CALGARY, Feb. 6, 2013 /CNW/ - Sterling Resources Ltd. (TSX-V: SLG) ("Sterling" or "the Company") announces details of its current financial position and its financing plans.
Current financial position
At the end of 2012, the Company had CAD 28.1 million of cash and cash equivalents on a group basis, including amounts restricted under the Breagh credit facility and Romanian JV accounts but excluding amounts still held in escrow relating to the drilling of wells in the first half of 2012. Early in January 2013, this was supplemented by the receipt of USD 12 million of loan proceeds from Vitol in accordance with the loan agreement signed on December 31, 2012 (as announced on January 8, 2013) and by USD 4.3 million from TAQA as the second part of proceeds for the sale of a 13.5 percent interest in the Cladhan field (as announced in April 2012). On a pro forma basis, reflecting these receipts and the transfer of some funds into the Equity Contribution Account ("ECA", an account restricted under the Breagh credit facility to be used for Breagh-related costs), the Company started 2013 with CAD 44.4 million of available funds, of which CAD 24.0 million was in the ECA, CAD 8.0 million was in other UK and Netherlands accounts (also largely restricted in an agreement reached with the lending banks, to be used for agreed technical and general and administrative costs), and CAD 12.3 million was in Canadian and Romanian accounts.
The Company is deferring payment schedules with a number of key suppliers in order to extend available funds well into March, by which time the Company is confident it will have additional financing to fund the group through to mid 2013.
Total financial debt at the end of 2012 was GBP 87.9 million (CAD 140.7 million), representing borrowings under the Breagh credit facility. In early January 2013, additional debt of USD 12 million (CAD 11.9 million) was assumed upon completion of the Vitol loan.
A number of equity and mezzanine financings have been considered by the Company to raise approximately CAD 50 million or more to cover expenditure requirements in the first half of 2013 and into the third quarter. This would provide adequate funding to end June 2013. In addition, upfront cash proceeds of USD 29.25 million from the sale of a portion of the Midia licence to ExxonMobil/OMV Petrom (as announced in October 2012) are expected in March or April 2013 following government and regulatory approval, although these are currently pledged to repay the Vitol loan as part of its Romanian security package (and the Breagh credit facility lenders have a second ranking charge over this security package). However, there is no certainty that the funds will be received in this timeframe. Progress continues towards a wider sell down of offshore licenses, which could provide additional funds in the second quarter of 2013 and a carry of E&A expenditures. In relation to Cladhan, the Company is pursuing an industry-based solution to funding development expenditure.
The Company has engaged a financial advisor to proceed with a high yield bond issue in the second quarter of 2013. Such an issue would be used to repay the existing Breagh credit facility in its entirety, to repay any short term debt as part of the short term CAD 50 million (indicative) financing referred to above, and to provide additional funds to be used towards Breagh Phase 2 and (if required) Cladhan development expenditures. The size of such a high yield bond issue could be in the order of USD 250 million. By refinancing the Breagh credit facility, the Company will be able to access Breagh Phase 1 cash flows from June 2013 onwards, rather than having to wait until project completion is achieved under the Breagh credit facility, which is expected to be around mid 2014. Such cash flows can be used towards Breagh Phase 2 and (if required) Cladhan development expenditures, as well as other corporate activities.
All statements included in this news 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. In particular, this document contains forward-looking information and statements regarding: (i) the intended use of proceeds from the anticipated sale of assets and financings, and (ii) future capital expenditures and projects.
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 news 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 news 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 purposes other than for which it is disclosed herein.
SOURCE Sterling Resources Ltd.