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Waalwijk

Northern acquired the Operatorship of the Waalwijk field in 2007 with an effective date of 1 January 2007. The field has contributed net production of 0.48 bcf of gas to Northern, from which 2007 gas sales were £1.99 million. During the year Northern undertook an integrated review of the subsurface and production data with the objective of identifying additional development opportunities. The results of these studies are ongoing and include near field exploration and progress towards the development of oil bearing Jurassic sequences above the main Triassic reservoirs of the field.

The acquisition of the Waalwijk field gives Northern access to a 33.33% interest in a 30bcf gas storage licence application with partner Essent. In a separate deal with Star Energy Group, Northern sold half of its 33.33% equity for €970,000. Under this agreement, Star will pay Northern’s share of the project costs until the Final Investment Decision (FID) is reached. Furthermore, Star will also pay 50% of €4.5 million due to Wintershall upon conclusion of the FID.

P12

The 23.611% equity in the P12 field was acquired by Northern as part of an asset exchange with Dyas B.V. in 2007. This offshore field is operated by Wintershall. 2007 production was 0.40 bcf of gas with net production revenues of £1.64 million.

Field Development Projects

Andel, Brakel, Ottoland, Papekop, Geesbrug and Grolloo

The transfer of the Drenthe III and Drenthe IV licences from the NAM to Northern was approved in July 2007. A long awaited administrative process which for the time severely hindered our programme.

This followed the drilling by Northern of the Ottoland field sidetracked well on the Andel III licence. The sidetrack comprised a technically challenging deviated well trajectory which succeeded in penetrating a horizontal reservoir section of 405 metres of which 210 metres was logged as net pay. The well was tested and encouraging flow rates of up to 1447 barrels of oil per day and 600,000 cubic feet of gas per day were attained. Subsequent workover activities were conducted by Northern to establish the full flow potential of the reservoir. These data were used to support the submission of a production licence application which was compiled and submitted to the Dutch authorities in the fourth quarter of 2007. The application covers not only the Ottoland field development but also Andel-6 (recently renamed Wijk en Aalburg) and Brakel.

Production Planning

Whilst awaiting the bureaucratically delayed transfer of titles of the licences from the previous Operator and the processing of the Production Licence Applications, Northern continued to review and optimise the detailed engineering plans for each of the six field developments. By the end of 2007, the Front End Engineering Design (“FEED”) studies had been completed as had the associated tender packages necessary for the long lead time items. After partner approval in early 2008, Northern issued invitations to tender in early 2008.

The production plans for the six fields forecast total initial production of 3900 barrels of oil equivalent per day (1750 barrels of oil equivalent per day net to Northern), with first production planned for late 2008 or early 2009. The production may increase following further revisions for Grolloo and Geesbrug and is prior to initiation of a second phase of development activities once production data has been analysed.

Dyas Transactions

Northern has profited from an €18 million sale of a 25% interest its six undeveloped discoveries along with three exploration prospects to Dutch exploration and production company Dyas, with an effective date 1 January 2007. In addition to the sale proceeds, Northern also acquired the Dyas interests in the offshore P12 producing gas field and the rights to the undeveloped Woudsend and Oppenhuizen gas fields in the onshore Zuid Friesland licence. Apart from sharing in the development and exploration risks, Dyas has been effective in providing “local” content and support to Northern’s activities in the Netherlands.

A wider component of the Dyas transaction has been the establishment of a Strategic Alliance between the two companies which has seen the screening of new exploration and production assets and corporate acquisitions, albeit outside of The Netherlands.

Exploration

Northern has concentrated its geoscience efforts to mature prospects for exploration drilling on its Andel and Drenthe licences. The acreage is prospective for both oil and gas and lies in the heart of proven hydrocarbon fairways. Northern has utilised high quality 3D seismic data to identify drilling targets on the Nieuwendijk and Tiendeveen prospects.

The Nieuwendijk prospect, estimated as containing upwards of 50 million barrels of oil in place, lies to the north of the Northern operated Waalwijk field. Nieuwendijk is prospective for oil trapped in the same Triassic aged Bunter reservoirs present and productive at Waalwijk. If successful the discovery will be developed in coordination with Northern’s Andel, Brakel and Ottoland fields. A surface drilling location has been secured and permitting is ongoing to enable a late 2008 spud.

Further to the northeast in the Lower Saxony named Basin, Northern has completed an integrated evaluation of the 3D seismic over the Drenthe III, the results of which have facilitated the selection of a drilling target for the Tiendeveen exploration prospect. The Tiendeveen prospect is just 5 kilometres northwest of Northern’s Geesbrug gas field development. The Tiendeveen structure is considered to have low exploration risk, with the potential for trapping gas in Permian Rotliegend and Carboniferous Westphalian sandstones, totalling some 67 billion cubic feet of gas and condensates in place. In the advent of success the Tiendeveen discovery will be integrated with the long term Geesbrug field development. Well planning is at an advanced stage after a surface drilling location was successfully negotiated with the local land owners.

Northern has entered into discussions with a number of drilling contractors to undertake the exploration drilling on the Andel III and Drenthe III licences. It is hoped to drill the wells in a back to back drilling campaign starting in late 2008. Elsewhere in the Netherlands, all of the available well and seismic data have been compiled in order to undertake an integrated evaluation of the hydrocarbon potential of the Utrecht (awarded April 2007) and the Oosterwolde (awarded March 2007) licences adjacent to the Andel III and Drenthe III licences respectively.

Further information


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