Norse Energy Shutting Down NY Office, Moving to Houston
For more than year, MDN has periodically reported on Norse Energy as they have struggled to hold on, waiting for New York State to finally start issuing horizontal hydraulic fracturing drilling permits (see MDN’s coverage here). Norse’s strategy has been to roll the dice that New York will allow shale gas drilling. Drilling is always risky, but betting the company on New York politicians is truly a Las Vegas kind of gamble.
In order to keep going, Norse has sold off various assets over the past year. According to their first quarter 2012 update (see below), they at least have enough money in the bank to keep their U.S. operations going through the third quarter of this year. And they still have a controlling interest in 135,000 acres in New York, much of it in the Marcellus and Utica Shale play areas, should New York finally get off the dime. But in a sign that they may be giving up on the Empire State, Norse is shutting down it’s New York office and heading back to Houston.
Norse Energy Corp. ASA is shuttering its New York offices and will move its U.S. headquarters to Houston, reclaiming offices the company has been subletting on Tanglewilde Street.
The company picked up most of its stakes in the Bayou City four years ago, planning to create a business division in Buffalo, N.Y., specifically for drilling the Marcellus Shale for natural gas, Dennis Holbrook, Norse’s chief legal officer, said. At the time, the company had about 45 people between its Buffalo and Pittsburgh offices.
“Those who said we should shut down drilling in New York may get their wish,” he said.
Norse has downsized to nine employees in Buffalo and a handful of accounting and financial staff in Pittsburgh, Holbrook said. Once the transition to Houston is complete, he said, Norse plans to relocate about 16 workers, including the CEO and CFO.
“What’s bad news for Buffalo is good news for Houston,” he said.(1)
Here’s the Norse press release with first quarter financial and operational updates:
Norse Energy Corp. ASA and its subsidiaries ("Norse Energy" or "the Company") today reported results for the first quarter ended 31 March 2012.
First Quarter Highlights
- In March 2012, the Company announced that it had entered into an agreement to sell its operated production, ~23,000 held by production (“HBP”) or owned acres (in which Norse retains a 37.5% working interest in the deep Utica formation), associated gathering system, and pipeline rights of way in Central New York for total cash consideration to Norse of USD 37 million subject to closing adjustments and with an effective date of the transaction of 1 January 2012. The transaction was closed on 16 May 2012 with estimated net proceeds of approximately USD 34.5 million after all adjustments and fees. The cash consideration received was used to fund the bond debt prepayment resulting from the restructuring that the Company announced on 28 February 2012. The terms of the restructuring required a prepayment of NEC02/04/05/06 bonds at par plus accrued interest (~USD 34.9 million).
- In February 2012, the Company announced it had reached a refinancing agreement with its bondholders constituting a majority in each of the NEC02/04/05 bond issues. The Company issued new convertible bonds with principal amount USD 21 million, where the bonds have been settled by conversion of a corresponding principal amount of NEC02/04/05 bonds (pro rata). The convertible debt has a strike of NOK 0.37 per share (subject to adjustment clauses), carries a 5% coupon, is 3 years in duration, contains a call provision, and is secured by the shares in Norse’s wholly owned subsidiary, Norse Energy Holdings Inc. (NEHI). The remainder of the outstanding bonds was prepaid in May as described above.
- In February 2012, the Company completed the conversion of a total of ~USD 22 million of bond debt to shareholder equity at a significant premium to market price per share.
- In February 2012, the Company announced increased reserves and resources as certified by Schlumberger Data and Consulting Services.
- Total 1P Proved Reserves as of 31 December 2011 increased from ~34.4 Bcf. to ~43.4 Bcf. compared to 31 December 2010, an increase of ~26%.
- Total 2P Reserves as of 31 December 2011 increased from ~41.0 Bcf to ~60.3 Bcf. compared to 31 December 2010, an increase of ~47%.
- Total 2C Contingent Resources as of 31 December 2011 increased from ~3.9 TCF (~697 MMBOE) to ~4.9 TCFE (~880 MMBOE) compared to 31 December 2010, an increase of ~26%.
- Western New York 2C Contingent Resources, newly certified, totaling ~0.9 TCFE (~164 MMBOE) comprise of ~0.7 Tcf of gas (~116 MMBOE) and ~48 MMBbls of oil.
- Central New York 2C Contingent Resources increased from ~3.9 Tcf (~697 MMBOE) to ~4.0 Tcf (~715 MMBOE), an increase of ~3%, inclusive of the 12/31/2011 divestiture
- Following the sale of the Herkimer assets and continued technical review, the Company’s 2C Contingent Resources are internally estimated to be 5.2 Tcfe (917 MMBOE). The identification of additional resources in Western New York are internally estimated to have more than offset the decrease attributed to the sale.
- As of 31 March 2011, the Company’s cash balance was ~USD 7.1 million. The current cash position is believed to be sufficient to fund the Company into the third quarter of 2012.
- EBITDA for the first quarter was USD -3.9 million compared with USD -4.6 million in Q1-2011.
The fourth quarter report and presentation materials are available through the following web links and through the Company’s website www.norseenergy.com:
First Quarter 2012 Shareholder Report (http://www.norseenergy.com/media/Q1-2012_Shareholder_Report.pdf)
First Quarter 2012 Shareholder Presentation (http://www.norseenergy.com/media/Q1-2012_Norse_Energy_Shareholder_Presentation.pdf)
First Quarter 2012 Live and On Demand Webcast (http://webtv.hegnar.no/webcast.php?id=58208) (2)
(1) Houston Business Journal (May 30, 2012) – Norse Energy is moving HQ back to Houston
(2) Norse Energy Corp (May 29, 2012) – First Quarter Report 2012