CALGARY, Nov. 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 September 30, 2009. Unless otherwise noted all figures contained in this report are denominated in Canadian dollars.
Net income for the quarter ended September 30, 2009 was $69,758,879 ($0.53 per share basic and diluted) compared to net income of $994,363 ($0.01 per share - basic and diluted) for the three months ended September 30, 2008. For the nine months ended September 30, 2009 net income of $66,935,434 ($0.51 per share basic and diluted) was recorded compared with a loss of $51,441 ($0.00 per share - basic and diluted) for the nine months ended September 30, 2008.
The significant increase in net income for the quarter when compared to the same quarter of 2008 is attributable to the gain of $72,103,206 recorded on the disposition of one third of Sterling's 45% interest in the Breagh gas field and varying interests in the surrounding blocks comprising the Greater Breagh Area in the UK Southern North Sea. This net gain on disposition represents the excess of the proceeds received over the carrying value of the assets disposed of, the costs of disposition, and the repurchase of the pro-rata share of the underlying encumbrance entitling a third party to a share of gross production from the Breagh field. Under present UK tax law this gain on disposition is not subject to UK capital gains tax provided that equivalent proceeds are re-invested in the UK North Sea sector within a period of three years.
Cash and cash equivalents at September 30, 2009 were $95,987,410 compared to $15,769,514 as at December 31, 2008. Net working capital was $81,096,315 at September 30, 2009 compared to net working capital of $13,967,470 at December 31, 2008. Capital expenditures during the nine months ended September 30, 2009 totaled $19,469,694 compared to $40,921,748 during the first nine months of 2008. Capital expenditures during the first nine months of 2009 were focused upon two major items: $13 million related to the completion and testing of the Breagh 42/13-5 and 5z wells in the UK Southern North Sea and $3.1 million related to the acquisition of high resolution seismic in the Romanian Black Sea.
Sterling's primary focus during the third quarter was upon finalizing the Breagh sales process which has been ongoing since early in 2009. During July, we were pleased to announce the signing of a fully termed sales and purchase agreement with RWE Dea UK SNS Limited ("RWE Dea"), a subsidiary of Hamburg based RWE Dea AG. RWE Dea has, as a result of multiple related transactions with Sterling and its former partners, acquired a 70 percent working interest in the Breagh field and the surrounding exploration blocks in the UK Southern North Sea. RWE Dea also became operator of the greater Breagh area, commonly referred to as the Quad 42 area. During August the transaction with RWE Dea closed with Sterling retaining a 30% interest.
"With the closing of this transaction and the receipt of the cash proceeds in late August, Sterling has never been in a stronger financial position and with a strengthened balance sheet the Company is positioned to move forward with our exploration plans. Discussions have also progressed with the Royal Bank of Scotland to secure funding for the related development program at Breagh, and Sterling is well positioned financially to move forward with all exploration and development plans for 2010," stated Stewart Gibson, Sterling's Chief Executive Officer.
In November the first well of a three well program in the Craiova EIII-7 concession in onshore Romania will spud. Our partner in this project, TransAtlantic Worldwide Romania SRL ("TransAtlantic") will earn a 50% interest by carrying the cost of these three wells. These wells are designed to establish the presence of shallow gas and favorable reservoir characteristics in multiple prospects within the expansive Neogene play. Planning is also underway to drill an offshore exploration well during 2010 with the likely target at Ioana (formerly Midia South East) which is located just to the south and east of the established gas bearing Doina trend.
Romania is currently in the midst of Presidential elections scheduled to take place on November 22 (first round), which will most likely be completed on December 6 (second round). In the interim the coalition government (Democratic Liberal Party- PDL and Social Democratic Party- PSD) formed in 2008, following parliamentary elections in November 2008, fell on October 1 due to the resignation of the Social Democratic Party. The interim government, made up of PDL members only, fell to a "No Confidence Vote" on October 13. As a result of these events, until a new government is in place, the existing government only has administrative powers. According to local political commentators, it is expected that the government and its agencies will return to "normal business" early in 2010, after the Presidential elections, the subsequent appointment of a new Prime Minister by the newly elected President and the formation of a new government.
Sterling and its partners are hopeful that assignment approvals relating to the offshore licenses will be granted early next year, once the new government is in place. This is consistent with the positive tone of recent communications with the Romanian National Agency for Mineral Resources (ANRM), the agency that regulates the oil and gas industry in Romania. While 2009 has been a frustrating year for Sterling in Romania, the recent approval from ANRM to grant an assignment of interest on our onshore farm out to TransAtlantic and the related drilling approvals for this license are indicative of improving relations with the Romanian government.
This positive tone has been further reinforced by the recent decision of a Romanian administrative court to dismiss a petition by a former Romanian government official. The petition related to the annulment of the original government decision which approved Sterling's "11th Amendment" to the offshore Petroleum Agreement. Had this petition been successful, the government would have then been in a situation where it would have had to re-start negotiations with Sterling to amend the Agreement. As a result of the dismissal of the case, the 11th Amendment remains a fully legitimate contract.
In spite of recent political challenges in Romania we remain optimistic that a resolution satisfactory to all stakeholders can be achieved and that our plans for the development of the offshore Romanian assets will eventually move forward.
In the UK North Sea two wells are currently planned for the Greater Breagh Area in Quad 42 in which Sterling holds a 30% interest. With drilling anticipated to start early in the second quarter of 2010, the Airidh and Macanta wells located to the south and east of the Breagh field respectively, will target the first potential satellite tiebacks to the developing Breagh infrastructure.
The Grian prospect in Quad 48 of the Southern North Sea is also planned to be drilled in 2010 in order to evaluate a Rotliegendes prospect located just to the west of the Hewett gas field. Sterling will operate this well which will be drilled to secure this prospect which was obtained in the 24th Round Licensing process. Prior to commencement of drilling, a partial farm down of Sterling's working interest may be considered.
A follow up well to the Cladhan discovery in the Northern North Sea is also planned for early in the second quarter of 2010. This new well will be designed to provide additional information regarding the potential significant upside around the exciting discovery well which did not establish the full extent of the oil reservoir. The Cladhan program may involve an additional sidetrack well and testing, with this decision to be made following evaluation of the data from the new well. Sterling is the operator at Cladhan and holds a 39.9% working interest
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.
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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: Stewart G. Gibson, Chief Executive Officer, Phone: 44-133082-6717, Mobile: 44-7768-042219, firstname.lastname@example.org; George Kesteven, Manager, Corporate & Investor Relations, Phone: (403) 215-9265, Fax: (403) 215-9279, email@example.com