CALGARY, April 3, 2013 /CNW/ - Sterling Resources Ltd. (TSX-V: SLG) ("Sterling" or the "Company") announces the following operational updates regarding Breagh, Crosgan and Cladhan and amendments to the Company's By-Laws.
Breagh
RWE Dea as Operator, has now completed a review of overall progress of works on the modifications being performed at the Teesside Gas Processing Plant ("TGPP") and has reported further delays of approximately 90 days to finish the modifications before gas can be received for processing from the Breagh Field. The reported earliest estimate for first sales gas is mid July with a best estimate of early August and a late case of the final week of August, 2013.
Pipework installations are now essentially complete and the project has moved to a phase of pre-commissioning in which cold and hot loop testing is being performed. Additional commission resources are now available from the AMEC construction team, and additional commissioning resources have been provided to the px Group team (operator of the plant) by Redhall Engineering. With the emphasis changing from construction to commissioning, px Group now leads this phase of the project. To date 20 of the 42 systems have been completed and handed over for commissioning, including most recently the critical path heat medium system that was handed over for commissioning 15 days ahead of schedule.
The improvements that have more recently been attained have been offset by further problems. It has been reported that the delays are attributed to interruption to work by bad weather (28 days more than planned), rework of previously installed pipework, productivity shortfalls and an underestimation at the last review, in late 2012, of the time to complete construction activities and handover for commissioning.
Other elements of the Phase 1 development are in progress:
- All elements of the onshore pipeline have now been completed. Preparations are currently being made to de-water the pipeline from TGPP to the Breagh Alpha ("BA") platform to nitrogen in mid-April.
- Drilling operations continue on the fifth BA producer (A05) which is expected to be finished by early May. Completion, perforation and production testing of the A05 and perforation, and production testing of the A04 well is expected by end May.
- Two further wells will be drilled after production testing of wells A04 and A05, and are expected to be on on-stream mid August and early November respectively. As it is most likely that Phase 2 of the field development will involve the use of a second platform in the eastern area of the Breagh field, current expectations are not to drill the 3 extended reach wells on BA, drilling 7 conventional wells only.
Initial production at Breagh is anticipated to range from 150 to 180 million standard cubic feet per day (MMscf/d) with five or six of the seven planned production wells on-stream. Average production for the last five months of 2013, assuming productions starts in the first week of August, is expected to be 180 MMscf/d.
Phase 2 of the Breagh development targeting reserves in the eastern area of the field is currently being evaluated as part of development planning activity and is likely to comprise the following:
| (i) |
Installation of the Breagh Bravo ("BB") Normally Unmanned Installation ("NUI") in 65 metres of water situated approximately six kilometres to the east of BA with 12 well slots. Front-end engineering design work on the platform is considering the capability to man up the platform intermittently for maintenance purposes. This is expected to be done with minimal change to the BA platform design and construction. |
| (ii) |
Installation of a six kilometre, 20-inch pipeline from the BB platform to the BA platform. |
| (iii) |
Development drilling of seven to eight deviated wells from the BB platform to locations arrayed approximately two to three kilometres from the platform. |
| (iv) |
Control of the Phase 2 facilities will be centred at the onshore TGPP control room. |
Incremental Phase 2 development expenditures are expected to be £284 million (£85 million net to Sterling). The Company intends to fund estimated incremental Phase 2 expenditures out of proceeds of a high yield bond issue and/or from production revenues.
A short-term extension of the Second Term licence for licences P1230 and P1328 (covering the Breagh field) has been granted by the UK Department of Energy and Climate Control ("DECC") until December 31, 2013 to enable the completion of plans to incorporate Breagh Phase 2 development activities into the Breagh Full Field Development Program ("FDP"). These plans have been agreed with DECC for the submission of an FDP addendum by June 30, 2013, the submission of Board letters and financial arrangements by September 30, 2013 and government approval of the FDP addendum by December 31, 2013 whereby production consent for the field until November 30, 2030 will be modified to reflect the FDP addendum.
Forecast costs for the first phase of the development are now estimated to be £648 million (net to Sterling £194 million) for Phase 1 with 10 wells; with £67 million (£20 million) remaining from April 1, 2013 until first gas revenues are received expected in September. In the alternative proposal of only drilling seven wells from the BA platform, current forecast costs are now estimated to be £545 million (net to Sterling £164 million).
Crosgan
Crosgan is a gas discovery that straddles the boundary between blocks 42/10 and 42/15 in the UK North Sea approximately 25 kilometres northeast of the Breagh field. The primary geological target is Whitby Sandstone. An appraisal well at Crosgan remains an outstanding obligation for the licence and a well is planned for late 2013 with the ENSCO 70 jack-up drilling rig, following the development drilling on Breagh. Should Crosgan be declared commercially viable a development project will be initiated with the likely concept being a small gas platform tied back to the BB platform on the east side of Breagh. Crosgan production will be comingled with Breagh gas offshore and exported to the TGPP via the Breagh infrastructure.
