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Interim Statement 2005

Interim Results for the Six Months to 30 June 2005

Highlights

• A significant new sphere of operations being established in the Netherlands with planned short term oil and gas field developments for 3200-5000 barrels of oil per day and 50Mw of electricity, 30% net to Northern.
• On going exploration and appraisal drilling programme in South of England
• Achieving of a substantial exploration licence position in Italy
• A strong cash position and tight expenditure control maintained

Chairman’s Statement

I am delighted with the establishment of the new sphere of operations in the Netherlands even if this anticipates the successful outcome of our Production Licence application in order to develop the Papekop gas and oil discovery. This will add to our position under the joint venture agreements with the Shell/ExxonMobil subsidiary – Nederlandse Aardolie Maatschappij (“NAM”).

We will now pursue this opportunity to bring a total of six oil and gas discoveries into production during the period of late 2006 and into 2007. We anticipate achieving production levels of 3200-5000 barrels of oil per day and on site generation of up to 50Mw. of electricity from the gas, 30% of which is net to Northern, which assumes that the Minister of Economic Affairs elects to designate Energie Beheer Nederland B.V. (“EBN”), a State owned company, as a 40% participant in the licences to which it is not currently party to in return for a pro-rata share of past exploration costs and a pro-rata share of all future costs of the joint ventures. Our share of this will greatly expand the company’s cash flow and is anticipated to provide sufficient surplus funds to sustain our ongoing exploration programme in the future.

The venture in the Netherlands will become our key project in the immediate future and will make a major call upon the Company’s management and technical staff. We have therefore decided to reduce our commitments in Spain by the exchange with Ascent Resources Plc of our 50% holding in three exploration licences for a 2.5% overriding royalty on those interests. This will avoid the commitment of substantial management and skilled technical resources and allow us to deploy them on less risky projects with greater perceived potential. Our project to re-perforate the wells in the Ayoluengo field progresses on the back of a 64% increase in the current local price paid for our product as against that received at the end of 2004, a major factor that enables me to report an increase of £72,000 in gross profits and a decrease of £41,000 in operating losses for the six month period despite increased activity levels and the consequential increase in personnel. The overall loss for the period is £233,000 as against £275,000 for the comparable period last year. These results once again demonstrate the Group’s tight control of its cost base and the efficiency of its staff.

In Italy our position has been expanded to twenty one licences and applications covering an area in excess of 11,000 km². The applications now include two oil discoveries in the southern Adriatic and one gas discovery off the Calabrian Coast. We have also entered into discussions with substantial potential new partners regarding our licences in the western Po Valley, Nibbia and Gattinara, and licences offshore south west of Sicily with a view to early drilling of those licenses at little or no expense to the company.

In the South of England our two well Wessex Basin drilling campaign on the Isle of Wight is in progress. The first well, Sandhills-2, drilled to appraise the 1982 logged oil discovery has disappointed with the realisation that the oil is predominantly bio-degraded. Some small comfort can be taken in that, at one time, a substantial accumulation of mobile oil was there and this has some positive implications for both the area to the east and the area to the west where we are currently drilling Bouldnor Copse-1, both as a further Jurassic test of the same Great Oolite Reservoir tested at Sandhills and the large Triassic prospect estimated by independent consultants to be of the potential of 300 million barrels of oil in place.

Our programme for the Weald Basin is planned for 2006 and our forecast is clearly not diminished by this year’s drilling campaign. We shall approach the work of obtaining planning consent with the benefit of our experiences on the Isle of Wight and trust that we will satisfactorily present ourselves as a suitable new neighbour in the communities concerned. I anticipate that drilling those prospects will be successful and soon add to our promising cash flow position for 2007 onwards.

I can also look forward with you to our first well in the Guyane offshore concession of which Hardman Resources is the operator. Our 1.25 % net beneficial interest may seem small, but with the potential to drill significant number of very substantial sized prospects of which several are in excess of one billion barrel potential, I see reason for cautious excitement. Hardman Resources has announced their intent to drill the first prospect in the middle of 2006 following the 3-D seismic survey to be conducted in October 2005.

I wish to thank Jerry White for his services to the company as Finance Director during our sustained period of growth since 1999. He continues as a non-Executive Director and Chairman of the Audit Committee. I also welcome Chris Foss stepping into the position of Finance Director following a period of commendable service as Group Financial Controller. This has been and continues to be a period of expansion both in the Company’s business and the Company’s skill base.

R Latham
Chairman

You can download a copy of the Interim Statement in Word .doc format by clicking the link below.

Download the Interim Statement 2005 (164K)

Previous Annual Reports and Interim Statements can be found in the archive.

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