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

  • Anonymous

    To listen to you ballyhooing the glorious future of NYS gas drilling, a
    company with gas leases totaling “180,000 net acres in New York State” ought to
    be rocketing skyward, not on the verge of collapse.

    Maybe the NY Times has gotten it right after all. And the first of the
    Ponzi schemes is about to unravel… 

  • I’d just like to point out Bob, that if I were the drilling fanboy you make me out to be, I wouldn’t report the “bad news” like this.

    As for the NY Times’ now debunked and exposed attempts to talk down gas drilling, perhaps you didn’t read Chesapeake’s announcement from yesterday about the Utica gushers they’ve drilled? Or about Range’s comments yesterday, saying new rock layers may yield as much gas as the Marecellus? Seems that not every gas drilling company is on life support as you would have us believe.

    You can try to keep ignoring the facts and singing “la la la I can’t hear you” all you want … but sooner or later Bob, you’ll be a convert to the natural gas cause. 🙂

  • Anonymous

    Me thinks, Jim, that you and so many others are looking at this gas industry invasion with rose colored glasses.  Visualize ahead when, in the future, you have all the pipelines layed (on land which will now be off limits to any type of building) and the beautiful PA landscape destroyed, and maybe even water pollution, which is of course is dependent on the integrity of cement and piping remaining in good working order after years of weather variation.  You may then say, “I wish I would have thought this one through a little bit better.”  By that time it will be too late and you won’t be able to close the barn door because the horse will have already escaped years earlier.  Where will all the jobs be now?

  • Not “bad news”, “good news”!