Sterling Resources Lines up Finance
Canada's Sterling Resources recorded a net loss of $17.4mn in 1Q 2016, compared with a net loss of $44.5mn in the same period last year, as it sold less gas and at a lower price. But it sees hope from a recapitalisation deal and expects higher production than forecast from the Ineos-operated Breagh field in the UK North Sea, it said May 19.
Revenue from Breagh was $9.7mn from sales gas production of about 2.2bn ft³ in 1Q 2016 which sold at an average price of 30.6 p/therm ($4.33/’000 ft³) and condensate production of 890 metric tons (6,542 bbls) at an average price of $276/mt. Last year Sterling’s share of the revenue from Breagh was $25.8mn, with sales of 3.3bn ft³ at an average price of 46.6 p/th; and 1709 mt of condensate at an average price of $444/mt.
Phase 2 development at Breagh remains on hold to allow for the assimilation of results from the 2014 3D seismic interpretation, including reservoir characterization of the south-eastern area of the field. Given the current low UK gas price environment, developing an economically viable means to proceed with Phase 2 will be challenging, it said.
Strong production performance continued through the first quarter of 2016 with high facilities uptimes and with production levels exceeding management forecasts. First quarter average gross sales gas rates reached 80mn ft³/d, net 24mn ft³/d to Sterling.
During the quarter the planned infill drilling campaign and onshore compression project were both deferred by the new operator of the Breagh field, as a result of significant market volatility. Both of these initiatives are expected to re-start in 2017. The drilling of at least two further Phase 1 wells and the re-entry and hydraulic stimulation of at least one existing well are expected to begin in the second quarter of 2017. With the deferral of the infill drilling campaign, gas production for the field during 2016 is forecast to average 71mn ft³/d as output from the existing wells declines.
Sterling also saw its first sales from its 2% stake in the UK Cladhan oil development in the period, totaling $0.4mn from the sale of 11,700 barrels of oil, at an average price of $35/barrel.
The amended recapitalization agreement with Nordic Trustee will yield proceeds of up to C$219.8mn ($167.6mn) and is due to complete “imminently” according to CEO Jake Ulrich. “With the materially reduced bond debt and access to additional funding, our financial position will be significantly strengthened, allowing the company to maximize the economic potential of Breagh and to weather low gas prices,” he said.
William Powell