Sterling Energy PLC - Interim Management Statement
INTERIM MANAGEMENT STATEMENT
• Production, net to the Company (including royalty barrels) from the Chinguetti field, averaged 342 barrels of oil per day ('bopd') (Q1 2016: 106 bopd).
• Adjusted Earnings before Interest, Tax, Depreciation and Amortisation and Exploration Expense ('EBITDAX') loss for the Group of
• Loss after tax of
• Net cash (zero debt) to the Group as at
• Somaliland 2D seismic campaign expected to commence May/
• Non-executive Directors appointed
• Continued mandate to execute M&A driven transformational growth (both corporate and at the asset level).
• Ongoing focus on capital discipline and evolution of the organisation to fit the strategic mandate.
On the Chinguetti oil field, we continue to persevere with Société Mauritanienne Des Hydrocarbures et de Patrimoine Minier ('SMHPM') and key stakeholders to safely and effectively implement the Abandonment and Decommissioning ('A&D') project, subject to Government of Mauritania approval. Chinguetti is due to cease production in late 2017, with decommissioning operations due to commence shortly thereafter. Once the A&D project is sanctioned, Sterling will update the market of the cost of the decommissioning and abandonment of this asset.
We have continued with our portfolio re-alignment efforts, most notably post Q1, by reducing our exposure on the Somaliland Odewayne block to the
We continue to mature our Mauritania C-10 exploration asset.
The primary focus of the Company has been to continue to originate, conduct full due diligence and ultimately execute transformative growth driven M&A projects. The Company remains confident that it can identify and source the right asset led or corporate solution to drive growth and shareholder value in the near term.
The Company continues it's efforts to reduce the Group's administrative expenses in reaction to external market conditions. These efforts have, year on year, reduced the Group's wages and salary expenses by ca. 38%. As a result, Q1 2017 administrative expenses (excluding recharges) are ca. 33% lower than in Q1 2016 (based on current work programme and budget assumptions).
Looking forward, we will persist in our efforts on limiting liability exposure on Chinguetti, delivering on our current portfolio and pursuing transformative growth projects for the Company and it's shareholders.
Chinguetti oil field (ca. 9.5% of cumulative production through the Funding Agreement and a 6% Royalty Agreement derived from Premier's WI).
The Company has economic interests in the Chinguetti field through a funding agreement with SMHPM, Mauritania's national oil company, and a royalty agreement with Premier Oil.
Chinguetti field production, net barrels of oil ('bbls') to the Group (including royalty bbls) in the period totalled 30,824 bbls (Q1 2016: 9,665 bbls), an average of 342 barrels of oil per day ('bopd'), compared to 106 bopd for the equivalent period in Q1 2016. Production in Q1 2016 was unusually low due to techincial difficulties, hence the improvement compared to Q1 2017.
Production from the Chinguetti field is stored on location in the Berge Helene floating, production storage and offloading vessel ('FPSO'). One cargo lifting was undertaken during the period totalling 41,950 bbls net (Q1 2016: one lifting totalling 30,489 bbls net). The realised oil price in the period was
The Chinguetti JV (Petronas, Tullow Oil, SMHPM, Premier, Kufpec) are converging on the optimal solution to the current end of field life challenges. Discussions continue to be held with the Government of Mauritania and relevant stakeholders on how best to both manage current operations and agree on a plan for a safe, cost-effective and technically robust decommissioning and abandonment phase.
PSC C-10 (WI 13.5%) Exploration block
Block C-10 covers an area of approximately 8,025km² and lies in water depths of 50 to 2,400m within the Nouakchott sub-basin, offshore Mauritania, and wholly surrounds the Chinguetti field. The C-10 production sharing contract ('PSC') is held by the Company's wholly owned subsidiary
Following entry into the C-10 block in mid-2015, Sterling and its JV partners have been actively maturing and ranking the technical description of the play, prospect and lead portfolio on the 3D seismic dataset.
Since 2014, Kosmos Energy has discovered and appraised in deep water block C-8, immediately outboard of C-10, several world class LNG scale gas discoveries of Albian to Cenomanian age, with the Tortue West (Ahmeyim) structure alone reported to have Pmean gas resources of ca.15 Tcf. In 2017, Kosmos and new partner BP have continued exploration within the Cenomanian/Albian play with a focus on proving an oil fairway adjacent to the northwestern boundary of the C-10 block, through the drilling of 4 high impact exploration wells commencing with the Yakaar prospect in late
Tullow Oil and the JV are in discussions with SMHPM and the Ministry with regards to the appropriate future path on the C-10 block, with a view to securing an extension and recognising that a well will not be drilled prior to the current Phase 2 expiry in
Should the JV not fulfil the minimum work obligations, the gross liability owing to the Mauritanian government would be
Odewayne (WI 34%*) Exploration block
This large, unexplored frontier acreage position comprises an area of 22,840km2. Exploration activity to date has been limited to the acquisition of airborne gravity and magnetic data, with no seismic coverage and no wells drilled on the block. Extensive geological field data provides strong encouragement for a deep sedimentary basin and has highlighted the presence of oil seeps at surface, suggesting that a working hydrocarbon system exists.
The Odewayne production sharing agreement ('PSA') was awarded in 2005 and is in the Third Period with an outstanding minimum work obligation of 500km of 2D seismic. The Third Period was recently extended in 2016 by two years to
The Company's wholly owned subsidiary, Sterling Energy (East Africa) Limited ('SE(EA)L'), currently holds a 40% working interest in the PSA, subject to a transfer of 6% to Petrosoma (as set out below). Following the transfer (subject to Government consent), SE(EA)L will hold a 34% working interest.
In 2016 the
*Subsequently, as of the
In the period, the Group reports the following results:
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Loss after tax
Net to Group - cash and cash equivalents at period end
JV Partner held funds
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(1) Revenue in the period is derived from income relating to interests in the Chinguetti field.
(2) Adjusted EBITDAX are (losses)/earnings before interest (plus other finance income and expense), tax, depreciation, depletion, amortisation, provisions and write-offs of oil & gas assets. Adjusted EBITDAX also excludes pre-licence award exploration costs and share based payments; the latter being a non-cash expense charged to the income statement under IFRS 2.
(3) Loss after tax in the period of
(4) Cash balances at the end of the period totalled
This announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
For further information contact:
Eskil Jersing, Chief Executive Officer
Michael Kroupeev, Chairman
Ticker Symbol: SEY
This information is provided by RNS
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