Sterling Resources Ltd. (“Sterling” or the “Company”) announces that it has signed a loan facility agreement (the “Facility”) with a group of banks for a GBP 105 million senior secured loan for the Phase 1 development by its wholly-owned subsidiary, Sterling Resources (UK) Ltd, of the Breagh gas field in the UK Southern North Sea (Sterling 30 percent).
The loan amount provided under the Facility comprises a main tranche of GBP 95 million and a cost-overrun tranche of GBP 10 million, and the loan has a life of 6.5 years.
The Facility also has a step-up amount of up to GBP 50 million for the Phase 2 development on an uncommitted basis.
The Facility has been arranged with Société Générale Corporate & Investment Banking (acting as Sole Bookrunner, Mandated Lead Arranger and Technical Bank), BNP-Paribas (acting as Mandated Lead Arranger and Facility Agent) and Commonwealth Bank of Australia (acting as Mandated Lead Arranger).
The Company is now awaiting final approval of the Field Development Program by the UK Department of Energy and Climate Change.
Phase 1 of the Breagh development comprises a platform on the western side of the field from which 10 wells will be drilled, a 100 kilometer 20 inch gas export pipeline to Teesside together with an associated smaller pipeline and cable, and an onshore pipeline and modifications to the Teesside Gas Processing Plant. Work on this phase of the development continues to progress well. Fabrication of the topsides is 90 percent complete and commissioning is expected to begin next week. The jacket is 77 percent complete and expected to be fully complete by the end of this month. Sail-out and installation is expected during early September 2011. The Company previously reported that the 3 inch methanol line and 20 inch export gas line have been laid away to the platform location and the beach crossing for both lines has been made. Over the remainder of July, the Company expects to connect the beach crossing lines to the offshore lines, thereby completing the pipeline from the platform location. Onshore pipeline operations are expected to commence in early August. It is planned to achieve peak full field 2P production for Phase 1 in 2015 at 167 million cubic feet of sales gas per day (MMcf/d) (100 percent) as estimated by the Company’s independent reserves evaluator RPS Energy.
Phase 2 of the Breagh development is currently under consideration and could comprise a second platform with further wells on the eastern side of the field, tied back to the first platform, or possibly a sub-sea development. Assuming this goes ahead, incremental production from Phase 2 would be expected to commence in 2013 and peak full field 2P sales gas production would be expected in 2016 at 186 MMcf/d (100 percent), as estimated by RPS Energy.
“The signing of this Facility is the culmination of many months of close collaboration with our bank group. The discussions took considerable time due to the nature of the two phased development and the impact of the successful 42/13a-6 well drilled earlier this year. We are delighted to have a bank group that is keen to support Sterling’s other future development projects and we look forward to beginning discussions on a step-up in the Facility for Phase 2 of Breagh,” said David Blewden, Sterling’s CFO.
“This is a very important step in enabling Sterling’s development from exploration company to a full-cycle exploration, development and production company,” commented Mike Azancot, Sterling’s President and CEO. “We can now look forward to bringing Phase 1 of Breagh on-stream in the middle of next year and we are already working on defining the Phase 2 development with operator RWE Dea UK SNS Limited. Together with the recently announced reserves increase, we are delighted with how the project is progressing,” he added.
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”.
Source:Sterling Resources , July 19, 2011