Northern Petroleum Plc (LON:NOP) has taken its first steps into the Italian gas production market after snapping up several onshore production and development gas assets from Rockhopper Exploration Plc (LON:RKH).
Among the assets the AIM-listed explorer is acquiring is a 100% interest in the Aglavizza production concession, which includes the producing Civita gas field.
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Civita is tied into the national gas network and averaged gas production of 130 barrels of oil equivalent per day in 2016. According to internal estimates, the field is estimated to contain approximately 1 billion cubic feet of recoverable gas.
Alongside Civita, Northern told investors it is reviewing the possibility to redevelop the Cupoloni field in the Scanzana licence, while it also has plans to explore the further subsurface potential of the Vigna Nocelli field in the Torrente Celone concession.
Revenue and operating profit – excluding various charges – attributable to the acquisition assets for the 12 months to 31 December 2016 was €1.1mln and €0.7mln respectively. The operating profit from the Civita gas field was €0.9 million.
WATCH: Northern Petroleum takes 'exciting' first steps into Italian production & development market
“This acquisition is the company's first step into the valuable gas production market in Italy and complements our oil production in Canada,” said chief executive Northern Petroleum.
“The deal is directly in line with our production led growth strategy, allows us to utilise our Italian tax position efficiently and demonstrates our ability to continue to grow production at little or no cost.
“We consider Italy to have further acquisition opportunities for growth and will continue to evaluate additional assets to supplement those acquired today, as we look to build an Italian production and development business,” he added.
Northern will assume abandonment liabilities
As part of the deal, Northern will assume the abandonment liabilities of a few other production concessions which, excluding Aglavizza and the two fields with redevelopment potential, are estimated to be €3mln over the next ten years.
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Rockhopper has agreed to foot some of the bill and will pay Northern US$1.6mln (€1.42mln) on completion of the deal, which is subject to Italian regulatory approval but expected to go through later this year.
Northern already has several exploration permits and applications in Italy, including a joint venture with oil giant Royal Dutch Shell PLC (LON:RDSB).
Back in 2015, Northern set up a US$0.9mln deal to bring in Shell’s Italian subsidiary for the onshore Cascina Alberto project – which will see Shell ‘carry’ some of NOP's exploration costs.