Final Results
Sterling Energy PLC
30 June 2003
Sterling Energy plc
Preliminary Announcement of Results for the Year Ended 31 December 2002
Sterling Energy plc ('Sterling', 'the Company'), the AIM listed oil & gas
company, today makes its preliminary announcement of its results for the year
ended 31 December 2002 and has today posted its annual report to shareholders.
Highlights
• Transformation of the Company following acquisition of Sterling Energy Ltd
for £7.9 million in October 2002
• Year-end reserve base increased to over 17 bcfe and daily production up to
3.3 mmcfe/d
• Book net assets up from £0.5 million to almost £15 million
• Reduction of year end loss: cut to £0.1 million from £1.5 million in 2001
• New projects on target for further early boost to revenues
• Consolidation of management team with proven track record
• Strong new institutional shareholder base
• Strong US gas prices
Chairman, Richard O'Toole, said:
'We are delighted that the implementation of our strategy of building a strong
cash generative production base in the Gulf of Mexico complemented with
selective international exploration prospects is rapidly taking shape. We look
forward to another exciting year for the Company and its shareholders'.
Chief Executive, Harry Wilson, stated that:
'The performance of the Company is the only true measure of the success of our
strategy. We believe our track record over the last year stands as an
endorsement that we are on the right track.'
Enquiries:
Harry Wilson, Chief Executive, Sterling Energy plc 01582 462 121
Graeme Thomson, Finance Director, Sterling Energy plc 01582 462 121
Allan Piper, First City Public Relations 020 7436 7486
07050 203 304
Chris Callaway, Evolution Beeson Gregory 020 7071 4309
Website: www.sterlingenergyplc.com
The following are extracts from the Sterling 2002 annual report.
Chairman's Statement:
Chairman, Richard O'Toole, said:
'As your Chairman since October 2002, I am pleased to report the successful
transformation of your Company which is now a cash-generative business with a
strong asset base and excellent development prospects.
While the annual results for the year to December 2002 include only two months
of trading after the acquisition of Sterling Energy Ltd for £7.9 million, the
results reflect an immediate impact of this transaction on the Company's
fortunes. Losses for the year fell dramatically from £1.5 million in 2001 to
£0.1 million in the current year and there was an increase in net assets from
£0.5 million to £15 million. Trading during the first four months of this year
is continuing to improve and the Company is now trading profitably.
The Company's proven and probable reserves have risen from virtually zero in
January 2002 to the year end level of 17 bcfe. Net production rose from a
negligible level in January 2002 to 4.4 mmcfe/d in April of this year.
We have recently entered into an active development phase and anticipate
production by the year-end to climb significantly, exclusive of any new
production brought in by acquisition.
Sterling currently has production interests in seven Gulf of Mexico gas fields
covering 15 leases, together with minor production onshore USA and Canada.
Approximately 95% of the Company's current production is from gas, at a time
when prices have been at an historically high level.
Apart from the acquisition of Sterling Energy Ltd other key milestones have been
achieved since the start of 2002. During the period the Company acquired:
• Westmount Resources, Inc. with small producing assets in the US.
• A 17.5% interest in the Galveston 303 licence:this acquisition has
not only paid for itself already but has significant development upside which we
hope to tap in the coming months.
• El Gordo/Sherman: These fields are presently producing revenues of
approximately $250,000 per month and have development upside which is presently
being exploited.
• Eugene Island 268: The Company acquired 60% of this licence since
the year-end, which has in excess of 4bcf of net proven and probable reserves
with exploration upside.
We also saw the successful drilling and hook up of the Gryphon #2 well on our
High Island 52 acreage, in which the Company has a 7.63% royalty interest. The
combined gross flow from these two wells is presently in excess of 35mmcfd. This
success has led to a significant increase in the reserves attributable to the
license and has improved the future development potential of the area in
general.
