Sterling Announces Sale of Interest in Cladhan

Sterling Resources Ltd. has announced the divestment of an interest in Cladhan, a significant improvement in the terms of the Breagh loan facility, and an update on the activity plan for the remainder of 2012.

The Company has signed a sale and purchase agreement with TAQA Bratani Limited (“TAQA”) for the sale of a 13.5 percent interest in the North Cladhan area (Blocks 210/29a and 210/30a) for an initial consideration of US$47 million including an allocation to tax allowances. The initial consideration will be satisfied in three installments; US$22.3 million paid upon completion, US$4.3 million paid on achievement of certain milestones expected in 2012 and the balance either as a carry of part of Sterling’s development expenditure in respect of Cladhan or, subject to satisfaction of certain conditions linked to project approval, in whole or in part (at Sterling’s election) in cash up to a maximum payment of US$20.4 million. If the carry alternative applies, the maximum carry amount, adjusted for tax, would be US$53.6 million. In addition, Sterling could receive a contingent consideration after first production linked to reserves upside up to a maximum additional payment of US$10 million if proven plus probable reserves are certified in the range of 30 million barrels to 45 million barrels for 100 percent of the field. TAQA will assume operatorship on or shortly after approval of a final Field Development Program expected to be submitted by end of the third quarter this year. On completion of this transaction, which is subject to necessary third party approvals, the new equity positions will be Sterling Resources (UK) Ltd 26.4 percent, TAQA 40.1 percent and Wintershall (UK North Sea) Limited 33.5 percent.

Sterling announces that TAQA will earn a 12.5 percent interest in Blocks 210/29c and 210/30b through a farm-in agreement as a result of which TAQA will fund Sterling’s remaining equity interest in the recently drilled well 210/29c-5 on the South Cladhan prospect. On completion of the farm-in agreement, which is subject to regulatory approvals, the new equity positions in South Cladhan will be as follows: Sterling Resources (UK) Ltd 12.5 percent, TAQA 12.5 percent, Wintershall (UK North Sea) Limited 25 percent, Valiant Exploration Ltd 30 percent and Agora Oil and Gas UK Ltd 20 percent.

 Exploration Funds Secured

Sterling also announced that it has reached agreement with the group of banks providing the reserve based loan for Phase 1 of the Breagh development for a reduction in the minimum group cash level required over the 12 month look-ahead period from £35 million to £20 million. The difference, £15 million (US$24 million) is therefore available for general corporate purposes.

Commenting on these announcements, Mike Azancot, Sterling’s President and CEO said, “As a result of the arrangements announced today, Sterling will have funds to conduct an active exploration program in the remainder of 2012 including drilling two exploration wells (on the Ioana and Eugenia prospects offshore Romania) and acquiring seismic on the Midia and Muridava Blocks offshore Romania, as well as acquiring seismic offshore UK and the Netherlands.”

“The Cladhan transactions demonstrate the repeatability of our primary strategy, which is to explore and appraise, then partially divest at an opportune time and acceptable price to promote funding of future activities. We believe that the Cladhan partnerships are strengthened with the involvement of TAQA and we look forward to working closely with them in the full development of the Cladhan area. I am pleased that our banking partners have agreed to reduce the level of our liquidity buffer as the Breagh project progresses. We will now work with them to facilitate the inclusion of the Cladhan development in the existing loan facility and freeing up some Breagh cash flow to fund other activities in 2013. With a strengthened balance sheet we look forward to an exciting year in 2012 across our portfolio on key exploration and development operations,” stated Mr. Azancot.

Sterling Resources Ltd. 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 shares are listed and posted for trading on the TSX Venture Exchange under the symbol “SLG”.

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Offshore Nieuws Staff, April 24, 2012; Image : Sterling Resources