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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sterling Energy Plc | LSE:SEY | London | Ordinary Share | GB00B4X3Q493 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 16.50 | 16.10 | 16.90 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSEY
RNS Number : 3509Z
Sterling Energy PLC
18 September 2020
18 September 2020
S terling Energy p lc
Results for the six months ending 30 June 2020
Overview
Sterling Energy plc ('Sterling' or the 'Company') an upstream oil and gas company listed on the AIM market of the London Stock Exchange (Ticker Symbol: SEY) today announces its results for the six month period ending 30 June 2020.
The Company is an experienced operator of international exploration and production licences, with a primary geographic focus on emerging markets including, Africa and the Middle East, although the Board would consider other regions for material opportunities. The Group has a high potential exploration asset in Somaliland and an active strategy to deliver shareholder value through disciplined, exploration and production projects; leveraging the Company's experience, with an emphasis on securing near term cash flow generative opportunities.
Operations summary
-- Odewayne block, Somaliland - Operating Committee Meetings ('OCM') held in Q3 2020 where the Operator presented an update on their latest technical work.
-- The final products of the reprocessing of 1,000km of 2D seismic data to Pre-Stack Time Migration were delivered Q1 2020. Sterling's assessment of the technical data is underway.
-- Sterling continued to support the Operator in progressing the technical understanding of the block.
Corporate summary
-- Continued merger and acquisition ('M&A') mandate for transformational growth (asset and corporate options).
-- Screened over 20 separate opportunities globally in 2020 with 3 of these progressing to the level of indicative offer (one of which from 2019 remains under consideration).
-- Both asset and corporate screening levels remain high. Sterling has noted an increase in the number of M&A opportunities on the market due to the impact of Covid-19, and remains well positioned to capitalise on potential future opportunities.
Financial s ummary
-- Cash resources as at 30 June 2020 of $ 43.8 million (30 June 2019 of $ 45.5 million).
-- The Group remains debt free and fully carried for Odewayne operations (Third and the Fourth Period).
-- A d j usted EBI T DAX loss of $ 289 k (1H 2019: loss $ 256 k). -- Loss after tax of $ 870k (1H 2019: loss $ 603k ).
-- Ongoing focus on capital discipline, cash general and administrative overheads ('G&A') reduced by ca. 3% to $1.1 million (1H 2019: $ 1.1 million ). A further ca. 10% decrease is forecasted for the 2020 full year in comparison with 2019 full year costs of $2.6 million.
-- Proactive focus on treasury management, with interest received totaling $288k (1H 2019: $574k).
For furth er information c ontact:
Ticker Symbol: SEY
S terling Energy p lc + 44 (0)20 7405 4133
www.sterlingenergyplc.com
David Marshall, Chief Executive Officer
Michael Kroupeev, Chairman
Peel Hunt LLP +44 (0)20 7418 8900
Richard Crichton
David McKeown
CEO Statement
Market Landscape
Commodity prices in 1H 2020 have averaged ca. $40/bbl, with the price being effectively capped by the Covid-19 situation and general market uncertainty. Global oil demand fell by ca. 16 mmbbls/d as world-wide Covid-19 related lockdowns continue to reduce demand. There is an upward improvement in demand from China and India, but uncertainty around a Covid-19 'second wave' continues to impact the forecast which is expected to average a fall of 9.3 mmbbls/d from 2019.
North Africa is buoyant given a number of large discoveries coming on-stream and in Egypt the situation continues to improve with the reversal of its long running receivables problem. There remains a clear appetite in this market for buying and selling existing production. The majors are selling their smaller land positions to focus on the larger deep water targets.
As stated before, Sterling remains well financed and is positioned to take advantage of acquisition opportunities during these market conditions. Our ability to filter opportunities quickly in a congested market, combined with the leverage our cash balance allows, provides confidence that we can secure a deal.
Operations
Operating Committee Meetings ('OCM') for the Odewayne licence were held in Q3 2020, where the Operator presented an update on their latest technical work. The costs associated with the Third and the Fourth Period are fully carried by Genel Energy Somaliland Limited ('Genel Energy'), hence the minimal capital investment shown within the accounts.
Corporate
Activity levels on opportunity and asset screening remains high and Sterling are well entrenched in the deal flow. Many smaller companies with viable developments but low cash reserves are looking for merger opportunities, giving them access to cash that is currently not available from capital markets. Sterling has noted an increase in opportunities in recent months.
