SEY.L Regulatory News (SEY)

4 Feb 2008 07:01

Sterling Energy PLC04 February 2008 04 February 2008 STERLING ENERGY PLC ("Sterling" or the "Company") BOARD CHANGES OPERATIONAL UPDATE Sterling (symbol: SEY), an AIM listed independent oil & gas exploration andproduction company with interests in the Gulf of Mexico, Africa and the MiddleEast, today announces changes to strengthen its Board and provides an update on2007 production and drilling and on its 2008 programme. It anticipatesannouncing its preliminary results in late April. Board Changes The Board has been considering how best to enhance the performance of theCompany's asset base, to carry out its growth strategy and to maximize value forits stakeholders. As a result it has agreed that, with immediate effect: • Harry Wilson, currently Chief Executive Officer ("CEO"), will become Executive Deputy Chairman and will focus primarily on business development opportunities which will assist Sterling to implement its growth strategy more effectively. A founder of Sterling, he has been its CEO since its listing on AIM over 5 years ago. • Graeme Thomson, currently Finance Director, Company Secretary and responsible for Sterling's USA business, will become CEO. Also a founder of Sterling, he has been an Executive Director for over 5 years and has worked in a variety of roles in the oil industry for over 25 years. • Jonathan Cooper will become Finance Director and Company Secretary. For the last 2 years he has been finance director at Gulf Keystone Petroleum and previously spent 9 years at Dresdner Kleinwort Wasserstein, where he worked as a Director in the Oil & Gas Corporate Finance Team. Sterling also announces that Paul Griggs, its Commercial Director, will beleaving the Company and stepping down as a Director on or around 30 April 2008.Paul has played an important part in the development of Sterling over the last 3years including the successful completion of the US $145 million Whittiertransaction and signing of a Production Sharing Contract in Kurdistan in 2007.He feels it is a good time to move on to new challenges and the Company wisheshim every success in the future. Dr Richard Stabbins, Chairman, said: "These changes will enable Sterling to focus on working its asset base moreeffectively and to fulfill its development potential. Having been Chairman nowfor six months, I can see great promise in the Company that needs to beunlocked. With our bank debt now refinanced, we expect that 2008 will be anexciting year as a result of our investments in production and exploration." Graeme Thomson, CEO, said: "We expect to drill prospects in the coming year that could significantly alterthe reserves base of Sterling. In both Gabon and Madagascar there is majorupside potential. Kurdistan is on track for drilling in 2009, whilst our USAprogramme is intended to strengthen a core producing area. Whilst we have anumber of challenges to deal with, I believe our experienced and dedicated teamcan ensure success." Operational Update Group production for the second half of 2007 is estimated at over 5,500 boepdcompared with 4,900 boepd in the first half. United States Net production for the USA operations at the end of 2007 was approximately 4,800boepd, of which about 80% was gas and the remainder was liquids. Recently, gasprices have been increasing having been relatively unchanged during a longperiod of rising oil prices. Production for Q4 2007 is estimated to haveaveraged 4,200 boepd. It was affected by natural production declines and byequipment and weather delays in hooking-up discoveries. In 2007, the USA operations drilled 35 wells with an 80% success rate. The thirdAustin Chalk well, Jet-3, has recently come on-stream and is producing at a netrate of 1.8 mmcfd (300 boepd). The fourth well in this programme is now drillingat about 15,000 feet. On the Thunder Stud prospect (Brown-1, NRI 10.7%) both oil & gas wereencountered and testing was carried out in two intervals of the Yegua formation.The deeper sand was non-commercial, whilst the upper sand flowed oil and gasat a gross rate of c.475 boepd. The shallower Hackberry sands will be completedas a small producer. Partners are expected to agree to drill a second well in2008, which will target sizable and better quality reservoir potential up-dip. Year-end USA reserves are currently being evaluated, with present indicationsthat 2P reserves will be approximately 110 bcfge, of which proved areapproximately 65%. Possible reserves will add a further approximately 70 bcfge. Gas prices have recovered in early 2008 and Sterling has entered into furtherhedges on its US production for 2008-9 at prices of approximately $8/mcf for gasand $84-89 /bbl for oil. The cost of US rigs and services remains high. The USA capital expenditure programme for 2008 is expected to be $45-50 millionand the major focus will be on appraisal and development drilling. Whereappropriate, a portion of internally generated exploration prospects will befarmed out. Africa and Middle East Gabon The offshore ICM-1 well is scheduled to spud in May on the Iris Marin licence(Sterling 50% interest*). This well is targeting gross reserves of 15-40 millionbbls. Mauritania An appraisal well will be drilled on the Banda discovery at the end of Q1 by theAttwood Hunter at no cost to Sterling as it holds a royalty interest. It willthen drill two development wells and carry out three workovers on the 50 millionbbl Chinguetti field during Q2 2008. The objective is to more than double field production, which in Q4 2007 averaged12,300 bpd. Sterling's share of the proceeds of the one cargo lifted in Q4 was$6.6 million. The hook-up of these wells is expected to generate additional net revenues inthe second half of 2008 and the results of these operations could have amaterial impact on the value of these interests. Petronas has now completed theacquisition of Woodside's interests in Mauritania, including Chinguetti, and hastaken over as field operator. AGC joint development area In AGC, the operator is in negotiations to secure a rig to drill an exploration/appraisal well targeting the exploration potential of light oil reservoirs onthe flanks of the offshore Dome Flore heavy oil discovery, plus also appraisingthe heavy oil accumulation. These negotiations are subject to regulatoryapprovals. Sterling has a carried 30% interest in the well. Madagascar Negotiations are in progress regarding possible early drilling on a significantprospect offshore Madagascar. Sterling currently has a partly-carried 30%interest in an area of approximately 25,000 sq km, with ExxonMobil as operator.Sterling will seek to farmout a further portion of its costs in the proposedwell. Kurdistan Planning for the 2D seismic programme on the recently acquired Sangaw Northpermit is making good progress. Recent field work has significantly improvedthe understanding of the block and has also identified a number of oil seeps onthe main structure which are extremely encouraging. Sterling is seeking tofast-track work on this highly prospective area. Financial Update Recent falls in interest rates are estimated to have reduced Sterling'sannualized financing costs by approximately $3 million. Current Group cashbalances are estimated at $14 million. Working capital management remains a highpriority. The borrowing base review of Sterling's USA and Mauritanian producing interests,effective from mid-February 2008, has been agreed. This follows completion ofthe refinancing of all its bank debt in mid December 2007. Sterling willmaintain its $154 million borrowings and will have undrawn facilities of $4million. The next review is effective from mid-July 2008 Enquiries Sterling Energy Plc (+44 20 7405 4133) Web site: www.sterlingenergyplc.comHarry WilsonGraeme Thomson Evolution Securities (+44 20 7071 4300)Rob CollinsChris Sim Citigate Dewe Rogerson (+44 20 7638 9571)Media enquiries: Martin JacksonAnalyst enquiries: Kate Delahunty In accordance with the guidelines of the AIM Market of the London StockExchange, Harry Wilson, BSc (Hons) Physics (1973), Executive Deputy Chairman ofSterling Energy Plc, who has been involved in the oil industry for over 33years, is the qualified person that has reviewed the technical informationcontained in this press release. *subject to completion of pre-emption over a further 11.43% This information is provided by RNS The company news service from the London Stock Exchange