12.05.08

Operational highlights - 2007:

• Substantial profit on the sale during the year of 25% of the Group’s interests in six onshore Netherlands fields to Dyas B.V;
• Netherlands production of 0.88 billion cubic feet of gas;
• Booked P2 reserves increased by 26.5% year on year to 76.55 million boe, a fifth successive year of increase, with reserves now in each of the Group’s three core areas;
• Independent engineering reports over the Giove and Rovesti discoveries in the Southern Adriatic, adding 26.61 million of Italian P2 reserves assessed by Blackwatch as having an NPV10 value of $305 million, assuming a $70 per barrel price;
• Development operations commenced at Ottoland and Brakel;
• A cost free move into assessing 30 Bcf working volume underground gas storage project at Waalwijk alongside two operators of gas storage facilities in Essent B.V. and Star Energy Group Plc. The Waalwijk licence is believed to also contain substantial upside with tested oil in two zones; and
• A Strategic Alliance has been established with Dyas B.V. targeting new assets and corporate acquisitions in selected EU countries and elsewhere.

Operational highlights - 2008:

• Front End Engineering Design (“FEED”) studies for all six oil and gas field developments have been completed with the tender packages issued for long lead items. Gross initial production rates in total for the six fields of approximately 3900 barrels of oil equivalent per day (Northern share post Dyas transactions of approximately 1750 barrels of oil equivalent per day) under oil and e-gen development schemes;
• Significant increases in initial field production rates to be expected if one or more of the discoveries are developed as gas fields, rather than e-gen, as gas production would not be facilities constrained; 
• Independent resource evaluation of six of the Company’s drilling prospects in the Adriatic Sea, with the combined potential of the prospects assessed at 2.29 billion barrels of oil in place at a P50 probability, rising to a potential of 6.03 billion barrels at a P10 probability;
• Negotiations are ongoing with potential downstream companies and marine service companies to progress the appraisal and development of the Rovesti and Giove oil fields in the southern Adriatic;
• The Company is working on plans to drill 10 wells across the portfolio in the next 18 months;
• Northern’s first operated well in Italy will be drilled in the summer of 2008 on the Savio licence (mean estimate of 220 bcf of gas in place), on trend to the recent Abbadesse gas discovery. Further wells planned during the next 12 months include Matamata (mean estimate of 1 billion barrels of oil in place), Nieuwendijk (mean estimate of 56 million barrels of oil in place), Tiendeveen (mean estimate of 67 bcf of gas plus condensates in place) and Markwells Wood-1 (mean estimate of 27.5 million barrels of oil in place); and
• At Avington the Planning Application for the Field Development Plan is with Hampshire County Council with a decision expected to be received in Q2 or Q3 2008. Long term production could commence shortly after receipt of the approvals.

Chairman's Statement

Summary

• Transactions with Dyas B.V. place Netherlands administrative processes in perspective and suggest an industry valuation of reserves at this stage; and
• A much strengthened cash position has enabled faster progress on the massive potential the Group has in Italy. In the Southern Adriatic alone 53.23 million barrels of P2 reserves have been established and confirmed by independent work together with an exploration potential with a mean estimate of 2.29 billion barrels of oil in place in just six of many structures and leads mapped to date.

It gives me the greatest pleasure to report results for the 2007 full year of a pre-tax profit of £19.41 million and undiluted earnings of 21.21p per share which compares with a pre-tax loss last year of £1.70 million or 2.66p loss per share. This has been achieved whilst increasing year on year our reserves by 26.5% to 76.55 million boe independently assessed, proven and probable, notwithstanding the sale of 13.9 million boe, including the applicable NAM net profits interests, in the Netherlands in a transaction with Dyas B.V. which was a major contributor to reported profits. It is an excellent result for the year.

The 26.61 million boe of Italian P2 reserves net to Northern added during the year have been independently assessed to have a value in excess of $305 million assuming a $70 per barrel oil price.

Production was ahead of forecast throughout the year with the Waalwijk gas field exceeding forecasted production levels by 6.6% in the five months during which we operated the field. Our production revenues in both the Netherlands and the UK at Horndean have of course benefited from the rise in both oil and gas prices, which has continued in 2008.

Our costs have risen substantially reflecting our deployment to meet increased activity levels in current and future operations. Even with the competition in the industry for well qualified and experienced personnel we have retained and increased our staff complement where appropriate. Our staff are an important asset for realising shareholder value. During the year we moved to excellent modern offices in the City with considerable room for further expansion.

Our cash position has been maintained at healthy levels throughout the period and was in excess of £22 million at year end. This continues to be predominantly held in Euros with concomitant £1.4 million of foreign exchange gains accruing and with a further €13 million as delayed payments to be received under the Dyas Strategic Alliance.

The results for the year ended 31 December 2007 have been prepared under International Financing Reporting Standards (IFRS), in accordance with the London Stock Exchange rules for AIM-listed companies. All comparative values for the previous year have been restated to align with IFRS requirements. A reconciliation between comparative values under IFRS, and as formerly reported under UK Generally Accepted Accounting Principles (UK GAAP), was published with the 2007 Interim Report and is available on the Group's website at www.northpet.com.

