CALGARY, July 1, 2014 /CNW/ - Sterling Resources Ltd. (TSX-V: SLG) ("Sterling" or the "Company") is pleased to announce an update of potential Breagh Phase 1 development plans and associated production and capital expenditure profiles for 2014 onwards, together with expected exploration and appraisal costs for 2014 and 2015.
Following the successful conclusion of operations on the A07 fracture stimulation last month, drilling operations have now commenced on the A08 well, which is targeting a location 1.8 kilometres northeast of the Breagh Alpha platform, between the A03 and A05 wells. The well is expected to encounter the better quality sandstones evident in the north-eastern areas of the field, with contingency plans to sidetrack and multistage hydraulically fracture stimulate the well if the well encounters a poorer quality reservoir than anticipated. Further drilling of two more wells (A09 and A10) and possibly two sidetracks and/or hydraulic fracture stimulations on existing Phase 1 wells are being considered for a drilling program possibly commencing in the third quarter of 2015, dependent on securing a drilling rig and stimulation vessel, and final approvals within the partnership.
Sterling now expects sales gas production for the second half of 2014 of 119 million cubic feet of sales gas per day ("MMscf/d") for the whole field (36 MMscf/d net to Sterling), and 111 MMscf/d for the whole field (33 MMscf/d net to Sterling) in 2015, with an exit rate at end 2015 of 117 MMscf/d for the whole field (35 MMscf/d net to Sterling). This assumes the A07 well coming onstream in August 2014 at 32 MMscf/d (as tested), the A08 well coming onstream in October 2014 at 48 MMscf/d (without sidetrack or fracture stimulation), and the assumed contribution from the sidetrack and hydraulic fracture stimulation of two existing wells in the second half of 2015 followed by the drilling of A09 and A10 which would come onstream the first half of 2016. The capital expenditure ("capex") profiles below for Breagh Phase 1, which includes installation of compression in addition to the well program outlined above, and Phase 2 pre-development are management's current estimates in accordance with the development plans outlined above, based on Operator's estimates where available (but neither the incremental development plans nor the revised capex has been approved by the Operator at this time). Breagh Phase 2 production profiles and development costs are not being addressed at this point.
| Year |
Phase 1 Capex
US$ millions |
Phase 2 Pre-dev. Capex
US$ millions |
| 100% Field |
Sterling Net |
100% Field |
Sterling Net |
2014 H1
2014 H2
2015
2016
2017 |
31
70
97
119
22 |
9
21
29
36
7 |
10
6
0
0
0 |
3
2
0
0
0 |
| Total |
339 |
102 |
16 |
5 |
Average expected field gas sales production for 2014 at Breagh for 100 percent of the field is now 91MMscf/d (27 MMscf/d net to Sterling), consistent with the guidance issued on May 22, 2014 of 90 to 95 MMscf/d (27 to 28.5 MMscf/d net to Sterling). In addition to gas production, condensate is expected to be produced at an average condensate-gas ratio of 3.3 barrels per MMscf.
Following completion of the A08 production well, the Ensco 70 jack-up drilling rig will move to the Crosgan field in block 42/15a (25 kilometres northeast of the Breagh field; Sterling 30 percent) to drill an appraisal well to the southwest of the discovery well 42/10b-2z drilled in 1995.
In the second half of 2014, in addition to the Crosgan well, the Company expects to drill an exploration well on the UK Beverley prospect (block 22/26c, Sterling 20 percent and largely carried on the well cost).
In 2015, the Company expects to drill four exploration wells, one offshore UK (on the Niadar prospect in block 49/18b, Sterling currently 100 percent) and three offshore Romania (one in the Luceafarul block, Sterling currently 50 percent, and two in the Muridava block, Sterling currently 40 percent). The intention is to drill all wells post completion of farm-down processes. For the purposes of the capex estimates below, management has indicatively calculated the net cost on a cash basis at half the current equity interest prior to the benefit of expected promotes. The net cost of Romanian exploration expenditure includes the assumed benefit of half the cost of 3D seismic acquisition on all Romanian blocks subsequent to farm-out completion.
| |
2014 H2
Net Capex
US$ millions |
2015
Net Capex
US$ millions |
| UK exploration and appraisal |
13 |
16 |
| Romania and Netherlands exploration and appraisal |
8 |
17 |
| TOTAL |
21 |
33 |
Sterling is progressing with plans to arrange incremental financing. At end June 2014, the Company expects to have total group cash (unrestricted plus restricted) of approximately US$37 million. For the second half of 2014, operating cash flow (revenues less operating costs less Gemini entitlement) plus proceeds of gas price put option exercise is expected to be approximately US$38 million on a cash basis.
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 Toronto Stock Exchange Venture (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 news 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 expected production, 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 news 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 news 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 news release should not be used for purposes other than for which it is disclosed herein.
SOURCE Sterling Resources Ltd.
For further information:
visit www.sterling-resources.com or contact:
Jacob Ulrich, Chief Executive Officer, Phone: +1 (403) 237-9256, jake.ulrich@sterling-resources.com
David Blewden, Chief Financial Officer, Phone: +1 (403) 237-9256, 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
