Vermilion Energy Inc. has entered into a definitive purchase and sale agreement with Northern Petroleum PLC whereby Vermilion, through its wholly owned subsidiary, will acquire 100% of the shares of Northern Petroleum Nederland BV (NPN). NPN is the Netherlands subsidiary of UK-based Northern.
Consideration for acquiring NPN is $27.5 million (Can.) on completion, a net profit interest in the Papekop production license, and a net profit interest over any future production from unconventional reservoirs.
The economic effective date of the transaction is Jan. 1. Completion is expected by mid-October and is conditional upon the official execution of the deed of transfer before a notary in the Netherlands.
NPN acquired the majority of the portfolio in 2005 from Nederlandse Aardolie Mij BV, the Exxon-Shell combine. The agreements allowed the company to bring into production undeveloped discoveries and pursue exploratory opportunities, providing valuable cash flow.
The portfolio consists of five producing gas fields onshore and one gas field offshore, for which NPN is receiving deemed production compensation, and two potentially commercial discoveries that await appraisal and development. Production for the 6 months ended June 30, including the deemed production from P12, averaged 851 b/d of oil equivalent.
The portfolio as a whole requires high levels of capital to develop and increase production to more material levels. Operations would further benefit from being part of a larger group of assets with the associated operating and drilling synergies. Without this level of investment, which is beyond NPN’s capacity, the net economic benefits are waning which led to the decision to sell.
The Papekop NPI grants Northern a 20% interest in any net operating profit generated from the Papekop oil and gas discovery if brought into production. The Posidonia NPI grants Northern a 10% interest in any net operating profit generated from the production of oil or gas from unconventional reservoirs, which is primarily the Posidonia shale sequence.
Northern said it will turn its attention to realizing some of the significant latent value held in its southern Adriatic licenses and the testing of its redevelopment play in Canada.