Less than three months ago, Norse Energy Corp. ASA was the first company in line seeking permission to drill unconventional gas wells in New York's portion of the Marcellus and Utica shales.
Now the Norwegian company, which has fallen into millions of dollars of debt waiting for the state to enact shale gas regulations, is seeking partnerships so that it can keep doing business in New York. To help make that happen, Norse is putting most of its leasehold in the state -- approximately 130,000 net acres in Broome and Chenango counties -- up for sale.
Dennis Holbrook, Norse's spokesman and executive vice president, told NGI that the company has fallen about $90 million in debt while waiting for the Department of Environmental Conservation (DEC) to begin crafting regulations over hydraulic fracturing (fracking).
"These are challenging economic times for us, for all of the obvious reasons," Holbrook said. "We've paid a tremendous price in terms of the cost of delay. Our hope is that we can do a partial asset sale and give ourselves some running space to take advantage of this long-awaited process. I'm hopeful this is finally coming to fruition."
Last Tuesday that "long-awaited process" got a bit longer after DEC Commissioner Joseph Martens announced that a key advisory panel would need to work into the early months of 2012 to complete their recommendations (see related story). Meanwhile the DEC is currently in the midst of a 60-day comment period over its proposed rules governing hydraulic fracturing (fracking) in the state. A revised draft supplemental generic environmental impact statement (SGEIS) was issued on the practice in September (see NGI, Sept. 12).
"It's our hope and expectation that we'll be able to continue to operate [in New York] and take advantage of the SGEIS when it finally comes to fruition. Our hope would be that we could sell some [assets] and keep some. We'd love to partner up with the right party so that we sell a portion of our interests and have some participation rights going forward. All of those things are on the table for consideration."
Holbrook said Norse was currently in discussion with several parties over a possible deal.
"You end up with a lot of tires being kicked," Holbrook said. "With the uncertainty that New York has presented over the last few years, a lot of parties have been taking a wait-and-see type of attitude. But I have noticed some improvement recently. There are a couple [of] parties that look like they're serious about advancing the process. Our hope is that the right deal is out there that will make sense for both sides to move forward."
At first blush, Holbrook said he couldn't comment on precisely how the DEC's proposed guidelines would affect the 130,000 leasehold acres that Norse is trying to sell or partner with in central New York, other than to say that "there are significant setoffs and restrictions on access that historically weren't there, including surface rights on state lands."
Brad Gill, executive director of the Independent Oil & Gas Association of New York (IOGA), told NGI that it was unfortunate that Norse -- a longtime IOGA member -- was having to shop around its acreage position just to stay active in the state.
"This is another example of why it's so difficult to do business in our state under the de facto moratorium," Gill said. "It's unfortunate that Norse is another casualty of this situation. There are other oil and natural gas companies that have either worked in New York State and have had to pull out, or have wanted to do business here but couldn't because our business climate is just not welcoming to them at this time."
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