We are now looking forward to an exciting period for our Company with several of
the Gulf of Mexico development projects coming to fruition. Over the next 18
months, we are planning a very active development programme with up to six wells
scheduled for drilling or recompletion at a net cost of up to $8 million. These
will include Eugene Island 268, where a new platform was installed during May
and a rig is presently on site, and El Gordo, where drilling of the number 4
well commenced in June. The Company is also planning to commence further work at
High Island 52 and High Island 68.
The Company has, in addition, an exploration licence covering the Reed Bank
area, offshore Philippines. Discoveries with potential reserves of up to 600bcf
were made during the 1970s and 1980s, and significant additional exploration
potential exists within the licence. Sterling is currently reprocessing and
reinterpreting seismic over the licence and studying the application of
innovative gas-to-liquids technology to unlock these potentially commercial
reserves.
In a period of international financial turmoil, the Company has also been in a
position to raise £6.6 million cash through the placing of new shares in 2002,
securing for itself a firm financial and institutional shareholder base. These
financial resources and the new shareholder support have played a key role in
enabling the Company to pursue its acquisition and development programme. We are
pleased to welcome the new shareholders to our Company and thank them for their
support at a time when so many, it would seem, had lost faith in the capital
markets. We are particularly gratified by the strength of the institutional
support we have received.
Underpinning this transformation has been the consolidation of the strong
management team, who themselves own some 19% of the Company. I would like to
express my appreciation for the dedication and effort of my fellow directors and
Company staff that have worked hard to create this exciting opportunity for the
Company and its shareholders.
OUTLOOK
The outlook for gas production in the US has rarely been better, with gas prices
recently running in excess of $5.50 per mcf, production declining, and
consumption increasing. The gas futures market in the US allows us to lock in
these advantageous prices for some of our gas production.
Consolidation within the oil industry has led to a high level of deal flow and I
am confident that this will afford us the opportunity to maintain a rapid growth
in both oil and gas reserves and shareholder value.
We are delighted that the implementation of our strategy of building a strong
cash generative production base in the Gulf of Mexico complemented with
selective international exploration prospects is rapidly taking shape. We look
forward to another exciting year for the Company and its shareholders.'
STRATEGY
Chief Executive, Harry Wilson, stated:
'Overshadowing our plans and strategy for Sterling is the outlook for oil & gas
prices. These have remained high. The fundamentals look strong for the sector
but we are careful to develop our strategy and assets without relying on this
continuing. This means being cautious about prices we input to our economic
modelling and reducing the downside by selectively hedging our sales.
The performance of the Company is the only true measure of the success of the
strategy. We believe our track record over the last year stands as an
endorsement that we are on the right track.'
OPERATIONS REPORT
In its operations report, Sterling's Operations and Technical Director, Nigel
Quinton, states that:
'Gulf of Mexico, USA
The Company has established an exciting portfolio of producing properties in the
Gulf of Mexico, as a result of the acquisition of Sterling Energy last year, and
supplemented by the addition of Galveston 303 in October 2002, plus the recently
announced Eugene Island 268.
95 percent of the Company's reserves are gas, which has considerable appeal
given a strategic view of the US gas market. Gas prices are currently at a
sustained high and there is a clear trend of diminishing supply versus demand.
All of Sterling's properties are located in the shallow water shelf region where
production, development and drilling costs are modest. All but one of our fields
are in less than 60 ft of water.
The properties have been targeted as fields that can be bought on the basis of
the proven remaining reserves, but in areas where there is remaining development
or exploration potential that has not been addressed or evaluated by previous
owners.
Sterling has generally taken a controlling interest in the properties and
brought in an operating partner such that we can control the direction and pace
of evaluation and development activity without the overhead associated with
being an offshore operator.
In January 2003 the Company hired Bob Munn as VP of its new Houston office. Bob
has 23 years of experience the last 10 years of which has been spent working the
offshore GOM, mostly with Amerada Hess where he reached the level of Division
Explorationist, the top technical grade. Under his leadership, the Company is
rapidly building a capacity to acquire, evaluate and eventually operate its
expanding portfolio in the Gulf of Mexico.