Sterling retains a strong position in the sector with a strong cash position of ca. $44 million and no debt or other liabilities. This is reflected in our share price increase from 8.7p at year end 2019 to 12.5p at the start of September, as investors look for stable companies with a healthy balance sheet. The Company has continued to reduce G&A and focus on robust treasury management, in line with the Board mandate for cash preservation to maximise our ability to deploy capital into new assets. The Company is forecast to achieve further G&A savings, whilst focusing on treasury management in 2H of 2020, against difficult market conditions.
Operations Review
Somaliland
Somaliland offers one of the last opportunities to target an undrilled onshore Mesozoic rift basin in Africa. The Odewayne block, with access to the Berbera deepwater port less than a 100km to the north, is ideally located to explore this frontier basin. A 2D geophysical survey acquired in 2017, along with potential field data and legacy geological field studies, help corroborate the presence of a sedimentary basin with further evidence for a working hydrocarbon system.
Odewayne (WI 34% - Fully carried by Genel Energy) Exploration b lock
This large and unexplored frontier acreage position comprises an area of 22,840km(2) , the equivalent of ca. 100 UK North Sea blocks. Exploration activity prior to the 2017 regional 2D seismic acquisition program has been limited to the acquisition of airborne gravity and magnetic data and surface fieldwork studies, with no wells drilled on block.
The Odewayne production sharing agreement ('PSA') was awarded in 2005. It is in the Third Period, with a minimum work obligation of 500km of 2D seismic. The Third Period has been extended, through the 6(th) and 8(th) deeds of amendment and its minimum work obligation was met in 2017 when the Somali Government (Ministry of Energy and Minerals) contracted BGP (Geophysical contractor) to undertake a 1,000km (full fold, 1,076km surface) 10km by 10km, 2D seismic campaign. The minimum work obligation during the optional Fourth Period of the PSA (also extended by 2 years) is for 1,000km of 2D seismic and one exploration well.
The Company's wholly owned subsidiary, Sterling Energy (East Africa) Limited ('SE(EA)L'), holds a 34% working interest in the PSA. SE(EA)L originally acquired a 10% position from Petrosoma Limited ('Petrosoma') in November 2013 and an additional 30% from Jacka Resources Somaliland Limited ('Jacka') in two transactions during 2014.
In April 2017, the Company agreed to revised farm-out terms to reduce the staged contingent consideration payments due to Petrosoma and reduce SE(EA)L's interest in the Odewayne asset by 6%. The farm-out agreement was amended such that the parties cancelled the $8.0 million contingent consideration in return for: (i) a payment by SE(EA)L to Petrosoma of $3.5 million; and (ii) a transfer from SE(EA)L to Petrosoma of a 6% interest in the PSA.
Post Government of Somaliland approval, SE(EA)L holds a 34% interest in the Odewayne Block, fully carried by Genel Energy for its share of the costs of all exploration activities during the Third and Fourth Periods of the PSA.
The JV partners elected in Q1 2019 to reprocess the entire 2D seismic dataset to full Pre-Stack Time Migration. This reprocessing started in Q2 2019 and final products were received in Q1 2020. An option was in place to process these same data to Pre-Stack Depth Migration, but was not exercised.
Operating Committee Meetings were held in Q3 2020 where the Operator shared a technical update on their progress interpreting the newly processed seismic data.
Outlook
Whilst Sterling's progress on interpreting the results of the reprocessing of the 2D seismic data has been hindered by Covid-19, Sterling intends to finalise this work by year end 2020. Once this interpretation is complete, a review of the prospectivity will be concluded and inform on the next steps for Sterling on the licence.
M&A strategy
Sterling has actively transitioned the port folio out of long cycle exploration assets requiring third party funding and continues to actively search for near to mid-term value creation and tra n s formative growth/monetisation options in both Africa and the Middle East (although the Board would also consider options further afield for the right project). A prudent, s elective and persistent M&A led e ffort is dir ected towards shorter -cycle re v enue generating pro j ects that will d eliver in a sustained low er oil price landscap e, in progressive jurisdictions.
The Company maintains a disciplined approach to all M&A efforts at a corporate and asset level, only pursuing and executing those growth options that the Company believes to have the best opportunity to ultimately deliver value for shareholders.
