3 Dec 2009 07:00
3 December 2009
STERLING ENERGY PLC
("Sterling" or the "Company")
Completion of Sale of USA Business & All Bank Debt Repaid
Sterling (AIM: SEY), the independent oil and gas exploration and production company with interests in the Middle East, and Africa, is pleased to announce that it has today completed the sale of its USA business to the Atinum Group from Korea. The Company's outstanding bank debt has been repaid in full. The sale process was handled by BMO Capital Markets
Background
Sterling's USA business comprised exploration and production projects, primarily in the onshore Gulf Coast and shallow waters of the Gulf of Mexico. Independent third party and Company reserve reports, effective 1 April 2009, estimated proved and probable reserves of 53 and 41 billion cubic feet of gas equivalent respectively, of which 73% is gas and 27% is oil. Average production for 2009 to 30 September was 21.2 million cubic feet of gas equivalent per day. In the year to 31 December 2008, the Company's USA business generated revenues of $83.2 million and a gross profit of $23.5 million.
Terms of Sale
The initial sale consideration was $90 million with an effective date of 1 April 2009 and on completion was adjusted for intra-Group cash movements since 1 April 2009 and other costs.
In addition to the initial consideration, there is a three year 'upside sharing agreement', under which Sterling is entitled to a 40% share of the annual excess net production proceeds (arising from the disposed USA business) if the average realised oil price exceeds $90 per barrel and/or the realised gas price exceeds $9 per thousand cubic feet in any of the years 2010-2012.
Use of Sale Proceeds
After adjusting for cash received from the USA business since 1 April 2009 and the various bank and other expenses associated with the sale, Sterling's net consideration is $78.9 million on completion, of which $8.3 million is held in escrow pending USA tax clearances; Sterling expects these clearances will be obtained within the next 180 days and will result in the receipt of the full escrow amount.
All of Sterling's outstanding bank debt of US$71.6 million has been repaid; the Company is now debt free. Sterling's cash balance is currently $73.4 million, including the US$8.3 million held in escrow.
Alastair Beardsall, Sterling's Chairman said:
"This step completes Sterling's exit from the USA. The Company will continue to re-focusing both technical and financial resources on higher impact exploration and production opportunities."
| Further information: | |
| Sterling Energy plc | +44 (0)20 7405 4133 |
| Alastair Beardsall, Executive Chairman Graeme Thomson, Chief Executive Jonathan Cooper, Chief Financial Officer | |
| Evolution Securities | +44 20 7071 4300 |
| Rob Collins Chris Sim Neil Elliot |