High Island 52 field
The High Island 52 Field was discovered in 1959 and has produced over 90 bcf to
date. Despite the long history, there are still discoveries being made in the
area. The field lies within the current trend of drilling for deep gas. In
addition to the Gryphon discovery, Forest Oil have a discovery in the
neighbouring High Island 53, which is expected to be tied back to the A platform
with the benefit of delaying abandonment and generating significant processing
fees.
Following acquisition of this property in 2000, Sterling was able to maintain
production at a higher level than previously expected. Sterling was, perhaps
surprisingly, the first owner to use 3D seismic to evaluate the field. Sterling
farmed out the deep rights in the NE/4 to Gryphon Exploration who drilled the
Bart discovery in 2001.
Following this success, the Company has worked up additional prospects and with
new seismic reprocessing, to be paid for by a potential farm-in partner, we hope
to be drilling further exploratory wells next year. We also have identified
additional development potential which is scheduled to be drilled in 2003.
Production has been shut in recently pending recompletions and drilling which
are scheduled in the coming months.
High Island 52-
Gryphon Exploration Bart Discovery
2002 saw the drilling of the second well on the Bart discovery that was made in
2001. Sterling has an overriding royalty interest of 7.6% in this field. The #2
well confirmed the extent of the reservoir and was a significant improvement on
the #1 well, with considerably improved reservoir thickness. The well was
completed early in 2003 just in time to catch the wave of higher gas prices.
Since February, production has been stable at 35 mmcfd from the two wells. This
is 100% 'profit', all costs having been paid by Gryphon Exploration and its
partners.
High Island A68/A83
These leases are very close to the end of their current producing life, and are
subject of a detailed review of remaining potential. We expect to be completing
this review shortly.
El Gordo
The El Gordo field was discovered in the 1970's and is one of the largest and
oldest fields lying in Texas State waters. Sterling purchased a majority
interest in this field in May 2002, and has worked closely with the operator to
establish a programme of development drilling and recompletions which commenced
in June 2003.
Beneath the main El Gordo sand (> 200 bcf produced to date) lie a series of
fault blocks that have only been imaged by recent advances in 3D seismic
quality. As a result we have been able to identify significant remaining
potential that was not apparent to previous operators.
A sidetrack operation is underway to recover reserves from the deepest reservoir
yet drilled on the field. A follow up programme is planned including a
recompletion of an undepleted reservoir, and an infill well which could have
reserves potentially as high as 40 bcf.
Sherman Field
The Sherman field presently consists of only two producing wells but these have
performed consistently since purchase as part of the same package that included
El Gordo. Sterling plans to purchase seismic data later this year to evaluate
the exploration potential in an area that although productive for many years has
very few well penetrations below 7000 ft.
Galveston 303
This property was acquired in late 2002, and has considerable development
potential, as well as exploration targets. The purchase achieved payout within
only a few months, and production from the A platform continues at rates in
excess of 3 mmcfde. Plans are under discussion with the operator for
recompletion and drilling operations for 2003 and 2004.
Eugene Island 268
As announced in April 2003 Sterling has taken a 60 percent working interest in
this project which involves the development of a 1997 gas discovery that was
deemed too small by previous owners. Gross reserves of 8.9 bcf have been
certified and a platform was installed at the end of May 2003. Re-entry and
completion operations are underway plus a pipeline to the nearby Unocal facility
at EI 267. Total development costs are less than $7 million, i.e. below $1 per
mcf, versus a current gas sales price in excess of $5.50 per mcf.
In addition there is offset drilling potential that will provide very cost
effective reserves additions once the 3D seismic has been worked up fully over
the coming months.
Other North American Interests
The Company maintains its long term holdings in Canada and the US, but will be
looking to dispose of these less material interests in the coming year. The
interests acquired through the acquisition of Westmount Resources Inc, which
consist mostly of small royalties in fields located in the Gulf Coast area, have
performed as expected.
