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Press release from CNW Group


Tuesday, November 16, 2010

STERLING RESOURCES ANNOUNCES THIRD QUARTER OPERATING AND FINANCIAL RESULTS18:00 EST Tuesday, November 16, 2010CALGARY, Nov. 16 /CNW/ - Sterling Resources Ltd. (TSX-V:SLG)("Sterling" or the "Company") an international oil and gas company with exploration and development assets in the United Kingdom, Romania and France, announces interim operating and financial results for the quarter ended September 30, 2010.  Unless otherwise noted all figures contained in this report are denominated in Canadian dollars.HighlightsSuccess in Cladhan in the UKCS with a threefold increase in P50 Contingent ResourcesOil discovery at Blakeney in the UKCSProgress in the Breagh developmentAward of exploration licenses in the UKThe net loss for the quarter ended September 30, 2010 was $3,182,931 ($0.02 per share - basic and diluted) compared to net income of $69,758,879 ($0.53 per share - basic and diluted) for the three months ended September 30, 2009. During the third quarter of 2009 a one-time gain was recorded on the sale of one third of the Company's 45% interest in the Breagh field in the UK North Sea.During the quarter Sterling recorded foreign exchange losses of $1,544,522 compared to gains of $384,234 during the third quarter of 2009. During the third quarter of 2010, the UK pound strengthened against both the US and Canadian dollars, resulting in losses on translation of US and Canadian dollars to UK pounds, the Company's functional currency.  Gains and losses in functional currency are then translated into the reporting currency, which is the Canadian dollar using the current rate method.  In order to minimize exposure to foreign exchange fluctuations, non-cash working capital is only held in foreign currencies where it is required for operating activities and cash is converted into foreign currencies for known or anticipated expenditures in the near term.Cash and cash equivalents at September 30, 2010 were $71,409,702 compared to $81,798,904 as at December 31, 2009.  Net working capital was $70,330,884 at September 30, 2010 compared to net working capital of $75,495,150 at December 31, 2009.  During July 2010 the Company entered into a bought deal financing agreement with a syndicate of underwriters to issue 21,055,000 common shares at a price of $1.90 per share.  The underwriters were granted an over-allotment option to purchase an additional 2,368,500 common shares, which was fully exercised by the syndicate.  The total net proceeds of $41,817,580 will be used towards any required equity component for the financing of the Breagh development project in the UK North Sea.  Up to £100 million of the required funding for the Breagh development is anticipated to come from a senior debt facility currently being offered by the Royal Bank of Scotland and other banks.  The Field Development Program (FDP) for Breagh is expected to be submitted during the fourth quarter of 2010 and until that time negotiations with lending banks cannot be finalized.  It is anticipated that the senior debt facility will be finalized during the first quarter of 2011 and initial facility draw down can commence upon FDP approval.During the nine months ended September 30, 2010 capital expenditures on oil and gas properties totaled $43,458,466.  Major capital expenditures year to date include:$7.1 million is attributable to preliminary Breagh development costs;$14.7 million relates to the cost of drilling the two Cladhan sidetrack wells and the testing of the first sidetrack well on Block 210/29a (Sterling 39.9%) in the UK Northern North Sea.  These sidetrack wells both successfully established higher resources estimates and the economic viability of the field;$4.2 million relates to the cost of drilling the Macanta well on Block 42/14 in the UK Southern North Sea.  The well was abandoned after encountering water-bearing sands;$3.8 million of preliminary costs related to the Grian prospect on Block 48/28b scheduled to be drilled in early 2011;$3.6 million related to the cost of drilling the Blakeney well on Block 21/27b (Sterling 25%) in the UK Central North Sea.  Although not tested the well encountered oil bearing sands as anticipated;$2.1 million related to the drilling of the Airidh well which failed to encounter hydrocarbons in the target formation and was abandoned;$1.3 million on licensing fees and other costs in the Paris Basin in France;$1.0 million related to the development costs for the Kirkleatham gas project onshore UK; and$5.7 million of capitalized overhead and stock based compensation, UK 26th Round Offshore Licensing Round costs and other miscellaneous costs related to onshore and offshore Romania."Sterling's level of activity during the third quarter has been very high with the primary focus upon drilling in the Cladhan field in the Northern North Sea," stated Mike Azancot, Sterling's President and CEO.  "However, in addition to Cladhan, the Company also continued to broaden its horizons with an expanding presence in France and the Netherlands, and with the recently announced cessation of the farm-in agreement in Romania, which we believe will now allow us to move forward with drilling and development in that country," added Mr. Azancot.United KingdomRecently the Company moved forward with a number of UK North Sea projects, most notably the successful drilling of two sidetrack wells at Cladhan on Block 210/29a in the UK North Sea.  Subsequent to the end of the quarter, Sterling released updated Contingent and Prospective Resources numbers which independently confirmed the magnitude of our drilling success at Cladhan.  