Banking on the possibility that New York will lift its moratorium on high-volume hydraulic fracturing (fracking) in the near future, Norse Energy Corp. ASA on Thursday completed a $37 million sale of operated production and other assets in the Empire State to EmKey Resources LLC (see Shale Daily, March 19), giving it cash to focus on core properties in the Marcellus and Utica shales in central New York.

The sales to EmKey included substantially all of Norse's central New York properties, which included producing wells, approximately 23,000 held by production, or owned acres, the associated natural gas gathering system, and pipeline rights of way. However, Norse said it will retain a 37.5% working interest in all deep formations, including the Utica Shale on the conveyed acres. As part of the deal EmKey receives a three-year warrant to purchase 81 million Norse (NOK) shares at a strike price of NOK 0.40.

"This is a significant milestone for Norse Energy," said Norse CEO Mark Dice. "This asset sale provides the cash needed to complete the bond debt restructuring that we announced on 28 February. Norse is now much better positioned to create value for shareholders through development of its significant shale resources."

EmKey is a private company that is led and partially owned by Oivind Risberg, a current Norse board member and former Norse CEO. As part of this transaction, EmKey has committed to construct a new pipeline system in central New York capable of transporting at least 90 MMcf/d for 15 years once Norse so nominates.

Coming out of the sale, Norse now owns or leases approximately 130,000 net acres in New York, of which 33,000 lies in the liquids-rich shale fairways of western New York, with the remaining 97,000 net acres in the Marcellus and Utica natural gas fairways in central New York.

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 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 on fracking, Norse is finding a renewed sense of optimism.

Last month DEC Commissioner Joseph Martens said there was no timetable for a final decision on whether fracking would be approved (see Shale Daily, April 23). However, legislators and regulators in New York are hinting that should high-volume fracking be permitted, localities that are the most receptive to the practice may be the first -- and, possibly, the only -- areas to allow it.

While it is still too early to speculate, places in or around New York's Chemung, Tioga and Broome counties are thought to be good places to begin exploration as they are the more geologically desirable regions bordering Pennsylvania. Support for natural gas there is also considered significant. Beyond that, Chenango, Cortland, Otsego and Tompkins counties could also be on the radar, but some localities are in opposition. The Town of Middlefield in Otsego County and the Town of Dryden in Tompkins County have enacted local ordinances that ban fracking. In separate rulings earlier this year, county judges have upheld those ordinances (see Shale Daily, Feb. 29; Feb. 23). Both decisions are expected to be appealed.