Hopeful that it is seeing the final months of a moratorium on high-volume hydraulic fracturing (HVHF) tick away in New York, Norse Energy Corp. ASA -- a company that, like many others, has suffered through years of uncertainty at the hands of the delay -- is positioning itself to hit the ground running in the Marcellus and Utica shales.

Norse said Thursday it has agreed to sell its operated production and other assets in the Empire State for $37 million to EmKey Resources LLC, which in turn has committed to constructing a pipeline capable of transporting a minimum of 90,000 Mcf/d, once Norse nominates for firm transportation.

"While we conveyed approximately 22,000 acres held by production, we retained a 37.5% interest in the Utica rights over that shale," Dennis Holbrook, Norse executive vice president, told NGI's Shale Daily. "We obviously think we see very significant potential in the Utica in those areas that we're holding presently by production. And if the shale in New York has the potential that we believe it does, we have a party that is also committed to building a pipeline."

EmKey is a privately owned company led and partially owned by Oivind Risberg, a current Norse board member and former Norse Energy CEO. Risberg also formed Appalachian Transmission and Marketing LLC, which purchased midstream assets from Norse in early 2011.

Norse shareholders will meet in April to consider the deal, but if approved the company will own or lease approximately 131,000 net acres in New York. That will leave the Norwegian company with about 98,000 net acres in the Marcellus and Utica natural gas fairways in central New York -- which the company considers its "core asset base" -- and about 33,000 net acres in the liquids-rich portion of the Devonian Shale in the western part of the state.

"One of the key elements for us is that this sale, in combination with a deal that we just structured with our bondholders, has allowed us to significantly reduce the overhead on our financial position," Holbrook said. "A year ago at this time we had $110 million in debt. With this last transaction we're down to the $10 million to $15 million range.

"Considering the circumstances in which we've been doing this -- depressed prices all over the country on natural gas and, of course, a lot of skepticism about what is going to happen in New York -- we've made significant strides in correcting our balance sheet."

Norse almost threw in the towel on New York. Last fall, it put most of its leasehold in the state up for sale, began looking into joint venture (JV) possibilities and mulled a shift toward Pennsylvania (see Shale Daily, Oct. 31, 2011; Oct. 25, 2011).

But with the New York Department of Environmental Conservation (DEC) making headway on its revised supplemental generic environmental impact statement (SGEIS) on fracking, Norse is finding a renewed sense of optimism.

"If anything, there's a reason to be more optimistic as we proceed," Holbrook said. "Right about the time we were putting that timeline together, Gov. Cuomo was quoted in an [interview] that he saw no reason why the DEC's review of the comments should take more than a couple of months. When he said that, he was doing more than just floating ideas; he was sending a message that he expects the DEC to wrap this process up."

During the company's 4Q2011 presentation to investors on Feb. 28, Norse revealed a timeline in which it estimated that the DEC will need until at least May to finish perusing the more than 60,000 public comments it received for the SGEIS (see Shale Daily, Feb. 8). But the company said it believes the agency should issue a final decision on fracking by June. If that happens, Norse anticipates permitting could begin in July followed by drilling in October.

DEC spokesperson Lisa King told NGI's Shale Daily the agency has so far received 65 permit applications to conduct HVHF in the Marcellus Shale. Of those, 47 were submitted by Chesapeake Energy Corp.; 10 were from Fortuna Energy Inc.; seven were from Norse, and one was from Vertical Resources Inc.

"[But] if high-volume hydraulic fracturing moves forward in New York, the permit applications would be incomplete and would need to be revised to comply with the conditions included in the final SGEIS," King said.

Holbrook said that is not a surprise.

"Our experience has been that you get in the queue, and if there's a need for corrections, refinements or clarifications you have an opportunity to respond and amend your filing," Holbrook said. "Our applications are more recent. We've obviously asked our people as best they can to submit applications that are as close to what we expect the rules to be, so that there will be less need for modification.

"This has been almost a four-year process, so it's not like we don't have a pretty good idea at this juncture what the SGEIS is expected to look like. My expectation is the number of [permit revisions] will be relatively minimal."

According to the DEC, Norse has submitted seven permit applications for HVHF wells in the Marcellus Shale. Those seven wells are:

Norse is also the only company with applications to drill HVHF wells into the Utica Shale. Two permit applications were submitted for the Norse-Housing 1H well in Smyrna, located in Chenango County, and the Branagan 1H well in Lebanon, which is in Madison County.

Holbrook confirmed that the company had an additional 22 permit applications in the works.

Holbrook said Norse was still interested in a joint venture to develop its assets, and would partner with firms from other nations as well.

"We're constantly on the lookout," Holbrook said. "You've got some pretty good-sized players: Exxon, Shell, Chesapeake, Talisman. I always remind them that we're out there and we're interested in somebody that wants to partner up.

"There seems to be foreign interest looking to come into the area. You may see us partner with somebody from Asia or Europe that's interested in getting a chance to get a foothold, rather than with our traditional majors. We still have a significant acreage position for a company our size."

Last year Norse sent notices of force majeure -- Holbrook said it was between 1,000 and 2,000 total -- to landowners covering its leased acres, citing the ongoing regulatory delays by the DEC (see Shale Daily, Jan. 18, 2011). No additional notices have been necessary.

"Among all of the companies that have been involved with this issue in New York, we have probably tried to stay the most active," Holbrook said. "We haven't added any additional acreage. We tried to drill other formations. In a different world, where shale development hasn't become a revolution, we probably could have economically drilled other formations. But you can't economically drill anything else now but the shale.

"If we could drill, and could determine that we could economically justify the drilling, we would remove the notice [of force majeure] on anything that preceded it."

Asked whether Norse would focus on its reportedly liquids-rich holdings in western New York or its drier natural gas assets in the central part of the state -- once the DEC's moratorium on HVHF is lifted -- Holbrook indicated that it would be the latter, citing more geoseismic data and proximity to existing pipeline infrastructure.

"We've done a lot more work in central New York," Holbrook said. "I suspect that our first focus may be on that which we've spent more of our time analyzing in recent years. [But] if you continue to see the disparity between the oil-related interests and gas, clearly economics can also drive the [decision]. We do view western New York as very good news in terms of potential."

During the Feb. 28 meeting Norse revealed that it had sold $26.7 million in acreage and royalties to fund operations through 2Q2012. About 22,700 acres in central New York were sold, along with an average 4% overriding royalty interest of its holdings in central and western New York.