Noreco Slides as Siri Platform Crack Curbs Cash Flow: Oslo Mover
Norwegian Energy Co. ASA (NOR), a North Sea oil producer, extended losses in Oslo after a new crack was found in the platform at Dong Energy A/S’s Siri discovery, forcing production to halt from Noreco’s neighboring fields.
Shares in Noreco, based in Stavanger on Norway’s west coast, dropped as much as 1.6 percent and traded 1 percent lower at 3.06 kroner as of 2 p.m. local time. That extends the decline to 8.7 percent since July 25 when Noreco said output from the Nini, Nini East and Cecilie field would be halted.
Noreco, which is seeking to ramp-up production after delays to fields including Huntington in the North Sea, normally processes, stores and ships oil from the Siri platform. Output from Nini, Nine East and Cecilie contributed 2,893 barrels of oil a day during the first half, the company said on July 25.
The crack, found in a bulkhead inside a riser support structure connected to a storage tank at the platform, will require repairs and while Dong is working to restart operations as soon as possible, it “cannot currently provide an estimate of when this will be,” Noreco said.
“Just as the Huntington field is approaching full production, Noreco has a new significant problem at its hands; this time an outage at the Danish fields hooked up to the Siri platform,” Pareto Securities said in a note dated July 26. “The duration of the downtime is unclear at the moment, but we think it may last for most of this year.”
The impact on Noreco’s three fields near Siri “weakens the company’s cash flow” ahead of debt maturities in the fourth quarter and next year “and makes Noreco even more reliant” on Huntington, said Pareto, which maintained its buy recommendation on the stock. “However we cut our target price to 4.5 kroner from 7 kroner as we think increased financing uncertainty will hold the share price back.”
Noreco’s shares have declined 39 percent during the last 12 months, giving the company a market value of 1.1 billion kroner ($185.6 million).
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