Given the significant pipeline of opportunities available to the Group within its existing asset base, the Board has decided that it would not be appropriate to propose a dividend at this time.

We expect production to increase and grow markedly in the Netherlands starting in late 2008 relying upon negotiations with owners to make use of existing local gas treatment facilities, thus keeping your company on an earnings trend to which our massive Italian asset position will contribute more and more in coming years. The substantial potential is, and was always, evident.

In the current year we look to further increase our income from production through both volume and already increased prices beyond $100 per barrel. We hope to further add substantial income from asset realisation and trading, reflecting once again our philosophy of taking profits when the major portion of the value added has been gained. A strategy suited to a project rich company, a distinguished position that was achieved by moving forward ahead of oil and gas price increases and the crowd that followed.

During the year operations in the Netherlands have proceeded more slowly than we would have liked as we dealt with the reality of the regulatory and planning authorities in order to realise our production goals. Progress has been made with the re-drilling at Ottoland and a sidetrack completed. The Ottoland well will now be fracced in the next few months to enhance production rates.

There has been discernable progress with planning at Papekop and Brakel in the south, whilst with the two gas fields in the north, Geesbrug and Grolloo, we have in the additional time available restructured the projects to have the option to take advantage of production declines at nearby gas processing facilities. This would allow Northern to potentially pipe untreated gas to those ready built facilities which now have greater spare capacity.

This has been a constructive reaction to the checks in the administrative and planning processes. With the considerable increases in gas prices, compared to those of electricity, and the lack of facilities constraints under a gas development scenario, the economics of gas sales over small unit generation of electricity are greatly changed and the new gas piping schemes are more profitable and have been analysed to have shorter lead times.

We plan to drill two high potential exploration wells in the Netherlands within the year in addition to the workover requirements at Papekop. Studies continue as to the future of the Waalwijk field as a storage facility.

In Italy the independent studies which resulted in the large gains to reserves in the Durres basin have also highlighted the enormous wider potential of our leases in the Southern Adriatic with the confirmation of a number of prospects, also previously mapped by Enterprise Oil Plc, with billions of barrels of oil potential.

The Giove and Rovesti fields have been assessed to contain 53.23 million barrels of P2 reserves with a NPV10 value of $305 million, assuming only a $70 per barrel price. Development would be by sub-sea completion and an FPSO, with production rates for each field projected at over 20,000 bopd. Negotiations are ongoing with potential downstream parties and marine service companies to progress the appraisal and development of the fields as the wells and FPSO represent the major part of the capital costs and an equity dilution for the provision of services is considered advantageous to rapidly advance the developments within current financial resources.

Six of the Company’s drilling prospects in the Adriatic Sea have been independently assessed, with the combined potential of the prospects being 2.29 billion barrels of oil in place at a P50 probability, rising to a potential of 6.03 billion barrels at a P10 probability. These prospects alone are substantial, being located in the awarded licences, however considerable additional potential is recognised in the further three adjacent preliminary awards.

We have further large prospects with billion barrel potential to the west of Sicily in the thrust belt and in the Sicily Channel. Northern is in negotiations with suitable farm out partners to progress the development of these licences. In the eastern Po Valley we have identified multiple gas prospects in the Savio and Longastrino licences and we expect the Savio prospect to be drilled later this year, which at 220 bcf GIIP is significantly larger than many prospects recently drilled in the North Sea.

In the UK we are seeking drilling sites or waiting on planning approval prior to drilling three wells on our licences – Markwells Wood -1, Hedge End -2, and an exploration well straddling the PEDL 099 and 155 boundaries. We will conduct the appropriate consultation processes concerning drilling locations and will also fulfil all obligations to the local community under good oil field and drilling practice. Development consent has been sought for the Avington field operated by Star Energy to allow production to commence from two wells. A further appraisal well is also planned for the Avington-1 discovery that is not part of the current field development.

Northern has applied for additional licences in the UK 13th Onshore Licencing Round and awards are expected later in the year.

Tullow Oil has stated that it plans to drill the large Matamata prospect offshore Guyane during the second half of this year. Long lead time items are in the process of being acquired.

I believe that from reading the long list of opportunities open to us outlined above you will agree with me that our strong asset and earnings position warrants fuller recognition for the quality of our portfolio and our equally strong and capable group of staff and management, who thoroughly deserve your thanks for bringing your company into such an exciting and well based condition.

I look forward to reporting on our progress through the coming year.

R H R Latham
Chairman

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For further information please contact:

Northern Petroleum Plc
Tel: +44 (0) 20 7469 2900
Derek Musgrove, Managing Director
Chris Foss, Finance Director
Graham Heard, Exploration & Technical Director

Bishopsgate Communications Limited
Tel: +44 (0) 20 7562 3350
Nick Rome / Maxine Barnes