Financial Rev iew
Selected financial data
Hot Features
Premium
1H 2020 1H 2019 FY 2019
Adjusted EBITDAX (1) ($m) (0.3) (0.3) (0.9)
--------------------------------------------- -------- -------- --------
Loss after tax ($m) (0.9) (0.6) (1.6)
--------------------------------------------- -------- -------- --------
Cash and cash equivalents net to Group ($m) 43.8 45.5 44.9
--------------------------------------------- -------- -------- --------
Debt ($m) - - -
--------------------------------------------- -------- -------- --------
NAVPS (2) (at period end) (GBP pence) 23.9 23.8 22.6
--------------------------------------------- -------- -------- --------
Share price (at period end) (GBP pence) 11.5 10.4 8.7
--------------------------------------------- -------- -------- --------
(1) Adju s t ed EBITDAX is cal c u lat ed as earnings be f ore int ere s t, taxat i on, depreciation, amor t i sat i on, impa i r m ent, pr e - l i cence expend i tur e, pr ov isio ns and shar e -ba s ed pa y m ents.
(2) Net asset value per share
Loss from operations
T he loss from operations for 1H 2020 was $1.1 million (1H 2019: loss $1.1 million).
During the period, net administrative expenditure decreased by ca. 3% to $1.1 million (1H 2019: $1.1 million) and includes pre-licence costs of $716k (1H 2019: $782k).
The Group continues to focus on such expenditures and forecasts G&A of ca. $2.3 million in 2020, a further ca. 10% decrease from the 2019 full year results of $2.6 million.
Adjusted EBITDAX and loss after tax
A d j usted EBI T DAX totalled a loss of $289k (1H 2019: loss $256k).
Finance inco me of $288k r epre sents inter est r e c eived on cash h eld by the Group (1H 2019: $574k). The Group continues to focus on treasury management to maximise interest received and preserve cash.
Finance costs totalled $ 60k (1H 2019: $ 45k).
T he loss after tax totalled $ 870k (1H 201 9: loss $ 603k ). Basic loss per share was 0.40 USc per share ( 1H 2019: 0.27 USc loss per share ). No dividend is propos ed to be paid for the six months to 30 June
2020 (30 June 2019: nil).
Cash flow
Net cash outflow from operating activities (pre -working capital move ments) totalled $992k (1H 2019: outflow $1.1 million ). A fter working capital, net cash outflow from operating activities totalled $ 1.2
million (1H 2019: outflow $ 1.2 million).
Cash generated from investing activities totalled $261k (1H 2019: $554k ), with net cash used in financing
activities totalling $133k (1H 2019: $188k ).
Statement of financial position
At 30 June 2020, Sterling held $43.8 million cash and cash equivalents available for its own use (30 June 2019: $45.5 million).
Group net assets at 30 June 2020 were $64.9 million (30 June 2019 were $66.8 million). Non-current assets totalled $22.0 million (30 June 2019: $22.2 million) with net current assets reducing to $43.7 million (30 June 2019: $45.5 million).
Going Concern
T he Group's business activitie s, togeth er with the factors likely to af f ect its future de v elop ment, performance and position are s et out in the CEO State ment and in the Op erations Re vie w. The financial position of the Group is de scribed in the Financial R e vie w.
T he Co mpany has s u fficient cash re sources for its working capital needs for at l east the n e xt 12 months. As a cons equence, the Dir ectors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. This assessment has been made by the Directors who remain confident the group has sufficient cash resources to meet its liabilities as they fall due for a period of at least 12 months from the date of signing these financial statements, and notwithstanding the impact that Covid-19 has had internationally. The Directors believe that the Group is in a strong position to absorb any potential impact on the Group arising from Covid-19. Accordingly, th ey continue to adopt the going concern basis in preparing the re sults for the s ix months ended 30 June 2020.
Disclaimer
T his document contains ce r tain forward-looking statements that are subj ect to the usual risk factors and uncertainties associated with the oil and gas e xploration and production busines s. Whilst the Group beli e v es the e xpectation re flected he r ein to be reasonable in light of the information available to it at this time, the actual outcome may be materially diff erent owing to factors eith er beyond the Group's control or oth erwise within the Group's control but where, for e xample, the Group decides on a change of plan or strategy. Acco rdingly, no reliance may be plac ed on the figures contained in such for ward -looking statements.
