were discovered in part of the sub-sea structure. Production resumed in January 2010 after temporary safety measures were put in place.

Dong said in a statement earlier Wednesday that it would make full and permanent repairs to the platform and estimated the costs at DKK2 billion. The firm said the work should be completed in 2012.

An Oslo-based analyst noted Noreco is short of cash after posting a NOK295 million ($54 million) net loss for the first quarter. As its share price plummeted, the company was forced to reassure markets last week that it has enough working cash to keep afloat.

"There is a large risk of an equity issue. They don't have a lot of money," the analyst said.

Dong Energy wasn't immediately able to comment.

Copyright (c) 2011 Dow Jones & Company, Inc.

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