|Being tidied up for a takeover.
Jake Ulrich's Sterling Resources Ltd. (SLG) added half a cent to 16.5 cents on 864,900 shares, its heaviest volume since October. It spent that month falling to 30 cents from 50 cents as investors fretted over its finances. Its main asset, the 30-per-cent-held Breagh gas field in the North Sea, had faced a delayed start-up, unexpected shutdowns and lower-than-modelled production over the past year. This was a problem because Sterling had issued $225-million (U.S.) of bonds in 2013 with the expectation that Breagh would do better. The bondholders cut the company some slack at a bondholder meeting last December, but a $32.7-million (U.S.) payment remained due to them at the end of this April, so Sterling began casting about for money. Options included the sale of part of Breagh or of non-producing assets in Romania. Today, Sterling announced that it had found a buyer for its Romanian assets, Carlyle International Energy Partners, which will pay $42 147104.5-million (U.S.).
This would be very heartening but for two things: One, Sterling has to pay a $10-million (U.S.) termination fee to a energy fund because of a 2007 investment deal, and two, the sale will likely not close until after April, so the bondholders may not see their money on time. Sterling is "considering options" for short-term liquidity. For the long term, it is still mulling a sale of part of Breagh, as well as potential financings. It can take heart that Breagh is getting better. Year to date, the field has produced about 38 million net cubic feet a day, slightly ahead of analysts' predictions. Meanwhile, elsewhere in the North Sea, the Cladhan field remains on schedule to start production in the third quarter.|
from Blue eyes on LSE
Fairfield considers options for a fresh shot at London
Gary Parkinson Market report
Published at 12:01AM, September 10 2014
If at first you don’t succeed, then come back four years later. Remember Fairfield Energy? This is the North Sea oil and gas company owned by private equity that hired Goldman Sachs and Credit Suisse to advise on a London flotation back in 2010. Its ambitions to raise at least £330 million, which would have delivered Fairfield a market value of upwards of £720 million, were thwarted after it failed to drum up enough interest among investors. The float was pulled.
In the past month, so it is rumoured, Fairfield has looked at a reverse into Sterling Resources, based in Calgary, quoted in Toronto, with assets in the North Sea and elsewhere and run by Jacob Ulrich, formerly the senior energy adviser to Och-Ziff, the hedge fund. That didn’t work out, either.
Now, apparently, Fairfield, owned by a consortium of private investors led by Warburg Pincus, is being advised by Rothschild on alternative routes to the public market. Perhaps via another shot at a London flotation or, more likely, a reverse takeover of any one of a number of quoted oil producers with UK assets and a yawning disparity between their values and market capitalisations. Ithaca Energy (off 1¾p at 133p), Faroe Petroleum (¾p easier at 107p) and Providence Resources (up 1½p at 132½p) were mentioned by speculators as potential targets. So were others|
OMV has announced an oil discovery at the Marina 1 exploration well ~60km offshore Romania.The well, drilled on the Istria XVIII permit, was drilled to a TD of ~2200m in 50m of water and initial tests indicate production of 1500-2000boe/day
The Istria XVIII permit is adjacent to the Sterling-operated Pelecan (65%) and Luceafarul (SLG 65%) permits. The company is currently seeking farm-downs for all its Romanian permits ahead of three exploration wells which are planned in 2015 (one in the Luceafarul block).
Source: Upstream, 16th July|
|Reckon the operators have it throttled back and are being cautious until their sale is closed. Need the new lot in there to get things moving forward and faster. Then there's Romania, a slow burner for now but should be a driver next year. I'll take that 85 cents too!|
|You do wonder- well I do - whether there is a depletion problem with the original set up which they are trying (out of necessity) to ameliorate.
Can we have our Vitol bid back at 85c please.|
|This from RBC this morning:
Sterling Resources (SLG.V): Breagh update confirms production and development
remains on track
Sterling released an update on Breagh Phase 1 yesterday outlining production and development plans for 2014 onwards, alongside an outline of exploration and appraisal drilling and costs for 2014 and 2015.
