Interim Management Statement

RNS Number : 6055V

Sterling Energy PLC

04 November 2010

 



Sterling Energy Plc

4 November 2010

INTERIM MANAGEMENT STATEMENT

Sterling Energy Plc ("Sterling" or the "Company") is today issuing its Interim Management Statement for the period beginning 1 July 2010.

HIGHLIGHTS

·      Sangaw North #1 exploration well is drilling ahead at 2,927m.

·      Production, net to Sterling from the Chinguetti field, averaged 621 bopd for the third quarter 2010

·      Adjusted EBITDA in third quarter of $2.8 million (unaudited).

·      Profit after tax in third quarter of $3.1 million (unaudited).

·      Cash as at 31 October 2010 of $110.4 million (unaudited), including partner funds of $4.4 million.

·      Exploration programme funded from existing cash, cash flow and partner-carry.

Alastair Beardsall, Sterling's Chairman, said:

"Operations at Sangaw North #1 continue to present challenges. However the drilling team continue to make progress in evaluating the prospectivity of the structure. Flow tests of two zones within the Cretaceous section have demonstrated that hydrocarbons are present but neither test delivered commercial flow rates. These zones may be stimulated and re-tested later, when the well has reached total depth. The progress of our projects offshore Cameroon and Madagascar remains slow as we wait for those countries to resolve their border and political issues, respectively."

Kurdistan

The Sangaw North #1 exploration well is drilling ahead at 2,927m. Drilling operations remain challenging with two side-tracks undertaken to drill past an open-hole testing packer that could not be retrieved and a bottom hole drilling assembly that became mechanically stuck. The well has drilled through several prospective Cretaceous reservoirs, two of which were flow tested.

DST #1 tested an open-hole interval within the Cretaceous Kometan formation. During a 6 hour flow period, an initial recovery of gas was followed by flowing water with minor gas content.

DST #2 tested an open-hole interval of the Cretaceous Shiranish formation. The well produced gas at an estimated flow rate of 4 million standard cubic feet per day (mmscfd) along with some drilling fluids. However the gas flow subsequently decreased and was followed by water, believed to be formation water, flowing at an estimated rate of 4,300 barrels per day. During a second flow period, the well initially flowed water and then produced gas at an estimated flow rate of 1 mmscfd. The gas flow again decreased and was replaced with water at an estimated rate of 750 barrels per day.

Below these Cretaceous horizons lie additional prospective Jurassic reservoirs which are planned to be evaluated. Sterling's best estimate of oil-in-place for the Jurassic and Triassic reservoir targets is 3 billion barrels (an estimate that RISC supported as reasonable). Assuming a 20% recovery factor, the prospective resources for the Jurassic and Triassic is 600 million barrels of oil. RISC estimates the geological chance of success at around 10% and considers that gas and condensate are at least as likely to be discovered as oil.

The Sangaw North #1 exploration well is expected to reach its target depth by the end of the 4^th quarter of 2010.

Cameroon

The Ntem Block, offshore Cameroon, remains in force majeure. Progress continues towards a resolution of the border dispute between the governments of Cameroon and Equatorial Guinea, but no specific timetable can be forecast. The Company currently holds 100% of the Ntem licence and expects to farmout a portion of its interest in exchange for being carried for its share of drilling costs.  

Madagascar

The Rajoelina government, formed after the coup in March 2009, has not been recognised by its African neighbours or by many other governments. Sterling and ExxonMobil, our partner and the operator of the Ampasindava Block, will look for an improvement in the political situation before undertaking any significant expenditure.

The current exploration periods for both the Ambilobe and Ampasindava licences come to an end in November 2010. Sterling and Exxon are in discussions with OMNIS, the state oil company of Madagascar, with regard to an extension of both licences.

Mauritania

Production from the Chinguetti field during the third quarter 2010 net to Sterling totalled 57,097 barrels, an average of 621 barrels of oil per day. There are no currently approved plans for further development of the Chinguetti field.

Financial Position

In the third quarter of this financial year, Sterling reports the following unaudited results:

		Q3-2010 (Unaudited)	FY 2009 (3)
		$ '000	$ '000
Revenue from oil sales		6,183	22,709
Adjusted EBITDA	(1)	2,799	10,510
Profit / (Loss) after tax		3,143	(31,632)
Cash and cash equivalents at period end	(2)	109,407	113,859

(1)       EBITDA is earnings before interest (and other finance income and costs), tax, depreciation, depletion, amortisation and write-offs of oil & gas assets.  Adjusted EBITDA is calculated before share based payments, charged to the income statement under IFRS 2.

(2)       Cash balances at the end of Q3 2010 totalled $109.4 million, including $6.4 million of partner funds, (year end 2009: $113.9 million, including $6.9 million partner funds).    The Group continues to remain debt free.

(3)       FY 2009 figures are for the continuing operations only and excludes, in particular, the results for the USA business that was sold in December 2009

Change of Auditor

Following a competitive tender process for audit services, BDO LLP has been appointed as auditors of the Sterling group of companies.

For further information contact:

Sterling Energy Plc [phone]

Alastair Beardsall, Executive Chairman

Jonathan Cooper, Finance Director

www.sterlingenergyplc.com

Evolution Securities [phone]

Rob Collins / Chris Sim

Andrew Grosse, B.Sc. (Hons) Geology & Geophysics (1980), Exploration & Technical Director of Sterling Energy Plc, who has been involved in the oil industry for over 29 years, is the qualified person that has reviewed the technical information contained in this press release.

 

END

 

 

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