International
The Company, led by our Exploration Manager Andrew Grosse, has been actively
developing and evaluating international exploration opportunities. In addition
to the exploration license in the Philippines, applications are underway in
several countries. The Company hopes to make announcements on the success of
these applications as the year progresses.
Reed bank, offshore Philippines
Sterling Energy was awarded GSEC 101 over Reed Bank, offshore Philippines, on
13th June 2002. The work programme includes seismic and engineering studies, and
has a 24 month term which may be extended to conduct additional work. The Reed
Bank concession lies about 200 kilometres southwest of the NW Palawan oil and
gas province which includes the giant Malampaya gas field and several oil
fields. It covers 10,360 km2 (2.6 million acres) over several large
shallow-water carbonate banks with water depths less than 100 metres.
The concession already contains the Sampaguita gas discovery, dating from
exploration in the late 1970's and early 1980's. Two wells flowed gas from
Eocene sandstones, demonstrating the presence of gas, and Potential Reserves
have been certified as 584 bcf.
The challenge is to find a commercial development strategy for these reserves,
as pipeline options will likely require the discovery of 2 tcf or more.
Recent advances in methanol production technology may make a methanol plant a
viable economic solution for developing Reed Bank gas and Sterling is
investigating this option as part of its committed work programme.
In addition to the proven gas, GSEC 101 has significant exploration potential.
Existing 2D seismic has identified several prospects, one of which, the Champaca
Prospect, is a large amplitude anomaly lying close to Sampaguita, but with
significantly greater reserves potential. Subject to the results of initial
studies, Sterling plans to acquire a 3D seismic survey over Sampaguita and
Champaca in 2004 with future exploration or development drilling expected to
follow in 2005 or 2006.
NW Europe Interests
The Company owns a 10 percent working interest in PEDL 71 in Yorkshire where
seismic mapping has identified prospects which are currently being evaluated.
The Company owns a 5 percent working interest in the Donkerbroek gas discovery
onshore Holland.
A summary of Sterling's Proven and probable reserves is:
Oil Gas Attributable reserves
(000 barrels) (million cubic ft) (million cubic feet equivalent)
1 January 2002 (1) - 30 30
Corporate Acquisitions (2) 99 13,807 14,398
Upwards revision (3) 30 3,244 3,424
Production -1 -240 -246
31 December 2002 (3) 128 16,841 17,606
Notes:
1. The reserves as at 1 January 2002 are estimated by the directors and
relate only to the Canadian interests.
2. The reserves acquired under corporate acquisitions are based on;
• evaluations by independent consulting engineers of the interests
acquired through the takeover of Sterling Energy Limited in October 2002. Their
published reserve estimates were effective as of the start of the year. These
reserve estimates have been adjusted for production to the acquisition date;
• reserves acquired through the purchase of an interest in Galveston
303 in October 2002;
• directors estimates for the net reserves attributable to Westmount
Resources, Inc at its date of acquisition in March 2002.
3. The year-end 2002 figures all relate to North America. The upward
revisions and the Galveston reserves are based on reserve reports as at 31
December 2002, which have been prepared by independent consulting engineers. The
upward revision is principally related to the Gryphon field following the
successful number 2 well. '
Financial extracts: extracts from the financial statements are set out below.
FINANCIAL REPORT AND OUTLOOK
In its financial report and outlook, Sterling's Finance Director & Company
Secretary, Graeme Thomson, reports:
'Acquisitions and fund raisings
The year saw a transformation in the financial position of the Group. At the end
of 2002 net assets had grown to £14.91 million from £0.47 million at the end of
2001 and net current assets had increased to £7.00 million (2001: £0.44
million). The emphasis during 2002 was on building a portfolio of cash flow
generating assets and enhancing the working capital position of the Group, as
well as investing in licences with potential for appraisal and drilling
opportunities.
