Shares in Northern Petroleum (LON:NOP) saw their value slashed by 37.5p to 75p this morning on news of dire production problems at the company’s Geesbrug, Grolloo and Wijk en Aalburg fields in the Netherlands. Northern has made substantial cuts to reserves estimates on all three fields and said the non-cash depletion and associate charges meant it was expecting to report a loss for the year to December 2010.

The revisions to reserves follow an ongoing economic and technical evaluation. Reprocessing of 3D seismic data over Geesbrug and Wijk en Aalburg fields, plus much of the rest of the Netherlands acreage has been underway for some time. That should lead to a new assessment of reserves later this year. In the meantime, the combined revisions have cut the group’s 2P reserves by 75.24 billion standard cubic feet of gas, which is the equivalent of 12.97 million barrels of oil equivalence. When the company issued its results for the six months ended 30th June 2010, it reported group 2P reserves of 102.67 million barrels of oil equivalence.

Average production for 2010 was approximately 1,200 barrels oil equivalence per day and the company expects to report 2010 revenue of approximately €15 million, broadly in line with market expectations. Average production for the first four months of 2011 has been just over 1,900 barrels oil equivalence per day.

The bad news at Grolloo, which started commercial production in late 2009, is that an expected stabilisation of pressure has never occurred. That stabilisation would have been the trigger to install compression and or other surface equipment to aid and increase production. Northern said that it was not now feasible to add compression in time to make a material impact to 2011 gas production and that it was now calculating its reserves projection based on the presumption that pressure support from the lower permeability reservoir matrix would not occur.

At Wijk en Aalburg, which came into commercial production in December 2010, Northern has experienced the production of increasing quantities of oil, followed by increasing quantities of water, which has now affected production levels. There could be numerous reasons for this and the company is currently assessing the well ahead of deciding on possible interventions. The carrying value of the Wijk en Aalburg field as at 31st December 2010 is approximately…

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