The significant upward revisions from just two new data points in high quality sands, in which we have yet to find an oil water contact, indicate the large potential for the field.Currently site survey work at Cladhan is in progress, and following conclusion of the rig selection process and regulatory approval from the UK Department of Energy and Climate Change (DECC), the Company anticipates commencing another drilling campaign at Cladhan during the first quarter of 2011.Development of the Breagh field in Quad 42 of the UK North Sea moved forward with the signing of agreements during September with the Teesside Gas Processing Plant (TGPP) for the processing and redelivery of natural gas.  The scope of the agreement also includes the facilitation of the construction of a 10 kilometer section of onshore pipeline across Teesside and required construction work at the TGPP, a plant owned by Teesside Gas & Liquids Processing (TGLP).Among the services to be provided by TGLP is the processing of Breagh natural gas production within a dedicated unit at the TGPP, with onward redelivery of gas to the UK National Transmission System and/or local customers. In addition to these infrastructure related activities, we anticipate that a development well will be drilled at East Breagh prior to the end of calendar year 2010. The well, which will be suspended for future tie-back, will aid in the location of the Breagh Bravo platform.During July a well was drilled at the Blakeney prospect located in Block 21/27b of the Central UK North Sea.  Drilled to a measured depth of 4,455 feet, the well encountered oil-bearing sands as anticipated in the Upper Tay sandstone formation but full PVT (pressure, volume and temperature) analysis of sampled fluid has not yet been completed, which would enable an estimate of any recoverable reserves to be made.  This is the first well in the Block, in which Sterling holds a working interest of 25% and Wintershall (Operator, 75%). The Blakeney discovery is approximately 10 kilometers southwest of the Company's Sheryl field in Block 21/23a in which Sterling holds a 35% working interest and could be part of an overall development plan for both Sheryl and Blakeney.  However, additional wells will need to be drilled in order to establish the development potential of Blakeney and at least one further prospect in the Block is planned to be drilled in the next few years.In the Southern UK North Sea, the Grian prospect (Block 48/28b) was originally scheduled to be drilled during the fourth quarter of 2010 in order to evaluate a Rotliegendes prospect located just to the west of the Hewett gas field. The Company now anticipates spudding the well during the first quarter of 2011, as the Ensco 72 rig has been delayed on other operations.During August, drilling was completed at the Macanta prospect in Block 42/14 located approximately 13 kilometers east of the main Breagh field. Drilled to a measured depth of 8,937 feet, the well encountered wet sands at a deeper level than anticipated and thus the well was plugged and abandoned.  However, it is anticipated that the stratigraphic information obtained from the Macanta well will enhance the Company's understanding of neighbouring prospects and possible deeper reservoir potential within the Breagh field.Recently the Company was advised that it had been awarded licenses as part of the UKCS 26th Round.  The Company has been awarded Blocks 21/30a and 22/26c (Sterling 100%) in the Central North Sea and Blocks 42/13b, 42/16, 42/17 (Sterling 30%) located adjacent to the Breagh development.  We await the results of additional license applications which are part of a tranche of Blocks that are still under review by DECC pending further environmental review.First gas production from Kirkleatham, a field located onshore UK in which Sterling holds a 47% working interest is expected in December 2010. Future potential for the field could come from a gas storage project which is currently being considered.RomaniaIn Romania we recently announced, effective November 1st the cessation of the farm-in agreement with Melrose Resources BV.  Sterling has withdrawn the 32.5% assignment and operatorship transfer request made during 2009 with the National Agency for Mineral Resources (NAMR) for Melrose Resources BV on Sterling's Pelican and Midia Blocks, offshore Romania.  The inability to obtain assignment approval has impeded progress on the Ana and Doina discoveries, as well as further exploration and appraisal activities on the offshore Blocks.  Sterling now intends to move forward proactively with offshore activities in concert with its other intended assignees, PetroVentures Europe BV and Gas Plus International BV.NetherlandsIn the offshore Netherlands, we await final award of operatorship for the five licenses in the F and L quadrants which contain four oil discoveries. Technical evaluation will continue with a view to drill an appraisal well later in 2011.FranceIn France, we await final award of 9.5 Blocks in the Paris Basin. This acreage (gross 150,000 acres) is in the Liassic shale region where the potential for shale oil hydrocarbons will be explored.Sterling Resources Ltd. is a Canadian-listed international oil and gas company headquartered in Calgary, Alberta with assets in the United Kingdom, Romania, and France. The shares are listed and posted for trading on the TSX Venture Exchange under the symbol "SLG".The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.Forward-Looking StatementsAll 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.%SEDAR: 00002072EFor further information: visit or contact:Mike Azancot, President and Chief Executive Officer, Phone: 44-1330-826764, Mobile: 44-7740-432883, Blewden, Chief Financial Officer, Phone: 44-1330-826766, Mobile: 44-7771-740804, Kesteven, Manager, Corporate and Investor Relations, Phone: (403) 215-9265, Fax: (403) 215-9279,