Glossary
$ US Dollars
2D two dimensional
-----------------------------------------------------
Adjusted EBITDAX earnings before interest, taxation, depreciation,
amortisation, impairment, pre-
licence expenditure, provisions and share based
payments
-----------------------------------------------------
Group Sterling Energy plc, together with its subsidiary
undertakings (the 'Group')
-----------------------------------------------------
km kilometre
-----------------------------------------------------
NAVPS Net asset value per share
-----------------------------------------------------
Petrosoma Petrosoma Limited (JV partner in Somaliland)
-----------------------------------------------------
Post-stack Processing of raw seismic data into a geological
representation of the subsurface
-----------------------------------------------------
PSTM or Pre-stack More advanced technique of processing of raw seismic
time migrated dataset data; used when considering complex geology
-----------------------------------------------------
PSA production sharing agreement
-----------------------------------------------------
Seismic Geophysical investigation method that uses seismic
energy to interpret the geometry of rocks in the
subsurface
-----------------------------------------------------
Subsurface image Geological representation of the subsurface typically
using geophysical investigation methods such as
seismic
-----------------------------------------------------
km(2) square kilometre
-----------------------------------------------------
WI working interest
-----------------------------------------------------
Condensed consolidated income statement for the six m onths to 30 June 2020
Restated
Six months Six months
to to Year ended
30th June 30th June 31st December
2020 2019 2019
$000 $000 $000
(unaudited) (unaudited) (audited)
------------ ------------ -------------------------------------
Other administrative
expenses (382) (350) (1,108)
Pre-licence costs (716) (782) (1,444)
--------------------------------------- ------------ ------------ -------------------------------------
Total administrative
expenses (1,098) (1,132) (2,552)
Loss from operations (1,098) (1,132) (2,552)
Finance income 288 574 1,068
Finance expense (60) (45) (116)
Loss before tax (870) (603) (1,600)
Tax - - -
Loss for the period attributable
to the owners of the
parent (870) (603) (1,600)
------------ ------------ -------------------------------------
Other comprehensive expense
- items to be reclassified
to the income statement
in subsequent periods
Currency translation
adjustments 6 (5) (3)
Total comprehensive Income/(expense)
for the period 6 (5) (3)
------------ ------------ -------------------------------------
Total comprehensive expense
for the period attributable
to the owners of the
parent (864) (608) (1,603)
============ ============ =====================================
Basic and diluted loss
per share (US cents) (.40) (.27) (.73)
Condensed consolidated statement of financial position as at 30 June 2020
Restated
As at As at As at
30th June 30th June 31st December
Note 2020 2019 2019
$000 $000 $000
(unaudited) (unaudited) (audited)
------------ ------------ --------------
Non-current assets
Intangible exploration
and evaluation assets 3 21,142 21,109 21,119
Property, plant and
equipment 819 1,115 975
21,961 22,224 22,094
------------ ------------ --------------
Current assets
Trade and other receivables 166 296 250
Cash and cash equivalents 43,798 45,507 44,851
43,964 45,803 45,101
------------ ------------ --------------
Total assets 65,925 68,027 67,195
============ ============ ==============
Equity
Share capital 28,143 28,143 28,143
Currency translation
reserve (198) (206) (204)
Retained earnings 36,974 38,841 37,844
------------ ------------ --------------
Total equity 64,919 66,778 65,783
------------ ------------ --------------
Current liabilities
Trade and other payables 178 240 439
Lease liability 98 61 208
276 301 647
------------ ------------ --------------
Non-current liabilities
Lease liability 700 918 735
Long-term provision 30 30 30
730 948 765
------------ ------------ --------------
Total liabilities 1,006 1,249 1,412
------------ ------------ --------------
Total equity and liabilities 65,925 68,027 67,195
============ ============ ==============
Condensed consolidated statement of changes in equity for the six months ended 30 June 2020
Currency
Share translation Retained
capital reserve earnings(1) Total
$000 $000 $000 $000
--------------------- ------------ ------------ -------
At 1 January 2019 28,143 (201) 39,444 67,386
------------------------------- --------------------- ------------ ------------ -------
Total comprehensive expense
for the period attributable
to the owners of the parent - (5) (603) (608)
------------
At 30 June 2019 - Restated 28,143 (206) 38,841 66,778
------------------------------- --------------------- ------------ ------------ -------
Total comprehensive expense
for the period attributable
to the owners of the parent - 2 (997) (995)
At 31 December 2019 28,143 (204) 37,844 65,783
------------------------------- --------------------- ------------ ------------ -------
Total comprehensive expense
for the period attributable
to the owners of the parent - 6 (870) (864)
At 30 June 2020 28,143 (198) 36,974 64,919
------------------------------- --------------------- ------------ ------------ -------
(1) The share option reserve has been
included within the retained earnings
reserve and is a non-distributable reserve.
