Sterling Resources has announced operating and financial results for the year ended December 31, 2008. Unless otherwise noted all figures contained in this release are denominated in Canadian dollars.
The net loss for the year ended December 31, 2008 was $2.3 million ($0.02 per common share) compared to a loss of $1.8 million ($0.02 per share) for the year ended December 31, 2007. Capital expenditures on oil and gas properties during 2008 totalled $87.0 million compared to $17.4 million during 2007. Working capital as at December 31, 2008 was $14.0 million compared to $10.9 million as at December 31, 2007.
The Company is pleased to report a significant increase in its Proved and Probable reserves from 1.2 million barrels of oil equivalent ("MMboe") at year-end 2007 to 40.3 MMboe at year-end 2008. In addition the net Best Estimate (P50) Contingent Resources have increased from 40.5 MMboe at year-end 2007 to 61.2 MMboe at year-end 2008.
"These significant reserve and resource additions are the result of the most active and operationally successful year in the Company's history. We are particularly pleased, given the high level of activity during 2008, that these milestones were achieved without any safety or environmental incidents," stated Stewart Gibson, Sterling's Chief Executive Officer. "However, in spite of these successes we continue to face many challenges as a result of the deterioration of capital markets during the past year, most notably ongoing access to capital to continue to develop the numerous attractive opportunities we have identified. The Company is, however, actively applying alternative methods to ensure the development of our key assets continues toward production," added Mr. Gibson.
Key operational milestones achieved during 2008 included the following:
- Six successful offshore wells added significant reserves and resources to existing discoveries in the Breagh area of the UK North Sea and the Doina and Ana area of the Romanian Black Sea. A farm-out agreement, first announced in December of 2008, was recently finalized under the terms of which Sterling will farm-out half of its 65% interest in the Ana and Doina fields in the Romanian Black Sea in exchange for funding of the Company's share of certain expenditures for the development of the Doina and Ana fields in a range up to a maximum of US $90.0 million depending on prevailing gas prices at the time the field commences production.
- A successful exploratory offshore well was drilled at Cladhan in the Northern North Sea, adding further resources and potential development on an entirely new prospect.
- Additional licenses were obtained in the UK Offshore 25th License Round with the awarding of blocks 42/10 and 42/15. Given their proximity to the existing Breagh field and previous drilling activity confirming the presence of natural gas, these were the Company's primary targets for licenses.
- Two major seismic programs were completed during 2008 offshore United Kingdom and Romania totalling 4,500 line kilometers, designed to move forward several major prospects located adjacent to existing discoveries.
- Since the Grenade-4 well onshore France was drilled and suspended early in 2008 no further onshore drilling has taken place. At the large Craiova concession onshore Romania, a 50% farmout of Sterling's interest will result in a three well shallow gas program during the second quarter of 2009 and during early 2009 production commenced at the small onshore UK Avington oil discovery of which Sterling holds an 8.33% interest.
During 2008 the following key corporate activities were completed:
- During January of 2008 Sterling completed a non-brokered private placement with a subsidiary of the Royal Bank of Scotland for 7,109,900 common shares at a subscription price of $2.00 per share for net proceeds of $14.2 million.
- Later in the first quarter of 2008 Company completed a bought deal financing of 16,000,000 common shares at a price of $2.50 per share with a syndicate of underwriters for net proceeds of $37.4 million.
- During August of 2008 the Company completed a bought deal financing of 11,274,600 units at a price of $2.55 per unit, for aggregate net proceeds of $27 million. Each full warrant entitles the holder to purchase one common share at a price of $3.25 until August 6, 2009.
- During January of 2009 the Company announced the successful drilling of the West Breagh well in the Southern North Sea. Subsequent testing of the well during January indicated a flow rate of 26 million cubic feet per day.
- On March 10, 2009 the Company entered into a fully termed agreement with Melrose Resources PLC ("Melrose") under which Melrose would earn a 32.5% interest in the Midia and Pelican blocks offshore Romania in the Black Sea by funding the Company's share of certain expenditures for the development of the Doina and Ana fields in a range up to a maximum of US $90.0 million depending on prevailing gas prices at the time the field commences production. After completion of this arrangement the Company would retain a 32.5% interest in the field. In addition, Melrose will provide US $12.0 million of short-term financing at commercial rates which is repayable after one year.
- On March 11, 2009, Sterling announced that it had elected to take back operatorship of the Sheryl (Block 21/23 in the central North Sea) discovery in which Sterling holds a 35% interest.
- On March 24, 2009, the Company announced a US $5.0 million bought deal financing with an over allotment option for up to an additional US $7.5 million at an interest rate of 15%. Each unit of US $100,000 of financing is repayable in 3 equal instalments 6, 9 and 12 months from closing and each unit will include one common share purchase warrant entitling the holder to acquire 20,000 common shares of the Company at $0.84. The warrants expire after 3 years from the closing of the transaction, subject to accelerated expiry in certain circumstances.
- The Company had a year over year increase of over 30 fold in its Proved and Probable reserves from 1.28 MMboe at year-end 2007 to 40.34 MMboe at year-end 2008.
- Best Estimate (P50) Contingent Resources have increased over 50% year over year from 40.50 MMboe at year-end 2007 to 61.19 MMboe at year-end 2008.
- The reserves additions to the Breagh field in the Southern North Sea have been added at a finding cost of approximately $1.00 per boe.
- A further 13.24 MMboe of net Best Estimate (P50) Prospective Resources have been attributed in the year-end resources report. These Prospective Resources are located in the Cladhan (Block 210/29a) and Crosgan (Block 42/10 and 42/15) areas of the UK North Sea where as at December 31, 2008, Sterling held 39.9% and 60% working interests respectively. These are classified as Resources rather than as Reserves primarily due to the requirement for final development plan approvals. Other factors requiring the classification of these as Resource volumes are the need for more delineation wells, detailed design estimates and near term development plans.