Sterling Resources has announced its operating results for the quarter ended March 31, 2009. The primary focus during the quarter was upon finalizing the terms of the farm-out of Romanian offshore assets and continuing to move forward with a potential farm-out or sale of a portion of the 45% interest in the Breagh assets in the UK Southern North Sea.
During the quarter Sterling was pleased to announce the execution of an agreement with Melrose Resources PLC (Melrose) to farm-out half of Sterling's 65% of the Midia and Pelican blocks offshore Romania in the Black Sea in exchange for Melrose funding the Company's share of certain expenditures for the development of the Doina and Ana fields in a range up to US $90 million depending on prevailing gas prices. The closing of the transaction is subject to regulatory approval, which is expected early in the third quarter.
In a separate transaction from the farm-in, Melrose is to provide a US $12 million short-term operating loan on commercial terms to the Company repayable after one year. The Breagh process continues to evolve and we continue to examine the options to maintain the program towards full development.
Subsequent to the quarter end the Company successfully closed a financing agreement of US $11.2 million. Net proceeds of approximately US $10.4 million will provide a bridge until the receipt of funds from these farm outs. This funding will also enable continued progress with the ongoing development activity in both the Doina and Breagh areas and a modest 2009 exploration program.
On the regulatory front, Sterling has received confirmation that an extension regarding blocks awarded in the UK North Sea during the 24th Offshore Round has been granted until November of this year. The only block not extended was Block 21/29d, which Sterling has chosen to relinquish. We have developed good prospects in the 24th Round Licenses and the recent deadline extension provides us with the opportunity to continue farm out activity and incorporate the results of currently drilling wells in nearby blocks, especially in the area known as the Mid North Sea High.
Contained within the recently announced UK Government Budget is the "Small Field Allowance", a program intended to attract capital and expedite development of small offshore UK fields. Sterling will continue to assess with our new partner, Premier Oil, the impact of this budgetary provision upon the Sheryl field in the UK Central North Sea. During the quarter Sterling assumed operatorship of the Sheryl field.
During the quarter we announced that a letter of intent had been signed with Challenger Minerals (North Sea) Limited (CMI) under the terms of which CMI would farm in to 10% of Sterling's current 39.9% interest in the Cladhan oil discovery located in Block 210/29a in the UK Northern North Sea. In exchange for this farm out of 10%, CMI agrees to pay a contribution towards past well costs and the payment of a carry on the forthcoming sidetrack well at Cladhan. In addition, Sterling will acquire an interest of 10%, on a ground-floor basis, by farming into the CMI Crosby well on Block 110/14d located in the East Irish Sea. A fully termed agreement with CMI is planned for completion during the second quarter of 2009.
Although modest in relation to the drilling program completed during 2008, Sterling anticipates the completion of an exploration drilling program encompassing the following four areas during 2009:
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