CALGARY, Aug. 17 /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, 2010. Unless otherwise noted all figures contained in this report are denominated in Canadian dollars.
The net loss for the quarter ended June 30, 2010 was $1,752,484 ($0.01 per share - basic and diluted) compared to a loss of $1,669,508 ($0.01 per share - basic and diluted) for the three months ended June 30, 2009. This quarterly loss, when compared to the second quarter of 2009 is virtually unchanged, as increased foreign exchange losses and stock based compensation expense have been offset by decreases in financing expenses attributable to the repayment of the secured notes on April 20, 2010.
For the six months ended June 30, 2010 a net loss of $518,430 ($0.00 per share - basic and diluted) was recorded compared with a loss of $2,823,445 ($0.01 per share - basic and diluted) for the six months ended June 30, 2009. Unrealized foreign exchange gains on the translation of US dollar cash and cash equivalents into Sterling's functional currency, the UK pound, was the main contributor to the reduced loss when compared to the first six months of 2009.
Cash and cash equivalents at June 30, 2010 were $50,984,737 compared to $81,798,904 as at December 31, 2009. Additional restricted cash of $6,421,510 at June 30, 2010 represents the Company's share of cash in escrow for expenditures related to the drilling of an offshore well during the third quarter.
Net working capital was $59,996,542 at June 30, 2010 compared to net working capital of $75,495,150 at December 31, 2009. Capital expenditures on oil and gas properties, excluding additions on assets for sale, during the six months ended June 30, 2010 totaled $15,045,194 compared to $12,645,935 during the first six months of 2009. Major capital items during the quarter included $3.5 million related to preliminary Breagh development costs; $3.5 million of preliminary costs set aside for the drilling of the Grian well planned for the fourth quarter; $2.0 million related to the drilling of the Airidh well; $0.7 million related to the Macanta well; $0.6 million of development costs for the Kirkleatham gas project onshore UK; $0.5 million of licensing fees and other costs in the Paris Basin of France; $1.9 million of capitalized overhead and other miscellaneous costs relating to onshore and offshore Romania; and $2.3 million of miscellaneous licensing fees related to the UK 26th Licensing Round application costs and other costs set aside for the Cladhan well.
Sterling's primary focus during the past few months has been upon the execution and expansion of drilling plans in the UK North Sea, progressing our development projects and advancing certain asset acquisitions and licensing submissions. In addition the Company has undertaken some strategic changes to the management team with the appointment of Mike Azancot to the role of President and CEO in May, and the appointment of David Blewden to the role of CFO in August. Both of their retiring predecessors, Stewart Gibson and Ian Hornby-Smith respectively, will continue in advisory roles at Sterling to ensure a smooth transition, with Mr. Gibson remaining a member of the Board of Directors.
During May the Company was pleased to announce that Sterling had taken a 25% working interest in Blakeney, an oil prospect in Block 21/27b in the UK North Sea. Our first well was successfully drilled to a measured depth of 4,455 feet and a 71 foot net oil column of excellent reservoir sand was encountered. It was always the intention not to test the initial vertical well given that any test will be conducted from a high angle well completed with properly sized sand screens. However reservoir pressures have been recorded and samples have been retrieved which are in the process of analysis to assist in reservoir estimation. Blakeney is only 10 kilometers southwest of Sterling's Sheryl discovery (in which Sterling holds a 35% working interest) in Block 21/23a, and overall economic potential could be enhanced with a common production and export facility. Completion of the farm-in also gives the Company a 25% interest in Blocks 21/21 and 21/22 where the operator has mapped additional prospects.
Drilling of the Airidh well commenced May 23rd in Quad 42 of the UK North Sea and reached a total depth of 4,371 feet. Although over 300 feet of Bunter Sandstone, the primary target formation, was encountered, no natural gas was present. The Airidh prospect was regarded as a high risk, potentially high return well because of hydrocarbon migration. The Bunter Sandstone at Airidh is younger than the rest of the Quad 42 targets with a different migration risk and therefore these results do not affect the Breagh area exploitation to the north of the dividing fault.
Subsequent to the quarter end, drilling was completed at the Macanta prospect in Block 42/14, a satellite location approximately 13 kilometers east of the main Breagh field and planned platform location. Drilled to a measured depth of 8,937 feet, the well encountered wet sands at a deeper level than anticipated. The well has been plugged and abandoned. The stratigraphic information obtained at the Macanta well will enhance our understanding of neighbouring prospects surrounding the Crosgan discovery and possible deeper reservoir potential within the Breagh field. At the same time, we believe these results at Macanta should not impact on future exploration and appraisal in the greater Breagh (Quad 42) area.
