Mar 12 - Sterling Energy Announces Annual Results - Updates Operations

Source Press Release
Company Sterling Energy PlcMurphy Oil Corporation 
Tags Upstream Activities, Financial & Operating Data
Date March 20, 2012

2011 SUMMARY

  • Completed farm-out of Ntem block, offshore Cameroon, to subsidiary of Murphy Oil Corporation;
  • Sterling retains 50% interest and is carried for its share of all exploration expenditure during the current exploration period under the Ntem contract.
  • Sangaw North-1 exploration well failed to find commercial hydrocarbons;
  • Secondary objectives within Sangaw North block are being evaluated.
  • Received $11.2 million of net cash flow from Chinguetti field operations during 2011 (2010: $15.6 million).
  • Cash resources as at 31 December 2011 $115.8 million (2010: $111.7 million).
  • Company remains debt free.
  • Strengthened technical team in support of New Ventures focus.
 CHAIRMAN'S STATEMENT

We believe Sterling's exploration portfolio contains a number of very prospective assets, a view supported by Murphy Oil Corporation when they chose, through a wholly-owned subsidiary, to farm-in to our Ntem licence in Cameroon. In exchange for a 50% interest they will fund all of the costs for Sterling's retained 50% interest during the remainder of the current exploration period of the licence. Murphy has a broad experience of drilling wells in deep water and they have become operator for the Ntem block. We look forward to when the boundary dispute between Cameroon and Equatorial Guinea is resolved and we can re-commence our exploration of the Ntem block.

The biggest disappointment for 2011 was the failure to discover commercial hydrocarbons in the Sangaw North-1 exploration well. However, our sub-surface specialists believe, based on all the available data, that there is potential for secondary objectives on the flanks of the main Sangaw structure. We plan to acquire 2D seismic this year to evaluate this potential.

In Madagascar progress on the Ampasindava and Ambilobe blocks remain stalled following the change of Government in March 2009. A 'roadmap' has been agreed between the current Government and their African neighbours for the holding of democratic elections during 2012, after which Sterling and ExxonMobil, our partner in Ampasindava block, will resume exploration activities. 

Notwithstanding the merits of our existing projects, we recognise the need to broaden the portfolio, and we have the human and financial resources to achieve this. Our focus remains exploration. Our preferred method of entry is to secure a material working interest which, following a work programme to de-risk and/or value-add, we can farm down prior to major capital exposure. We have refreshed our new venture team with a new Exploration Director and several new sub-surface specialists who will complement the skills of our existing team. I look forward to reporting on our progress towards securing opportunities during 2012.

Financial

The Company remains in a very strong financial position with cash resources of $115.8 million at the end of 2011. Its approved work programme for 2012 is fully funded and the company now has substantial funds available for new venture activity. During 2011,  the company held these very material funds to cover two possible eventualities: if the outcome of the Sangaw North-1 well had been more positive  the company would have funded  its 53.33% working interest of an accelerated programme of seismic and an appraisal well, and prior to farming out 50% of the Ntem block to Murphy Cameroon Ntem Oil Co. Ltd  the company wished to be ready, if circumstances permitted force majeure to be lifted, to progress the drilling of an exploration well as required under the Ntem Contract. Sterling is now able to commit a much larger proportion of the cash reserves towards acquiring and progressing new ventures.

The company remains pleased that the revenue from Chinguetti field operations in Mauritania provided positive cash flow during 2011 in excess of Sterling's administrative costs.

Board and management changes

During 2011, Dr Jonathan Cooper, Sterling's Finance Director, and Mr Andrew Grosse, Sterling's Exploration Director, resigned. I thank them both for their valuable contributions over the years and wish them well in their new endeavours.

Dr Philip Frank was appointed Sterling's new Exploration Director on 3 October 2011. Philip has spent some 34 years in the E&P industry and already, in the few months he has been with Sterling, his experience as a successful explorer has greatly enhanced Sterling's new venture activity.

Nominated Adviser and Broker

On 16 December 2011, Sterling appointed Liberum Capital Limited as the Company's nominated adviser and broker. Liberum provides a wide range of services for its clients, including corporate finance advice, stock broker and research.

Outlook for 2012 and beyond

Whilst the company has no influence over the resolution of the border dispute between Cameroon and Equatorial Guinea, the company is ready to commence the drilling programme to evaluate the large prospects, identified from 3D seismic, when force majeure can be lifted.  The company believes the Ntem block contains significant potential value waiting to be tested with the drill bit.

During 2012 one of its key objectives is to add to its portfolio of assets. Additions will be sought to broaden its exposure to opportunities in Africa and the Middle East. However, outstanding opportunities outside of these core areas will also be considered.

I would like to thank all Sterling's Directors and staff for their resilience during a disappointing 2011 and look forward to reporting progress with  its existing projects and delivering new opportunities during 2012.

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