CALGARY, Jan. 18, 2016 /CNW/ - Sterling Resources Ltd. (TSX-V: SLG) ("Sterling" or the "Company" and together with its subsidiaries the "Group") announces an update on certain operational matters and on plans to redeem the UK senior secured bond (ticker on Nordic ABM exchange: STRE01 PRO) (the "Bond") issued by its subsidiary Sterling Resources (UK) plc ("Sterling UK").
Production at the UK Breagh gas field continues slightly ahead of management's expectations based on well decline rates previously projected by the Group's reserves evaluator, RPS Energy, in its mid-2015 Breagh reserves evaluation (of which an executive summary report dated August 20, 2015 is filed on SEDAR). Production in December 2015 averaged 28.1 million standard feet of sales gas per day ("MMscf/d") net to Sterling compared to 26.1 MMscf/d in the RPS mid-2015 reserves evaluation. The field was in continuous production throughout December and January to date.
Following completion of the acquisition of Dea UK's UK North Sea business from LetterOne Group by Ineos Group AG (as announced by Sterling on October 13, 2015), Ineos has advised Sterling that it is conducting a review of further investments in Phase 1 of Breagh in relation to potential cost reductions and the timing of re-commencement of drilling activity. Such drilling activity would involve the drilling of up to four new wells and hydraulic stimulation of up to two existing wells (in addition to all new wells). The earliest that the drilling activity could start is now estimated by Sterling to be April 2016 (given no rig contract has yet been signed) but Sterling is of the view that the activity could be further delayed. Sterling's previous guidance was for rig activity to commence in January 2016 as disclosed in the news release of November 19, 2015.
Of the four potential new wells and the potential hydraulic stimulation of two existing wells, two wells (both hydraulically stimulated) and one hydraulic stimulation of an existing well have been budgeted and approved by the partnership for a 2016 campaign. The remaining drilling activity (two further wells and one re-entry and hydraulic stimulation of an existing well) is not yet budgeted and Sterling expects plans to be firmed up during the second or third quarter of 2016, following final interpretation of 3D seismic acquired in 2014 and associated reservoir studies. Review of the potential second phase of development of Breagh is likely to continue through 2016, also following-on from the 3D interpretation and reservoir studies.
Sterling does not expect any delay to the onshore compression project. Construction work is expected to commence during the second quarter of 2016 with compression operational around the end of the third quarter of 2017.
The Company continues to pursue options to redeem the Bond as well as potentially to recapitalize the Group, and is fully engaged with the Bond trustee and its advisors in this regard.
At the end of December 2015, the Group had total group cash resources of $12.2 million of which $10.6 million was unrestricted. Through to and as of the date of this news release, the Group was not in breach of the any of the terms of the Bond agreement (as amended and restated, and reflecting certain further waivers).
Sterling Resources Ltd. is a Canadian-listed international oil and gas company headquartered in Calgary, Alberta with assets in the United Kingdom, France and the Netherlands. The shares are listed and posted for trading on the TSX Venture Exchange under the symbol "SLG".
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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All statements included in this news release that address activities, events or developments that Sterling expects, believes or anticipates will or may occur in the future are forward-looking statements. In particular, this news release contains forward-looking statements with respect to future operational activity, Bond redemption and financial recapitalization.
These forward-looking statements involve numerous assumptions made by Sterling based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. In addition, these statements involve substantial known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other-forward looking statements will prove inaccurate, certain of which are beyond Sterling's control, including: the impact of general economic conditions in the areas in which Sterling operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with oil and gas operations. Readers should also carefully consider the matters discussed under the heading "Risk Factors" in the Company's Annual Information Form.
Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Sterling's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. These statements speak only as of the date of the news release. Sterling does not intend and does not assume any obligation to update these forward-looking statements except as required by law.
SOURCE Sterling Resources Ltd.
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