Northern Petroleum brings Geesbrug gas field on stream to add 307 bcf to production

Northern Petroleum (AIM: NOP) has brought its Geesbrug gas field in the Netherlands on stream to add 307 bcf (billion cubic feet) of gas to production, marking the start of what it said will be a period of “satisfying revenue growth.”

Geesbrug is the second of four gas and two oil fields in the onshore development programme currently undertaken by the company and its partners. The field is expected to achieve an initial production rate of 7.4 mmcf/d (million cubic feet per day), which is expected to increase significantly as further production wells are drilled to produce Geesbrug’s reserves of 165 bcf (billion cubic feet) and 142 bcf in the proven and probable categories respectively.

The gas from Geesbrug is being delivered via a dedicated pipeline to the NAM operated Coevorden-17 facilities.

The detailed production and development plan will be determined after well pressure data from the initial production period has been analysed. Until then the combined production net to Northern from Geesbrug and the recently commissioned Grolloo gas field will amount to 6.7mmscfd, or 1150 boepd (barrels of oil equivalent per day).

The total proven and probable reserves net to Northern amount to 137 bcf, which is eleven to fifteen times the Grolloo gas field reserves.

“Achieving production from the Geesbrug gas field is an important step forward for Northern...this is the second new field to be brought into production following our highly successful 2008/09 fraccing programme,” said managing director Derek Musgrove.

The company is now looking to install its own independent gas processing plants at the Wijk en Aalburg and Brakel gas fields in southwest Netherlands, which are set to be brought on stream in summer.

Revenues from the current Netherlands programme will be used to develop Northern’s exploration prospects in Italy and to re-drill and place into production three of the old discoveries in the Utrecht licence in the southwest Netherlands. These discoveries are estimated to have combined reserves of 217 bcf, or 37.4 million boe (barrels of oil equivalent) in place with 60% attributable to Northern.

A financial institution has modelled Northern’s Gasterra gas sales contract, projecting an average price of €0.24/cu m (cubic metre) for H1 2010 and €0.27/cu m for H2 2010.

“This is the start of a rewarding period of satisfying revenue growth for Northern,” added Musgrove.

Northern Petroleum Nederland B.V. holds a 45% interest in Geesbrug with state owned EBN and Dyas B.V. holding 40% and 15% respectively.

Broker Jefferies International has recently reiterated its “buy” recommendation and upped its target price for Northern Petroleum following the commencement of production from Grolloo, de-risking development NAV (net asset value) and leading Jefferies to set a target equal to its core NAV valuation.

While increasing the target price for the stock to 172 pence from 153 pence, Jefferies cut its core NAV valuation 10% to 172 pence per share with a 20% upside as the company remained “attractive from a valuation perspective.”

Once the Netherlands projects come on stream, Northern’s operating cash flow is expected to increase, enabling a more active forward programme. The company is currently planning eight wells to test exploration and appraisal targets in Italy, the Netherlands and the UK.  http://www.proactiveinvestors.co.uk/companies/news/11907/northern-petroleum-brings-geesbrug-gas-field-on-stream-to-add-307-bcf-to-production-11907.html