14th Mar 2016 08:29
LONDON (Alliance News) - Sterling Energy PLC on Monday said it is working with its partners to decommission its sole producing asset after the operation became uneconomic, but said it remains debt free with plenty of cash to move forward with its other interests.
The oil exploration and production company said its revenue experienced a steep drop to only USD5.0 million in 2015 from the USD16.0 million generated in 2014 as its producing operation became unprofitable thanks to a fall in production and oil prices.
All of its production and revenue is derived from the Chinguetti field off the Mauritanian coast, but the operation proved unprofitable as Sterling Energy reported a USD997,000 gross loss in the year compared to the USD4.1 million profit in 2014.
The operation achieved an average oil price of only USD50.30 a barrel in 2015 with a total cash operating cost of USD75.30 a barrel, compared to 2014 when the operation was achieving a price of USD94.20 a barrel at a cost of only USD57.40 a barrel.
That resulted in the company's pretax loss in the year widening to USD16.0 million from the USD12.3 million loss in 2014.
Sterling Energy said net production from Chinguetti fall to an average of 310 barrels of oil per day compared to 432 barrels a day in 2014, as production steadily declined throughout the year, reflecting the maturity of the field.
Due to the uneconomic nature of the field in the current environment, Sterling Energy and its partners on the field are evaluating how to manage the Chinguetti field in a low oil price environment and with end-of-field-life challenges.
"Formative discussions continue to be held with the government of Mauritania and relevant stakeholders on how best to manage current operations and agree on a plan for a safe, cost effective and technically robust, decommissioning and abandonment phase," the company said.
As at the end of 2015, Sterling Energy reported a cash balance of USD98.7 million, lower than the USD108.1 million at the end of 2014, but the company remains debt free. Sterling said it can comfortably fund its other commitments, with other assets in Mauritania, Madagascar, Somaliland, and Cameroon.
"We shall continue to act cautiously with regard to our own investments in new ventures with a bias towards projects that can be appraised and developed via our existing resources. We will then have the option to accelerate and/or expand these cash flow generative ventures via third party project finance," said Chairman Alastair Beardsall.
"In addition to our strategy for growth, the group has, via a combination of our own funds and carried interests, the resources to see our existing projects advance during 2016," he added.
Sterling Energy shares were trading down 1.8% to 14.0 pence per share on Monday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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