Noreco, a Norwegian energy company focused on North Sea oil operations, said Monday its financial situation was deteriorating because of low oil prices.
Crude oil prices have been trading in a bear market at least since June, dropping more than $40 per barrel to fetch around $62 per barrel for Brent, the global price index comprised of North Sea oil.
Tommy Sundt, chief executive officer at Noreco, said high costs and low oil prices created a situation where the company needs to re-examine its momentum going forward.
"Noreco's financial situation and outlook has continued to deteriorate due to the significant and continued drop in oil prices, increases in projected operating costs and accelerated retention of cash to cover future abandonment costs," he said in a statement Monday.
The company said it expects to end the year with a cash balance that's $21 million less than expected Dec. 4. With its current debt schedule, Noreco said it expects to end the year with a $190 million shortfall.
In an effort to find what Noreco said was a "swift solution to its financial situation," the company said it was moving forward with safeguard measures.
"While we continue to pursue opportunities to best preserve values for all stakeholders, we need to accelerate work on an overall financial restructuring," Sundt says.
Major oil companies from BP to Marathon have trimmed back their expectations as oil prices continue to lose value. The price of oil is at a point where some drillers may no longer be able to make a profit.
Noreco added it was unable to bring one of its offshore British operations, Huntington, back on stream because of infrastructure problems with a production platform.
"The riser platform will be closed at least until Dec. 18, probably longer," the company said.
