Norse Energy in Trouble, Wants Bondholders to Become Stockholders

Not long ago, MDN wrote about Norse Energy’s layoff of half of its employees since the beginning of 2011 (see MDN story here). One of MDN’s readers (“BinFranklin”) left a comment stating that “Norse Energy is a company on life support.” It seems it was a perceptive comment. He also said Norse has been selling off assets to keep going—again, accurate.

A new press release issued from the company today talks about Norse’s ongoing efforts to convert some of it’s debt into equity (convert bonds into stocks, handing over bits and pieces of ownership) because they will soon not be able to pay bond holders the payments due on the money they’ve borrowed. The press release, reprinted below in its entirety, basically says, “We’re still working on it but we haven’t done a deal yet.”

Reference is made to the press releases dated 16 August 2011 and 13 September 2011, where Norse Energy Corp. ASA ("NEC" or the "Company" ticker code OSE – NEC, Oslo, Norway, U.S OTCQX symbol "NSEEY") announced that the Company has held discussions with bondholders and shareholders with respect to a potential future equity covenant breach in its bonds and a potential private placement of shares in the Company.

Since the last update Norse has continued discussions with certain existing shareholders and institutional investors regarding a potential private placement of shares in the Company in combination with a partial conversion of debt to equity. Despite the constructive discussions NEC has not yet reached a solution to refinance the Company. NEC will continue its dialogue with shareholders and bondholders in order to achieve a long term financial solution to the Company and will inform the market of any developments in due course.

For further information, please contact:

J. Chris Steinhauser, CFO
Tel: +1 716 218 4229
Cell: +1 925 286 2819
[email protected]

About Norse Energy Corp.:

At year end 2010 the Company had third party certified total contingent resources of ~3.9 TCF (~700 MMBOE) of which approximately ~3.7 Tcf are in the Marcellus and Utica Shale Formations. The Company has a significant land position of ~180,000 net acres in New York State.*

What does it mean for landowners? MDN is not trying to pile on here or cause any issues for Norse, but if we were landowners in New York, we’d be very careful about signing any leases with Norse. And if we had a lease with Norse, we would watch the company closely. Norse may sell their lease assets to other companies to avoid a default, or perhaps sell the entire company to someone else. Exxon and other companies are very much still in the hunt for acquisitions of land in the Marcellus and Utica Shale.

If New York finally gets its new shale gas drilling rules released and grants Norse permits to start drilling (something not likely to happen until first quarter of 2012), will that be the cavalry riding in to save the day? As MDN’s perceptive commenter “BinFranklin” said at the close of his comment:

Now it [Norse] is laying off staff to save capital. Norse is "doubling-down" in shale wells despite the fact that profitable shale wells in PA are several 10s miles to SW.  Such gambles have paid-off before in E&P, but not often.

*Norse Energy Press Release (Sep 29, 2011) – NEC provides update on financing