Drilling of the Cladhan sidetrack well in Block 210/29a commenced in early August. Delineation of the field begins with side tracking to an up dip location in Upper Jurassic channel sands. Depending on the results at this first location, a further sidetrack might be conducted, targeting a down dip location to prove a deeper oil column in the structure. If successful this delineation work should be sufficient to consider development of the field. Sterling is operator and currently holds a 39.9% working interest in the Cladhan field.
Development of the Breagh 'A' field moved forward with the important award of the engineering, procurement and construction (EPC) contract to build the jacket and topsides to Heerema Vlissingen B.V. (Heerema). Heerema will construct the jacket, topsides and piles at their Vlissingen yard in the Netherlands with a planned delivery date of late July 2011. The jacket will be approximately 85 metres tall with a total weight including the piles of some 4,000 tonnes. The topsides will weigh approximately 1,400 tonnes. The Breagh 'A' field is located in the United Kingdom Continental Shelf (UKCS) Block 42/13 of the Southern North Sea in 62 metres water depth, approximately 100 kilometres to the east of Teesside. Gas will be exported via a 20" pipeline to be laid from the platform to the UK mainland with initial gas production anticipated to begin in 2012.
In April the Company submitted applications for licenses in the UKCS 26th Round targeting areas to enhance our portfolio and provide additional quality exploration prospects. Results of the awards are expected by year-end.
Subsequent to the quarter end the Company completed the sale of non-core UK onshore oil assets.
In Romania, it is our intention to resume exploration operations with the drilling of a well at the Eugenia prospect, located in the Pelican Block, before the end of 2010. Since the change of government in Romania in late 2009, Sterling has been proceeding with the approval of the assignment of interests to co-venture partners. In parallel, preparation work has been accomplished for the submission of the field development program for the Ana and Doina assets. We remain cautiously optimistic that final approval of the assignments will be granted during the third quarter of 2010, allowing the continuation of both offshore development and exploration activities.
In France, plans are progressing with the Company's partners to accelerate the operations on the large gas prospect on the St Laurent permit, in which Sterling holds a 33.42% working interest. In the Paris basin, Sterling, as operator, applied for a total of 9.5 blocks with a working interest ranging from 25% to 50% and the applications await final approvals from the General Industry and Environment Council. With a gross area of some 150,000 acres, the blocks have the potential for conventional traps in the Jurassic and Triassic formations, which are productive in nearby fields. The first well is not expected to be drilled until 2011. These licenses are adjacent to, and in three of the blocks shared with, the Toreador/Hess group who has a primary focus on exploring shale oil in the region with drilling planned on their own blocks late 2010.
Progress continues in the Netherlands, where Sterling has signed a Sale and Purchase Agreement to acquire an operated interest in the F Quad offshore blocks. Upon completion of the agreement, subject to Ministry approval, Sterling will hold a significant working interest in five blocks of over 400,000 acres which contain several offshore oil discoveries.
On July 22, 2010, the Company entered into a bought deal financing agreement with a syndicate of underwriters to issue 21,055,000 common shares at a price of $1.90 per share. In addition, the Underwriters were granted an option to purchase a further 2,368,500 shares at the same price. The offering closed on August 12, 2010 at which time the option was also exercised in full. Total gross proceeds from the issue and the option were $44,504,650 and total net proceeds after deducting the underwriters' fee, but before deducting other expenses of the issue were $42,056,894. Net proceeds will be used towards the required equity component of the financing of the Breagh development project in the United Kingdom North Sea, for which Sterling recently announced an offer of up to (pnds stlg)100 million of project financing from the Royal Bank of Scotland (RBS). The offer is currently in the syndication and documentation phase which is targeted for completion at the end of September 2010.
"With our current financing situation, the Company is well placed to move forward with its development plans at Breagh, and its broader drilling plans in the UK North Sea and Romanian Black Sea," stated Mike Azancot, Sterling's President and CEO. "We are focused upon executing these plans in order to achieve initial gas production at Breagh by 2012 and we maintain the impetus towards exploitation of Sterling's other core assets," added Mr. Azancot.
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".
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
All statements included in this press 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 addition, statements relating to reserves or resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves and resources described can be profitably produced in the future.
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 press release. Sterling does not intend and does not assume any obligation to update these forward-looking statements except as required by law.
Financial outlook information contained in this press release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this press release should not be used for purpose other than for which it is disclosed herein.
SOURCE Sterling Resources Ltd.
For further information: For further information: visit www.sterling-resources.com or contact: Mike Azancot, President and Chief Executive Officer, Phone: 44-1330-826764, Mobile: 44-7740-432883, firstname.lastname@example.org; David Blewden, Chief Financial Officer, Phone: 44-1330-826766, Mobile: 44-7771-740804, email@example.com; George Kesteven, Manager, Corporate and Investor Relations, Phone: (403) 215-9265, Fax: (403) 215-9279, firstname.lastname@example.org