In early March 2002, the acquisition of Westmount Resources, Inc ('Westmount')
for approximately £0.5 million was completed. The consideration for this
transaction comprised the issue of 6.5 million shares at 4.5p, together with
approximately £0.2 million in cash. This increased the net current assets of the
Group by approximately £0.15 million and yielded an operating cash inflow in the
10 months since purchase of over £0.03 million.
The major highlight of the year was the acquisition of Sterling Energy Limited
('SEL') for approximately £7.9 million in mid October 2002. This was set out in
a circular to shareholders dated 26 September 2002 and completed following an
Extraordinary General Meeting ('the EGM'). This acquisition brought with it
producing assets and new drilling prospects in the USA, as well as an
experienced executive management team. The initial consideration at completion
was 157 million ordinary shares, with a further 40 million expected to be issued
by the end of 2003, subject to deduction for any agreed warranty claims. The
financial statements consolidate the results of SEL for the two and a half
months since acquisition to the end of the year. During that time it contributed
in excess of £0.5 million to turnover and approximately £0.2 million to gross
profit.
A coterminous placing and open offer at 4p per share was also completed in
October. This resulted in the issue of approximately 60.4 million ordinary
shares and raised approximately £1.8 million of cash after deducting the costs
of the SEL purchase and this fund raising.
The purchase of a 17.5% working interest in Galveston 303 licence offshore USA
for a net consideration of approximately $0.1 million (£0.06 million) was also
completed in October. It adds further to the portfolio of drilling prospects. By
year-end the incremental operating cash flows from this asset had exceeded the
purchase price. As a result of these various purchases, offshore US production
had increased to an average of approximately 3.3 million cubic feet of gas per
day by December 2002.
A further placing of 90.9 million shares at 5.5p in December raised
approximately £4.75 million in cash, net of expenses. In conjunction with the
other transactions described above, the issued share capital had therefore risen
to approximately 353.8 million shares at the year-end (2001: 39.0 million).
Since the 2002 year-end, the Group has acquired a 60% interest in the Eugene
Island 268 lease in the Gulf of Mexico. Drilling commenced in late June 2003 and
Sterling expects its total direct investment in this project in 2003 to be
approximately US$4.2 million (£2.63 million). In addition, also in June 2003,
drilling started on the sidetrack on the EI Gordo licence in the Gulf of Mexico,
with Sterling Energy plc's share of costs budgeted at $1.6 million (£1.0
million).
In May 2003, approximately 20.7 million warrants to subscribe for ordinary
shares at 6p were exercised, raising approximately £1.2 million in cash for
working capital purposes.
Profit and loss
Gross profit in 2002 improved to over £0.2 million (2001: £0.02 million),
principally as a result of the Company and asset acquisitions set out above. The
non-recurring nature of the 2001 write down on exploration assets of £0.94
million and abortive acquisition costs of £0.3 million were the primary reasons
for the reduction in the Group's operating loss, which fell from £1.48 million
in 2001 to £0.078 million in 2002. After adjustment for net financial costs, the
net loss for 2002 was £0.098 million (2001: loss of £1.49 million). Loss per
share fell to 0.1p in 2002 from a loss of 6.7p in 2001.
Cash flow and balance sheet
The Group's cash flow from operations moved from an outflow of £0.5 million in
2001 to an outflow of £1.1 million in 2002. However, this was more than
compensated for by the proceeds from the share placings and the open offer,
which resulted in a significant improvement in cash balances by the end of 2002
when they stood at £7.33 million (2001: £0.57 million), including £0.86 million
of escrowed abandonment funds.
Net current assets improved to £7.00 million (2001: £0.44 million), whilst the
effect of consolidating the net assets of Westmount and SEL at their fair value,
of the various share issues and of the deferred shares expected to be issued in
respect of the SEL acquisition, are the primary reasons for the increase in net
assets from £0.47 million at the end of 2001 to £14.91 million at the end of
2002.