Drilling started at Breagh A08 well:
Following the successful A07 fracture stimulation, drilling has commenced on the A08 well, ~1.8km northeast of the Breagh Alpha platform. The well is expected to encounter the better quality sandstones seen in the northeastern areas of the field, with contingency plans to sidetrack and hydraulically fracture stimulate if required. Further drilling of two more wells and possibly two sidetracks are being considered for late-2015, subject to rig availability.
H2/14 increase in production:
Sterling expects gas sales production for H2/14 of ~120MMscf/d (36MMscf/d net to SLG), slightly ahead of our current forecast, and 111MMscf/d in 2015 (33MMscf/d net), in line with expectation. The company's average gas sales production for 2014 is expected to be 27 MMscf/d net, consistent with expectations, with additional condensate expected to be produced. The production forecasts assume the A07 and A08 wells come on-stream in August and October, respectively, and the sidetracks and hydraulic fracking contributes from H2/15.
Updated capex in line:
Sterling's capex for Breagh Phase 1 is $21m in H2/14 and $29m in 2015, in line with our expectations. The company's total capex remains unchanged at ~$42m in H2/14 and ~$60m in 2015. However, the 2015 capex estimate assumes Sterling secures farm-out deals in Romania ahead of exploration and retains half the current equity interest prior any benefit of expected promotes. Sterling expects to have cash of ~$37m, in line with our forecast, at the end of H1/14. Financing considerations are ongoing and H2/14 operating cash flow is expected to be ~$38m.
Exploration catalyst expected later in H2/14 and 2015:
Following completion of the A08 well, the rig will move to the Crosgan field (SLG 30%), 25km northeast of Breagh. We include upside / risk of +C$0.04/-C$0.03 per share for this well in our C$1.17/share NAV. In H2/14 Sterling also expects to drill an exploration well on the UK North Sea Beverley prospect (SLG 20%), with the company largely carried on well costs. We include upside/risk of +C$0.13/-C$0.02 per share for this well in our NAV for this higher impact well. Four exploration wells are planned in 2015: one offshore UK (Niadar prospect, SLG 100%) and three offshore Romania (one in the Luceafarul block, SLG 50%, and two in the Muridava block, SLG 40%). The intention is to drill all wells post farm-down processes.|
|At last, some great news. Successful Breagh Well A07 Fracture Stimulation - "These results have exceeded our expectations"
|Disappointed that the Muridava-1 exploration well was a miss. Plugged and abandoned. More pain for share holders.
|Great 13 min long video on the Breagh story. A good watch for long timers and newbies alike.
Sterling Resources (SLG.V): Q1/14 impacted by 3-week shut-in at Breagh
Sterling reported Q1/14 results overnight. As a result of the three-week shut-in at the Breagh gas field (SLG 30%), gross production averaged ~23MMscf/d in Q1/14, generating revenue of ~$20.5m, slightly ahead of our $18m forecast. During the quarter, the company also realised a gain of ~$27m on the sale of the Midia Deep block in the Romanian Black Sea.
Operating cash flow of ~$11m was slightly lower than anticipated. Sterling ended the quarter with cash of ~$46m, and restricted cash of ~$10m in accordance with the bond requirements. In the remaining quarters, Sterling expects to spend ~$60m in capex, which includes development spending at Breagh and two exploration wells.
Romania farm-out completed, Muridava-1 well ongoing: Following the farm-out of the deepwater area within the Midia block, a 3D seismic program over key parts of the Midia Shallow and Pelican blocks (SLG 65%) was completed earlier than expected in Q1/14. This will accelerate the company's planned farm down of this acreage. On the Muridava block (SLG 40%),the Muridava-1 exploration well started drilling in early April and is expected to take two months to complete. The well is on the same geological trend as the existing Olimpiyskaya and Eugenia gas discoveries; we include upside/risk of +C$0.15/-C$0.03 per share for a ~170Bcf discovery in our C$1.20/share NAV. The other two commitment wells for the block have been postponed to 2015.
