2nd quarter operating and financial resultsSterling Resources announces 2nd quarter operating and financial results
CALGARY, Aug. 18 /CNW/ - Sterling Resources Ltd. (TSX-V:SLG) ("Sterling" or the "Company") an international oil and gas company with exploration and development assets in the United Kingdom, Romania and France, announces interim operating and financial results for the quarter ended June 30, 2009. Unless otherwise noted all figures contained in this report are denominated in Canadian dollars.
The net loss for the quarter ended June 30, 2009 was $1,669,508 ($0.01 per share - basic and diluted) compared to a loss of $1,001,700 ($0.01 per share - basic and diluted) for the three months ended June30, 2008. For the six months ended June 30, 2009 a net loss of $2,823,445 ($0.02 per share -basic and diluted) was recorded compared with a loss of $1,045,804 ($0.01 per share - basic and diluted) for the six months ended June 30, 2008. Factors which account for these larger losses when compared to the second quarter and first half of 2008 include: interest expense on the secured notes, lower interest income as a result of lower average cash balances and interest rates, lower capitalization of overhead due to lower capital related activities, increased stock based compensation as a result of new options issued in 2009 and amortization of debt issue costs related to the bridge financing facility.
Cash and cash equivalents at June 30, 2009 were $12,108,896 compared to $15,769,514 as at December 31, 2008. The net working capital deficiency was $3,687,999 at June 30, 2009 compared to positive net working capital of$13,967,470 at December 31, 2008.Capital expenditures during the six months ended June 30, 2009 totaled $16,416,221 compared to $11,648,048 during the first six months of 2008. Capital expenditures during the first half of 2009 were focused upon two major items: $10.4 million related to the completion and testing of the Breagh 42/13-5 and 5z wells in the UK Southern North Sea and $2.1 million related to the acquisition of high resolution seismic in the Romanian Black Sea.
Sterling's primary focus during the second quarter has been upon finalizing the Breagh sales process which has been ongoing for a number of months. Subsequent to the end of the second quarter, we were pleased to announce the signing of a fully termed sale and purchase agreement with RWE Dea UK SNS Limited ("RWE Dea"),a subsidiary of Hamburg based RWE Dea AG. RWE Dea will, as a result of multiple related transactions with Sterling and its partners, acquire a 70 percent working interest in the Breagh field and the surrounding exploration blocks in the UK Southern North Sea. RWE Dea will also become operator of the greater Breagh area, commonly referred to as the Quad 42 area. The agreement is expected to close before the end of the third quarter and is subject to approval by the UK Secretary of Energy and Climate Change.
"The completion of the Breagh sales process is a major milestone for the Company, and we are pleased that a major player with the stature of RWE Dea has chosen to partner with us as we move forward towards achieving initial gas production. We have appreciated the patience of shareholders as the Breagh process advanced and we look forward to pursuing exploration and development activities in the greater Breagh area which we believe will continue to add significant value for Sterling's shareholders," stated Stewart Gibson , Sterling's Chief Executive Officer."Our first order of business this summer at Breagh is completion of a pipeline survey to Tees side in preparation for onshore delivery of future gas production," added Mr. Gibson.
At closing of the Breagh transaction, Sterling will receive consideration of approximately $103 million in exchange for a 15percent working interest in the Breagh field and varying interests in the surrounding exploration blocks. Sterling will retain a 30 percent interest in the Breagh field and the surrounding blocks of Quad 42 which comprise the greater Breagh area. Sterling anticipates that it will fund its share of future Breagh development through a combination of equity and project financing.
During the first quarter of 2009 the Company announced that a letter of intent had been signed with Challenger Minerals (North Sea) Limited ("CMI") under the terms of which CMI would farm into 10 percent of Sterling's current 39.9 percent interest in the Cladhan oil discovery located in Block 210/29a in the UK Northern North Sea. As part of the letter of intent, CMI have agreed to pay a contribution towards past well costs and a partial carry on the forthcoming sidetrack well at Cladhan. In accordance with the same letter of intent, Sterling farmed into a 10percent interest in CMI's Crosby prospect on Block110/14d in the East Irish Sea . Sterling's share of the Crosby well was funded by a portion of CMI's contribution to Cladhan's past costs. The Crosby well was completed during the second quarter, but failed to find hydrocarbons.
Offshore Romania,the closing of the previously announced farm-out to Melrose Resources plc ("Melrose") continues to await Romanian government approvals which have been delayed due to the political situation and we continue to closely monitor events as they pertain to Sterling's interests. Prior to commencing activities in Romania , Sterling had in place all of the legally mandated licensing and permits, and we intend to defend our interests should any action be taken against the Company. Sterling's representatives in Romania have been active participants in the dialogue that is occurring there and we remain optimistic that resolution of the issues raised can be achieved to the satisfaction of all stakeholders.
Early in the second quarter Sterling successfully closed a financing totaling US$11.2 million (including the proceeds of a significant over allotment) which is providing a bridge until funds from the sale of Sterling's interest in Breagh are received. This funding will also enable continued progress with the advancement of Breagh pre-development activities including the pipeline survey to Teesside. The Breagh sale, Melrose farm-out and the bridge financing arrangement should see the Company well-financed until late 2010, but significant additional funding will be required to complete the Breagh and Doina/Ana development projects. We have accordingly initiated the process for putting this financing in place by entering into a non-binding project financing arrangement with The Royal Bank of Scotland ("RBS"). Under the terms of this mandate letter, RBS will assume the role of lead debt structuring bank, to arrange project financing and services as required over the next three years. The selection of RBS, a domestic UK lender with global operations, as lead is consistent with recent UK government initiatives encouraging the financing of oil and gas projects designed to further expand UK petroleum supplies.
The Company anticipates the completion of a drilling programencompassing the following three areas during the latter portion of 2009 and early in 2010:
- Three onshore shallow gas wells at Craiovain Romania are planned to
be drilled commencing during the fourth quarter of 2009. These wells
will be drilled by Trans Atlantic Petroleum Corporation who will fund
this program in order to earn a 50 percent interest in Craiova;
- Planning is underway to drill further wells in Quad 42 (greater
Breagh area) in the Southern UK North Sea late in 2009 or early in
2010. Drilling of these wells will be planned in accordance with the
broader scope of progressing the greater Breagh area with RWE Dea, as
described above, and is anticipated to result in a multi-well
program; and
- Following discussion with partners, a sidetrack well at Cladhan in UK
Northern North Sea is now planned for early 2010, as opposed to the
fourth quarter of 2009 as originally planned.
Sterling Resources Ltd. is a Canadian-listed international oil and gas
company headquartered in Calgary,Alberta with assets in the United Kingdom,
Romania and France. The shares are listed and posted for trading on the TSX
Venture Exchange under the symbol "SLG".