Sterling Resources announces second 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 June 30, 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
    "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 Teesside 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 15 percent 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 10 percent 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 program encompassing
the following three areas during the latter portion of 2009 and early in 2010:

    -   Three onshore shallow gas wells at Craiova in Romania are planned to
        be drilled commencing during the fourth quarter of 2009. These wells
        will be drilled by TransAtlantic 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".

    The TSX Venture Exchange has not reviewed and does not accept
    responsibility for the adequacy or accuracy of this release.

    Filer Profile No. 00002072

    Forward-Looking Statements

    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
    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
    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.

    %SEDAR: 00002072E

For further information:

For further information: visit or contact:
Stewart G. Gibson, Chief Executive Officer, Phone: 44-133082-6717, Mobile:
44-7768-042219,; George Kesteven, Manager,
Investor Relations, Phone: (403) 215-9265, Fax: (403) 215-9279,

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