Sterling Energy, an AIM listed independent oil & gas exploration and production company with interests in the Gulf of Mexico, Africa and the Middle East, issued the following update regarding its banking facilities, recent trading and certain other corporate matters.
- The Company is in advanced discussions with its syndicate banks regarding the granting of a waiver until mid August in connection with the schedule of repayments on its loan needed to bring borrowings into line with the expected reduction in the Borrowing Base.
- Natixis, as agent and technical bank, has indicated that, reflecting the major fall in energy prices in the last few months, the Company's Borrowing Base under its syndicated debt facility would currently be approximately US$76 million.
- The reduction would give rise to a debt gap of approximately US$28 million, after taking account of an US$8 million repayment by the Company on 17 February 2009.
- While there can be no certainty of a successful outcome to these discussions, Sterling expects to reach agreement with the Banking Group and is satisfied that such an agreement would provide sufficient headroom for Sterling to continue to service its existing cash flow obligations until at least the next scheduled Borrowing Base re-determination.
- The Group's current cash resources are approximately US$7 million.
- Net production in the USA and Mauritania averaged 4,750 boepd in 2008 and is currently 5,100 boepd. Since the start of 2009 Sterling has participated in 4 wells in the USA, all of which have been successful.
- Seismic acquisition on the Sterling operated Sangaw North block in Kurdistan has been completed and is highly encouraging. Early interpretation of the processed data confirms a larger than expected sub-surface structure with multiple target horizons. Drilling preparation is proceeding for Q4 2009.
- Due to prevailing market conditions, Sterling has not yet finalised the sale of its USA assets but remains committed to the sale and is in discussions with a number of interested parties for all or part of these assets.
- On November 4, 2008, the Board announced that it had received approaches regarding possible offers for Sterling from third parties. Discussions with third parties continue, which may lead to an injection of assets and/or cash into, or an offer for the Company. There can be no certainty that these discussions will lead to either an injection of assets and/or cash into, or an offer for the Company. A further announcement will be made when appropriate.
Graeme Thomson, Sterling CEO, said:
"Completion of this financing agreement will be an important step forward for Sterling. We are working closely with our banks to reach an agreement acceptable to all parties as quickly as possible.
"Sterling is focused on both improving expected cash flows through action to drive down costs and asset realisations, whilst bringing greater focus into the business through better prospect prioritisation. Discussions with third parties continue as we seek a longer-term platform from which it can expand. Notwithstanding the marked decline in energy prices over recent months, we remain confident that Sterling has some highly prospective world class assets and we are determined to exploit the potential upside that they offer."