Sterling Resources Ltd. an international oil and gas company with exploration and development assets in the United Kingdom, Romania, France and the Netherlands, announces interim operating and financial results for the quarter ended March 31, 2013. Unless otherwise noted all figures contained in this report are denominated in Canadian dollars.
For the three months ended March 31, 2013 the Company recorded a net loss of $8.9 million ($0.04 per share) compared with a net loss of $7.6 million ($0.03 per share) for the three months ended March 31, 2012. This larger loss is mainly attributable to $2.0 million of costs related to a short-term loan used as bridge financing during the first quarter and to $1.6 million of one-time banking and professional fees associated with procurement of additional funding.
Pre-licence and other exploration costs during the first quarter of 2013 were $1.3 million, a decrease of $0.8 million compared to the same period in 2012. Of this total cost, approximately $0.8 million was related to licences in the UK, an amount similar to that expended during the first quarter of 2012; $0.2 million was related to licences in Romania compared to $0.6 million expended during the first quarter of 2012; and $0.4 million related to licences in the Netherlands and other international ventures compared to $0.5 million during the first quarter of 2012.
A foreign exchange loss of $0.6 million was incurred during the first quarter of 2013 related the US dollar denominated bridge loan as a result of the weakening of the Canadian dollar in US dollar terms. The comparable foreign exchange loss of $0.3 million for the same period during 2012 was primarily due to the weakening of the US dollar compared to the UK pound on translation of US dollar cash balances.
Net employee expense for the quarter was $1.9 million a decrease of $0.9 million compared to same period in 2012. Total employee expense was composed of non-cash share based compensation of $0.6 million and $1.3 million to salaries and wages. Non-cash share based compensation was $0.8 million less than the amounts in the first quarter of 2012, as certain options were fully amortized and no new options were granted.
Cash and cash equivalents totaled $21.0 million at March 31, 2013 compared to $9.4 million at December 31, 2012. Restricted cash of $29.3 million was held at March 31, 2013 comprised of $23.9 million related to anticipated Breagh expenditures, $5.9 million held in joint venture bank accounts for the Romanian drilling campaign and $0.5 million in other escrow accounts.
Net working capital, excluding the current portion of long-term debt, totaled $36.3 million as at March 31, 2013. The current portion of the long-term debt of $132.5 million was refinanced in May 2013 and has therefore been excluded from the derivation of this net working capital figure. Ongoing delays in the commencement of production at Breagh and increasing development costs resulted in the Company fully drawing the credit facility, and therefore raising additional funding through an equity offering and bond issuance. During 2013, net operating cash flow after general and administration costs and financing costs is expected to be approximately $35 million. Net operating cash flow is anticipated to rise to approximately $120 million during 2014 when a full year’s production will be achieved and cash flow is expected to increase during 2015 and 2016 as production continues to ramp up.
The net proceeds from the Bond issue of approximately $US219 million were received into an escrow account on May 2, 2013 and disbursed to the Company shortly thereafter following perfection of security. With the bond issue settled, the Cladhan farm-down completed and access to upcoming cash flow from Breagh the Company expects to be fully financed for all of its planned activities during the term of the bond. Following the repayment of the bank credit facility with the proceeds from the bond issue, pro-forma cash (including restricted cash) as at March 31, 2013 is approximately $125 million.
“We look forward to first gas production from Breagh later this summer, which will be a major milestone for Sterling and the culmination of nine years of work,” stated Mike Azancot, President and CEO of Sterling. “The bond issue settled subsequent to the quarter end has provided Sterling with additional funding, which allowed us to refinance the existing bank credit facility and will allow us to fund an exciting program of exploration, appraisal and development activity for the remainder of 2013 and beyond,” added Mr. Azancot.
Press Release, May 22, 2013