North Energy Enters into Agreement with TGS-NOPEC

North Energy has entered into a four-year collaboration agreement with TGS-NOPEC Geophysical Company ASA (TGS) concerning the purchase of seismic data and services. This represents a natural progression from an earlier collaboration agreement with Rex Oil & Gas (Rex) on the purchase of virtual drilling (VD) services for prospect evaluation, which calls for access to substantial volumes of seismic data.

"The agreement with TGS gives us access to large volumes of seismic data from the market leader in the Barents Sea," says Erik Karlstrom, chief executive of North Energy. "TGS has ambitious plans, not least for a continued commitment to the Barents Sea. Through this deal, we have reinforced our position in the far north. The combination with Rex fits like a glove."

The collaboration with TGS includes a credit facility of up to NOK 200 million for the purchase of seismic data and services. These purchases will be made in line with North Energy's requirements for seismic input in connection with work on applications in licensing rounds and the like. The conditions of the loan are eight per cent annual interest and a four-year term during which repayments may be made but are not mandatory. TGS has an annual right but no obligation to convert the net amount of the loan which has accumulated over a 12-month period to shares in North Energy at a price of NOK 8.00 per share.

In parallel with the agreement, the collaboration with Rex is being expanded to include a credit facility of up to NOK 100 million over four years for the purchase of VD services. Interest and conversion terms correspond to those in the TGS agreement. The bulk of VD service purchases will be based on North Energy's requirements.

"These credit facilities of up to NOK 300 million strengthen our balance sheet ahead of the awards under Norway's 22nd licensing round," comments Karlstrom. "They also provide opportunities to fill our drilling programme with more firm wells. And the collaboration puts us in a unique position to make applications in the 23rd licensing round."

TGS is a multi-client geoscience company delivering data and services to oil and gas exploration and production companies on a global basis. It is listed on the Oslo Stock Exchange with a market value of NOK 22 billion.