Condensed consolidated statement of cash flows for the six months ended 30 June 2020
Restated
Six months Six months Year
to to ended
31st
30th June 30th June December
Note 2020 2019 2019
$000 $000 $000
(unaudited) (unaudited) (audited)
------------------------------------------- ------------------------------------------- ----------
Operating
activities:
Loss before
tax (870) (603) (1,600)
Depreciation,
depletion
&
amortisation 166 74 191
Finance income
and
gains (288) (574) (1,068)
Finance
expense and
losses - 21 55
------------------------------------------- ------------------------------------------- ----------
Operating cash
outflow
prior to
working
capital
movements (992) (1,082) (2,422)
Decrease in
trade
and other
receivables 84 94 140
Decrease in
trade
and other
payables (262) (235) (35)
Increase in
provision - 30 30
Net cash
outflow from
operating
activities (1,170) (1,193) (2,287)
Investing
activities
Interest
received 284 570 1,068
Purchase of
property,
plant and
equipment - - -
Exploration
and
evaluation
costs 3 (23) (16) (26)
Net cash
generated
from
investing
activities 261 554 1,042
Financing
activities
Principal paid
on
lease
liability (108) (167) (201)
Interest paid
on lease
liability (25) (21) (54)
Net cash used
in financing
activities (133) (188) (255)
Net decrease
in cash
and cash
equivalents (1,042) (827) (1,500)
Cash and cash
equivalents
at beginning
of period 44,851 46,312 46,312
Effect of
foreign
exchange rate
changes (11) 22 39
Cash and cash
equivalents
at end of
period 43,798 45,507 44,851
=========================================== =========================================== ==========
Notes to the consolidated results for the six months ended 30 June 2020
1. Basis of preparation
T he financial information contained in this announcement does not constitute statutory financial statements within the meaning of S ection 435 of the Co mpanies Act 2006.
T he financial information for the six months ended 30 June 2020 is unaudited. In the opinion of the Directors, the financial information for this period fairly repre s ents the f inancial position of the Group. R e sults of operations and cash flo ws for the period are in compliance with International Financial Reporting Stan dards as ad opted by the EU ( 'E UIFRS'). The accounting policie s, e stimat es and judg e ments applied are consistent with those disclos ed in the annual financial statements for the year ended 31 De c e mber 2019. The se financial statem ents should be read in con junction with the annual financial statem ents for the year ended 31 De c em b er 2019.
The financial information for the six months ended 30 June 2019 has been restated as a consequence of IFRS 16 being adopted by the Group. The accounting policies, estimates and judgements applied are consistent with those disclosed in the annual financial statements for the year ended 31 December 2019.
A ll financial information is pres ented in USD, unle ss oth erwise disclos ed.
An unqualified audit opinion was expressed for the year ended 31 December 2019, as delivered to the Registrar.
The Directors of the Company approved the financial information included in the results on 18 September 2020.
2. Results & dividends
T he Group has r etained earnings at the end of the p eriod of $37.0 million (30 June 2019: $38.8 million r etained earnings) to be carried forward. The Directors do not recom mend the paym ent of a dividend (1H 201 9: nil ).
3. Intangible exploration and evaluation (E&E) assets
Total
$000
(unaudited)
------------
Net book value at 31 December 2018 21,093
------------
Additions during the period 16
Net book value at 30 June 2019 21,109
------------
Additions during the period 10
Net book value at 31 December 2019 21,119
------------
Additions during the period 23
Net book value at 30 June 2020 21,142
------------
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END
IR BUGDCDBBDGGR
(END) Dow Jones Newswires
September 18, 2020 02:00 ET (06:00 GMT)
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