Noreco Slides as Unstable Oil Output Pressures Bonds: Oslo Mover

Norwegian Energy Co. ASA fell to a two-week low in Oslo as intermittent output from two of the North Sea oil producer’s fields cuts cash flow and puts pressure on its ability to repay a bond maturing in December.

Shares in the Stavanger, Norway-based company declined as much as 3.9 percent to 2.47 kroner, the lowest intraday level since Sept. 6, and where the stock was trading as of midday in the Norwegian capital. About 935,000 shares have been traded so far today, more than 50 percent of the average daily volume during the past three months.

Production at the Huntington and Oselvar remains unstable due to technical problems with facilities that the fields rely on, Noreco said in a statement today. Huntington output fell to 3,922 barrels of oil equivalent a day net to Noreco from 6,800 barrels reported on Sept. 9, while Oselvar pumped 444 barrels of oil equivalent a day as of mid-September, the company said.

While the “issues with Huntington and Oselvar seem to be of relatively limited duration, it’s important for Noreco that they are addressed, as the company has very limited headroom” to meet about 1 billion-krone ($169 million) of debt maturing in December, Pareto Securities AS said in an e-mailed note to clients today.

Yields on Noreco’s 300 million-krone senior unsecured bonds maturing in December rose to 21.5 percent today from 21.4 percent on Sept. 20, according to DNB ASA pricing compiled by Bloomberg.

Refinance Debt

Noreco, which is seeking to increase output after earlier delays at its Huntington field in the U.K.’s North Sea, has experienced a slew of shutdowns at its Oselvar field off Norway and Nini, Nini East and Cecilie in the Danish North Sea. Shares in the company sank to a record on Aug. 29 amid concerns that intermittent output from Huntington and at Noreco’s Danish assets my result in the company needing to sell new shares.

“It’s important that production regularity stabilizes at a high level over the coming months” to allow the company to refinance its bond debt without raising equity, Pareto said.

While output resumed at the Lulita field off Denmark on Sept. 9, there’s still no precise date for when the Siri platform will be able to receive oil and gas from the Nini, Nini East and Cecilie fields, Noreco said.

Before it's here, it's on the Bloomberg Terminal.