Cladhan
The Cladhan project is proceeding well and the partners are working towards achieving governmental approval for the Field Development Plan at the end of April 2013 with first oil planned for the start of 2015. The Company is finalising an agreement with TAQA Bratani Limited in relation to Cladhan funding; further details will be provided soon.
CEO Comments
"Despite our deep disappointment with the further delays to the onshore plant modifications the fundamentals of the whole Breagh project remain robust with good well results so far and with the second phase of development now taking shape," stated Mike Azancot, Sterling's President and CEO. "Having completed our recent equity financing of $63 million we have repaid the Vitol loan of US$12 million and provided sufficient operating funds until August. We hope to announce soon our selection of a strategic solution aimed at refinancing the current bank credit facility, and one that will alleviate any concerns around a cash shortfall before revenues are received from Breagh," Mr Azancot added.
By-Law Amendments
Sterling's board of directors (the "Board") has adopted amendments to the Company's By-Laws, including introducing an advance notice requirement in connection with shareholders intending to nominate directors in certain circumstances (the "By-Law Amendments").
In particular, the By-Law Amendments set forth a procedure requiring advance notice to the Company by any shareholder who intends to nominate any person for election as director of the Company other than (i) by or at the direction of the Board or an authorized officer of the Company; (ii) by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Business Corporations Act (Alberta) (the "Act") or a requisition of the shareholders made in accordance with the provisions of the Act. Among other things, the By-Law Amendments set a deadline by which such shareholders must notify the Company in writing of an intention to nominate directors prior to any meeting of shareholders at which directors are to be elected and set forth the information that the shareholder must include in the notice for it to be valid.
The Board believes that the By-Law Amendments provide a clear and transparent process for all shareholders to follow if they intend to nominate directors. In that regard, the By-Law Amendments provide a reasonable time frame for shareholders to notify the Company of their intention to nominate directors and require shareholders to disclose information concerning themselves and the proposed nominees that is mandated by applicable securities laws. The Board will be able to evaluate the proposed nominees' qualifications and suitability as directors and respond as appropriate in the best interests of the Company. The By-Law Amendments are also intended to facilitate an orderly and efficient meeting process.
In the case of an annual meeting of shareholders, notice to the Company must be made not less than 30 and not more than 65 days prior to the date of the annual meeting; provided, however, that in the event that the annual meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made, notice may be made not later than the close of business on the 10th day following such public announcement. In the case of a special meeting of shareholders (which is not also an annual meeting), notice to the Company must be made not later than the close of business on the 15th day following the day on which the first public announcement of the date of the special meeting was made.
The By-Law Amendments are effective immediately and will be placed before shareholders for ratification at the annual and special meeting of shareholders of the Company, presently anticipated to occur in mid-June. A copy of the By-Law Amendments has been filed under the Company's profile at www.sedar.com. The By-Law Amendments are in effect until they are confirmed, confirmed as amended or rejected by shareholders at the Meeting and, if the By-Law Amendments are confirmed at the Meeting, they will continue in effect in the form in which they were so confirmed.
Sterling is a Canadian-listed international oil and gas company headquartered in Calgary, Alberta with assets in the United Kingdom, Romania, France and the Netherlands. The Common Shares are listed and posted for trading on the TSX-V under the symbol "SLG".
Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this release.
Filer Profile No. 00002072
Forward-Looking Statements
All statements included in this press release that address activities, events or developments that Sterling expects, believes or anticipates will or may occur in the future are forward-looking statements. In addition, statements relating to reserves or resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves and resources described can be profitably produced in the future.
These forward-looking statements involve numerous assumptions made by Sterling based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. In addition, these statements involve substantial known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other-forward looking statements will prove inaccurate, certain of which are beyond Sterling's control, including: the impact of general economic conditions in the areas in which Sterling operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with oil and gas operations. Readers should also carefully consider the matters discussed under the heading "Risk Factors" in the Company's Annual Information Form.
Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Sterling's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. These statements speak only as of the date of the press release. Sterling does not intend and does not assume any obligation to update these forward-looking statements except as required by law.
Financial outlook information contained in this press release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this press release should not be used for purpose other than for which it is disclosed herein.
SOURCE: Sterling Resources Ltd.
For further information:
visit www.sterling-resources.com or contact:
Mike Azancot, President and Chief Executive Officer, Phone: 44-20-3008-8488, Mobile: 44-7740-432883, mike.azancot@sterling-resources.com
David Blewden, Chief Financial Officer, Phone: 44-20-3008-8488, Mobile: 44-7771-740804, david.blewden@sterling-resources.com
George Kesteven, Manager, Corporate and Investor Relations, Phone: (403) 215-9265, Mobile: (403) 519-3912, george.kesteven@sterling-resources.com
