Sterling Energy PLC Chinguetti - Termination of Funding Agreement (0891D)
27 January 2018 - 1:20AM
UK Regulatory
TIDMSEY
RNS Number : 0891D
Sterling Energy PLC
26 January 2018
26 January 2017
CHINGUETTI OIL FIELD - TERMINATION OF FUNDING AGREEMENT
Sterling Energy Plc ("Sterling" or the "Company"), the AIM
listed oil and gas exploration and production company (AIM: SEY),
provides the following update with respect to its interest in the
Chinguetti oil field, offshore Mauritania.
Background
The Company has had an economic interest in the Chinguetti oil
field through a funding agreement with the Government of Mauritania
and Société Mauritanienne Des Hydrocarbures et de Patrimoine Minier
(Mauritania's national oil company) ("SMHPM") since 2004 ("Funding
Agreement"). The Company has no direct equity interest in
Chinguetti, but through the Funding Agreement the Company and SMHPM
share in the revenue and costs related to SMHPM's 12% equity
interest in Chinguetti.
The Chinguetti oil field has been in production since February
2006. In the year ended 31 December 2016, Sterling recognised a
loss of US$2.0m in respect of the Chinguetti Field and a loss of
US$0.97m in the period to 30 September 2017. The Chinguetti oil
field is now in the process of being decommissioned and abandoned.
The Abandonment and Decommissioning ("A&D") project is awaiting
the final approval of the Government of Mauritania. The A&D
Plan consists of two phases:
1. Cessation of Production ("CoP") and Temporary Well Suspension
("TWS"), undertaken from early 2018 to Q2 2018; and
2. Final plugging and abandonment of the well stock in 2019-2020 ("Final P&A").
Termination of Funding Agreement
In light of the cessation of production from the Chinguetti oil
field, the Company, the Government of Mauritania and SMHPM have
agreed to terminate the Funding Agreement ("Deed of
Termination").
The Deed of Termination provides for a payment by Sterling to
the Government of Mauritania and SMHPM of a fixed sum to settle any
and all claims under the Funding Agreement, including Sterling's
obligation to pay for its share of A&D costs and outstanding
2018 operational expenditures. The fixed sum payment will be made
forthwith and Sterling will have no residual exposure to the
A&D costs.
In the Company's 2016 annual report, the Company reported that
the present value of future decommissioning costs for Chinguetti,
as at 31 December 2016, was USD$31.45m (consisting of USD$16.98m in
short term provisions (2017) and USD$14.47m in long term provisions
(beyond 2017)).
The quantum of the payment under the Deed of Termination is
confidential but is not materially different from that provided for
in the Company's 2016 annual report.
Cash Position and strategy
After the payment made pursuant to the Deed of Termination, the
Company will have no residual exposure to the A&D costs under
the Funding Agreement and will have cash reserves of approximately
USD$48.9m (unaudited). In 2018, the Company will look to
operationally progress the Odewayne asset in Somaliland and
continue to pursue its strategic M&A driven mandate.
Comment
Eskil Jersing, the Company's Chief Executive Officer
commented:
"Sterling has had a long standing and robust relationship with
the Government of Mauritania and SMHPM on the Chinguetti oil field,
since 2004. Sterling has additionally been a partner in the C3 and
C10 offshore exploration blocks in Mauritania. Sterling would like
to thank both the Government of Mauritania and SMHPM for the
opportunity to be involved in all of those projects. The Company
wishes them every success in the future development of the oil and
gas industry in Mauritania.
For Sterling, this is the final part of a strategic exit from
Mauritania; the settlement of the A&D costs for a fixed amount
with no exposure to future operational risk and/or cost overruns
creates certainty for the business as it plans for 2018 and
beyond."
Further information:
This announcement is inside information for the
purposes of Article 7 of Regulation 596/2014.
Sterling Energy Plc Tel: +44 20 7405 4133
Eskil Jersing (CEO)
Michael Kroupeev (Chairman)
Peel Hunt LLP Tel: +44 20 7418 8900
Richard Crichton
Ross Allister
James Bavister
This information is provided by RNS
The company news service from the London Stock Exchange
END
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