Two UK exploration wells in H2/14: Exploration wells at the Beverly (SLG 20%) and Crosgan(SLG 30%) prospects remain scheduled for H2/14. We include a combined upside/risk of +C$0.17/-C$0.05 per share for these wells, Sterling are mostly carried through the Beverly well through a farm-out arrangement.|
|Log re Breagh I wouldn't much disagree with you except that Breagh for me was very much the assumed bread and butter and now we have to see if its even the bread never mind the butter .
I exaggerate of course..
Cheap as chips at 57c I suppose if Breagh could be sold at anywhere near 100c which was always the assumed baseline NAV - but it seems to be a tad troublesome geologically so who would pay that now unless a full year of trouble free operations .
It seems to be the execution equivalent of Bowleven - all fur coat and no knickers .|
|ohisay I think there are a few large PI holders in the same boat which is why I suspect it may take a while to get back to close to $1! It's 40% of 185bcf also and a fairly new play so likely not commercial. Not sure I'm that excited about Romanian explo. Having said that the market cap is more than covered by Breagh/Cladhan. The workover news of A07 is a lot more important than current Romanian explo IMHO.
|Is it just me ? - Romania 185 bcf but EDR gives me exposure to 20 tcf of gas at a fraction of SLG's market cap.Even for a fracking co.it seems a no brainer.
Ergo Romania is the company maker....not Breagh unless they sell it .
Well I would now - warts and all - except I suspect bidders have already a somewhat jaundiced view of the field.
I need 90c to get out of my residual holding pain free - I would in a trice.|
Polarcus Naila is acquiring the 'UK Breagh' RightBand(TM) multi-client project. The survey is designed to provide enhanced imaging of the Carboniferous Breagh field areas in UK Block 42/13 and to deliver improved understanding of the prospectivity of the adjacent open blocks recently offered for licensing in the UK 28th License Round.
The survey, expected to run for approx. 1 month, is supported with high industry prefunding.|
|From Petroceltic today,
Romania: The Muridava-1 exploration well was initiated on the Muridava (EX-27) Licence (Petroceltic 40%, Operator, Sterling Resources, 40%, Petromar 20%) on 11 April 2014, and is drilling ahead at 1750 metres measured depth. The well is expected to take two months to complete, and is targeting gross mean unrisked prospective resource of 185 BCF from the Eocene, Paleocene and Upper Cretaceous intervals.|
|production down, gas prices down, delayed drilling, production start up delays and need more cash by the third quarter, wonderfully candid news release but probably all the recent rises will be lost today.|
|Tip by JS on BNN yesterday. Tp 1.68 I think.|
|Sterling seems surprisingly strong of late. Anyone got any ideas why? [not that I'm complaining!]
|Thanks, Mark. :-)|
|Ed, it does. The provisions are broken down into broad categories on p44 of the report. £37m is "litigation provisions" (the rest relates to warranties on sales of businesses, onerous property leases and insurance), which would include liabilities from project problems. NB 2013 provisions are actually slightly down from 2012 when they stood at £171m. Clearly there is a possibility that the Breagh consortium could make a claim (if a settlement hasn't already been reached, which would be included within the losses AMEC has booked for the project).|
|Thanks, marben100. :-)
Another perspective would be interesting.
I see that AMEC's Balance Sheet includes £163 million of provisions. Of course they may want to keep the build-up of that figure confidential, but I wonder if it includes a sum which may one day land in Sterling's bank account?|
|Just ploughing through AMEC's annual report in preparation for their AGM tomorrow. Interested (& pleased) to note that AMEC made losses on the TGPP contract - so it wasn't just Sterling that suffered from that one. I will ask what went wrong tomorrow. ;0)
I hold considerably more AMEC shares (by value) than Sterling. They don't usually mess up so badly and generally make a hod of money.