Update with broker comment....
Shares in oil and gas group Northern Petroleum (LON:NOP) edged up in early trade after it sounded a confident note on outlook, pointing in particular to the “significant” upside potential of projects in Italy.
The company, which announced a profit warning last month, revealed a small loss over its full year.
For its full year to December 2010 the group posted a loss of €200.000 on revenues of €15 million. Average production for the year increased to 1,195 barrels of oil equivalent per day (boepd) compared to a 2009 average of 365 boepd.
The loss is attributed to charges including impairment. The cash position currently stands at €23 million of cash.
The company’s shares were badly hurt last month when it cut reserve estimates at three of its five gas fields in the Netherlands and issued a profits warning.
Today the group indicated production for 2011 will be in the range 1,550 to 1,650 boepd, assuming three months of downtime to allow for remedial action at its Wijk en Aalburg field in the Netherlands, one of the three affected by the cut in reserves.
Wijk en Aalburg, which only began commercial production in December 2010, initially produced increasing quantities of oil but this was eventually followed by increasing quantities of water, hitting production levels.
Northern is planning on providing further guidance on production later in 2011.
The group’s chairman Richard Latham struck an especially upbeat note on prospects in Italy which the group believes have “significant upside” potential and of a different order of magnitude to the ventures in the Netherlands.
In Italy Northern is continuing discussions with existing and potential future new partners to explore and drill large licence positions containing “significant prospects with highly material potential”. In addition, the group is moving forward the developments of its Rovesti and Giove oil fields with 53 million barrels of proven and probable oil reserves. “Even allowing for new partners providing the required finance our interests in these projects should remain substantial,” said Latham.
In response to the results Will Arnstein, analyst at finncap, said the numbers look in line but that "there is little new to get excited about on the operational side and production guidance for 2011 is disappointing". As a result, Arnstein reckons the risk to finncap's forecasts is on the downside. "With few catalysts we see no reasons to upgrade our rating at this time," he adds.
finncap has an 85p target price on the stock and rates it at 'hold'.
In early morning trade Northern Petroleum shares were up 1.5p to 80p, valuing the company at £74m.