TIDMSEY
RNS Number : 4894D
Sterling Energy PLC
10 October 2018
10 October 2018
INTERIM MANAGEMENT STATEMENT
Sterling Energy plc (the 'Company' or 'Sterling') together with
its subsidiary undertakings (the 'Group') is today issuing its
Interim Management Statement and financial results for the third
quarter ended 30 September 2018. All figures are unaudited unless
stated otherwise.
Operations
-- Odewayne block, Somaliland; trial line 2D processing ongoing.
-- Dialogue continues between the Joint Venture ('JV') partners
on developing the technical understanding of the block.
Financial
-- Net cash (zero debt) to the Group as at 30 September 2018 of
$46.6 million (30 September 2017: $83.1 million).
-- Adjusted Earnings before Interest, Tax, Depreciation and
Amortisation and Exploration Expense ('EBITDAX') loss for the Group
of $313k (Q3 2017: $1.4 million loss).
-- Loss after tax of $306k (Q3 2017: $4.3 million loss).
Corporate
-- Appointment of GMP FirstEnergy as the Company's co-broker,
with immediate effect. GMP FirstEnergy's Oil and Gas expertise,
experience and capabilities in research and capital markets will
benefit the Company's continued drive to a material M&A
transaction.
Chief Executive Officer's Statement
"Technical understanding of the Odewayne exploration block
continues, with the initial 3 trial seismic lines increasing the
imaging quality. Discussions with the JV on the progression of the
block are ongoing and updates will made at the appropriate
time.
Since my appointment in June, Sterling has progressed its
efforts on securing a material M&A transaction. The appointment
of GMP FirstEnergy as co-broker, coupled with the engagement of
Pinsent Masons, adds to strengthen Sterling's ability to achieve
the mandate.
We have a clear strategy and can move quickly and decisively for
the right opportunity, leveraging our full cash balance of ca.$47
million and technical capabilities to good effect. We remain very
focused on finding a suitable acquisition.
In line with other AIM companies, the Board has decided that its
regular market updates will continue in conjunction with
publication of its annual and interim financial statements. Given
the Company's obligation to keep the market immediately updated as
material events occur, it was concluded that going forwards there
was little benefit from continuing to provide quarterly updates
(for Q1 and Q3)."
Somaliland - Odewayne (WI 34%) Exploration block
Overview
This large and unexplored frontier acreage position comprises an
area of 22,840km(2) , the equivalent of approximately 100 UK North
Sea blocks. Exploration activity prior to the 2017 regional 2D
seismic acquisition program has been limited to the acquisition of
airborne gravity and magnetic data and surface fieldwork studies,
with no wells drilled on block.
The Company's wholly owned subsidiary, Sterling Energy (East
Africa) Limited ('SE(EA)L'), holds a 34% working interest in the
PSA. SE(EA)L originally acquired a 10% position from Petrosoma
Limited ('Petrosoma') in November 2013 and an additional 30% from
Jacka Resources Somaliland Limited ('Jacka') in two transactions
during 2014.
In April 2017, the Company agreed to revised farm-out terms to
reduce the staged contingent consideration payments due to
Petrosoma and reduce SE(EA)L's interest in the Odewayne asset by
6%. The farm-out agreement was amended such that the parties
cancelled the $8.0 million contingent consideration in return for:
(i) a payment by SE(EA)L to Petrosoma of $3.5 million; and (ii) a
transfer from SE(EA)L to Petrosoma of a 6% interest in the PSA.
Post Government of Somaliland approval, SE(EA)L holds a 34%
interest in the Odewayne Block, fully carried by Genel Energy
Somaliland Limited ('Genel Energy') for its share of the costs of
all exploration activities during the Third and Fourth Periods of
the PSA.
In June 2017, the Somali Government (Ministry of Energy and
Minerals) contracted BGP (Geophysical contractor) to undertake a
1,000km (full fold, 1,076km surface) 10km by 10km, 2D seismic
campaign, to both satisfy and exceed the 500km minimum work program
for the current Third Period. This acquisition program was
undertaken over the basinal areas identified from the potential
fields (gravity and magnetic) legacy data. The three month program
was completed in late August 2017, safely and on time, with the
second 500km recorded at an average of 14.5km per day.
Exploration Term
Period Date Work commitment
Period 3 To 2 Nov-18 500km 2D seismic acquisition*
Period 4 (optional) To 2 May-20 1,000km 2D seismic acquisition and
one exploration well*
Period 5 (optional) To 2 May-21 500km 2D seismic acquisition and one
exploration well
Period 6 (optional) To 2 May-22 500km 2D seismic acquisition and one
exploration well
6(th) Deed of Amendment (dated August 2016) in place which
allows for the extension to Period 3 beyond 2 November 2018, thus
extending all subsequent Periods accordingly.
* Sterling is fully carried by Genel Energy for its share of the
costs of all exploration activities during the Third and Fourth
Periods of the PSA.
Outlook
In November 2017, Sterling undertook an integrated geological
review of the basic post-stack processed 2D dataset provided by the
Operator Genel Energy. Following encouraging technical indications,
the Company then undertook a highly focused and rigorous processing
effort, independent of the Operator, with the primary technical
objective of improving the deeper subsurface image. An initial 3
seismic lines of approximately 235km in length have now been
processed to a full pre-stack time migrated dataset. This new
processing has resulted in a material increase in the subsurface
imaging quality, and technical work is underway to integrate this
new insight into our technical understanding of the block. The
option to process the remaining 765km (13 lines) of data remains in
place and the decision to progress to this second phase is
currently under review while the deliverables are being assessed.
This workflow will allow for an informed technical and commercial
perspective on the block in 2H 2018.
Financial Summary
In the period, the Group reports the following results:
Q3 2018 Q3 2017 FY 2017
(unaudited) (unaudited) (audited)
$ '000 $ '000 $ '000
------------- ------------- -----------
Revenue (1) - 1,771 4,433
Adjusted EBITDAX (2) (313) (1,377) (5,926)
Loss after tax (306) (4,261) (9,000)
Net to Group - cash and cash equivalents
at period end 46,589 83,058 81,365
============= ============= ===========
(1) Revenue 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.
For further information contact:
Sterling Energy plc +44 (0) 20 7405 4133
David Marshall, Chief Executive Officer
Michael Kroupeev, Chairman
Peel Hunt LLP +44 20 7418 8900
Richard Crichton
James Bavister
www.sterlingenergyplc.com
Ticker Symbol: SEY
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END
MSCZMMGGMLDGRZZ
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