Financial outlook
With the increase in average production following the purchases made in late
2002, with the Gryphon 2 well commencing production in early 2003 and with
strong gas futures prices in the US, the directors consider the outlook for the
Group to be excellent. Although the impact of the current and planned drilling
and production improvement programme will not become apparent until the second
half of 2003, results for the first quarter were still significantly better than
in the last quarter of 2002. The directors remain optimistic that, based on
expected production levels, assuming good drilling results, with forward gas
prices as indicated by the markets and taking into account hedging contracts
entered into, 2003 results will show a continuing increase in profitability,
leading to improved cash generated from operations. Existing working capital
will enable the Group to invest further, not only in the producing operations
but also internationally in early stage exploration projects where outstanding
returns may be found.'
Notice of Annual General Meeting ('AGM')
The AGM is to be held on 23 July 2003. The Notice of Meeting and form of proxy
were sent to shareholders today.
Enquiries:
Harry Wilson, Chief Executive, Sterling Energy plc 01582 462 121
Graeme Thomson, Finance Director, Sterling Energy plc 01582 462 121
Allan Piper, First City Public Relations 020 7436 7486
07050 203 304
Chris Callaway, Evolution Beeson Gregory 020 7071 4309
Sterling Energy plc
Consolidated profit & loss account
For the year ended 31 December 2002
Notes 2002 2001
£000 £000
Turnover - existing operations 22 49
- acquisitions 3 566
_________ _________
588 49
_________ _________
Cost of sales- existing operations (13) (24)
- acquisitions 3 (365) -
_________ _________
(378) (24)
_________ _________
Gross profit - existing operations 9 25
- acquisitions 3 201 -
_________ _________
210 25
Administrative expenses
Amounts written off intangible fixed assets 4 - (944)
Abortive acquisition and deal costs 4 - (303)
Other - existing operations (131) (259)
- acquisitions 3 (157) -
_________ ________
(288) (1,506)
_________ ________
Operating (loss)/profit- existing operations (122) (1,481)
- acquisitions 3 44 -
_________ ________
(78) (1,481)
_________ ________
Investment income 22 13
Interest payable and similar charges (42) (25)
_________ ________
Loss on ordinary activities before taxation (98) (1,493)
Taxation 2 - -
_________ ________
Loss for the financial year (98) (1,493)
_________ ________
Loss per share (basic and diluted) 5 (0.1)p (6.7)p
_________ _________
The accompanying notes are an integral part of these extracts from the financial
statements.
Sterling Energy plc
Consolidated balance sheet
31 December 2002
Notes 2002 2001
£000 £000
Fixed assets
Intangible assets 3 4,096 26
Tangible assets 3 6,560 7
_________ ________
10,656 33
_________ ________
Current assets
Debtors 673 20
Cash at bank and in hand 7,334 566
_________ ________
8,007 586
Creditors: Amounts falling due within one year (1,006) (149)
_________ ________
Net current assets 7,001 437
_________ ________
Total assets less current liabilities 17,657 470
_________ ________
Creditors: Amounts falling due after one year (808) -
Provisions for liabilities and charges (1,939) -
_________ ________
Net assets 14,910 470
_________ ________
Capital and reserves
Called-up equity share capital 3,538 1,282
Shares to be issued 3 1,600 -
Share premium account 13,334 2,443
Currency translation reserve (173) 36
Profit and loss account (3,389) (3,291)
_________ ________
Shareholders' funds 14,910 470
_________ ________
Shareholders' funds may be analysed as:
Equity interests 14,910 (421)
Non-equity interests - 891
_________ _________
14,910 470
_________ _________
The accompanying notes are an integral part of these extracts from the financial
statements.
Sterling Energy plc
Consolidated statement of total recognised gains and losses
For the year ended 31 December 2002
2002 2001
£000 £000
Loss for the financial year (98) (1,493)
Currency translation adjustments (209) -
_________ _________
Total recognised losses relating to the year (307) (1,493)
_________ _________
Reconciliation of movements in Group shareholders' funds
For the year ended 31 December 2002
2002 2001
£000 £000
Loss for the financial year (98) (1,493)
Other recognised losses for the year (209) -
Shares issued (net of expenses) 13,147 1,063
Shares to be issued 1,600 -
________ _________
Total movement in the year 14,440 (430)
Shareholders' funds at 1 January 470 900
________ _________
Shareholders' funds at 31 December 14,910 470
________ _________
Consolidated cash flow statement
For the year ended 31 December 2002
Notes 2002 2001
£000 £000
Net cash outflow from operations 6 (1,104) (453)
Returns on investments and servicing of finance (3) 1
Capital expenditure (79) (55)
Acquisitions 405 -
_________ _________
Cash outflow before financing (781) (507)
Financing 7 6,574 1,025
_________ _________
Increase in cash 5,793 518
_________ _________
The accompanying notes are an integral part of these extracts from the financial
statements.
Sterling Energy plc
Abridged notes to financial statements
1. These financial extracts are taken from the financial statements for the
year ended 31 December 2002 which were approved by the Board of Directors on 24
June 2002 and on which the auditors, Deloitte & Touche, have issued an
unqualified opinion thereon. They do not constitute full financial statements
within the meaning of the Companies Act 1985. The annual report, which includes
the financial statements, will be posted to shareholders today. The Company has
delivered financial statements for the year ended 31 December 2001 to the
Registrar of Companies.
2. Save for the adoption of FRS19 in respect of deferred tax, which had no
material impact on the financial position of the Group, the accounting policies
have been consistently applied during the periods under review.
3. The acquisitions of the whole of the issued share capital of Sterling
Energy Limited ('SEL') for £7,880,000 on 18 October 2002 (satisfied by the issue
of 197,000,000 ordinary shares at 4p), and of Westmount Resources, Inc. on 6
March 2002 for approximately £495,000 (satisfied by the issue of 6,500,000 in
ordinary shares at 5.5p and £202,000 in cash), have been accounted for at their
fair value from their date of acquisition. Of the total consideration paid for
SEL, 157,000,000 ordinary shares were issued as the initial consideration shares
(£6,280,000) and up to a further 40,000,000 ordinary shares (£1,600,000) will be
issued no later than 31 December 2003. Details of the acquisition of SEL were
set out in a circular to shareholders dated 26 September 2002. The £5,290,000
excess of the fair value of the consideration paid for SEL over its book value
of £2,590,000 at the date of acquisition has been allocated by the directors,
having regard to reports by independent petroleum consulting engineers. Of this
sum, £1,090,000 was allocated to tangible fixed assets and £4,200,000 was
allocated to intangible fixed assets. The results for these companies for their
respective periods since acquisition are shown as 'acquisitions' in the profit
and loss account.
4. Amounts written off intangible fixed assets of £944,000 in 2001 arose in
connection with a North Sea licence that was relinquished during 2002. Abortive
acquisition and deal costs of £303,000 in 2001 represents costs incurred in
connection with an aborted deal.
5. The calculation of basic earnings per share is based on the loss for the
financial year of £98,000 (2001 - loss of £1,493,000) and on 90,983,836 (2001 -
22,146,233) ordinary shares, being the weighted average number of ordinary
shares in issue. Diluted earnings per share is the same as basic earnings per
share in both years as the effect of potential ordinary shares is anti-dilutive.
Sterling Energy plc
Abridged notes to financial statements (continued)
6. Reconciliation of operating loss to net cash outflow from. Operations
2002 2001
£000 £000
Operating loss (78) (1,481)
Depreciation and depletion 170 4
Amounts written off intangible fixed assets (note 4) - 944
(Increase)/decrease in debtors (334) 10
(Decrease)/increase in creditors (862) 70
_________ _________
Net cash outflow from operations (1,104) (453)
_________ _________
7. Financing of £6,574,000 (2001: £1,025,000) is the issue of ordinary
shares for cash, net of cash expenses of £839,000 paid in relation to the issues
of ordinary shares in the year.
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