Where to now?

14th Aug '09 by emptyend

19 comments 4950 reads

Sterling Energy has spent a long time in the doldrums, having been caught over-leveraged by the oil price fall in 2008 occurring before they could divest their US operations. Today they have announced a major recapitalisation, raising £60mn+ in a placing and they intend to follow this by raising a further £20mn in an Open Offer:

http://www.investegate.co.uk/Article.aspx?id=200908140700054352X

The deal also brings the arrival of Alistair Beardsall (Executive Chairman of Emerald, which is now in the process of being taken over by Sinopec) to the board, along with Michael Kroupeev and his Waterford vehicle (a major shareholder in Emerald too!) - which will own 29.99% of the shares once the placing has been completed!

Time to "watch this space" I suspect, once the fund raisings have been completed.

I'm surprised at the key players coming in before Emerald is completely done and dusted - but they plainly don't intend to waste any time.....so it will be interesting to see what their strategy is going to be.in relation to SEY's asset mix.

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Sterling (AIM: SEY), the independent oil and gas exploration and production
company with interests in the Middle East, Africa and the USA, is pleased to
announce that it has today signed a binding sale agreement in respect of its USA
business to a non-USA buyer. The agreed initial gross consideration is US$90 million payable
on completion and further amounts may become payable depending on future
oil and gas prices over the next three years.

Kurdistan- Sangaw North PSC: In the Sterling operated Sangaw North block (53.33% WI), the drilling rig is now
in transit to the well location and the well is scheduled to start drilling in the second half of December.
The planned total depth of the well is 3,660m, with an option to drill to 4,160m. The well will target several
prospective reservoirs in the Cretaceous. An independent review of the Sangaw North prospect undertaken
by RISC (UK) Ltd gives a best estimate of gross prospective oil resources for the Cretaceous interval of 804
million barrels. If the well is drilled to 4,160m it will also test potentially prospective reservoirs within the
Jurassic.

The sale of the Company's USA business is progressing well and is expected to be
completed in early December. The proceeds of the sale, after costs, will be used
to repay the outstanding bank debt and the remainder will be used as working
capital.

tiswas

14th Aug '09

Surprised at how well the sp is holding up despite massive dilution but there again if this IS the turning point for SEY this is a company life saver. No doubt this will be talked about as the new GKP! Tempted to buy a few but will wait and see if the sp is driven down but not holding my breath as it had been rising in the last week or so when those in the know had the chance to sell.

emptyend

In reply to tiswas (post #1)

interesting to look at the chart above in the context of the placing being at 1.3p.....the rise from Thursday last week didn't go unremarked-upon though .........http://www.stockopedia.com/forum/view/28067/ma?comment=143#143

It looks as clear a case of insider trading as one is ever going to see.........whomever was behind the strong buying clearly knew what was planned, even if those outside the inner circle were reduced to guessing! Big dilution for existing shareholders though - and a great opportunity IMO for those who were on the inside and got the placing shares......

Interesting to see that the shares of GKP [another Kurdistan player .....and one that recently decided to clear the decks recently of its other assets] are up 13% this morning. The recapitalised SEY will be worth close to the same as GKP - I wonder whether some in the market are betting on another Kurdish-focused company emerging from a combination of SEY and GKP?

Whatever the case, this is definitely an environment where the wheeler-dealers of the E&P world are getting seriously busy on doing deals - especially in Africa and the Middle East!

In reply to emptyend (post #3)

Number of Ordinary Shares in issue following Admission | 7,132,825,585

And that is before shareholders offer of another 1.54bn which makes the market cap at 3p something like £260m!! Can that be right?

GKP have 478m at 38.5p = £184m. Makes them look cheap and I bought back a few first thing this morning on the lastest Algerian rumours

tingtang

>>It looks as clear a case of insider trading as one is ever going to see......... ee.

Yep, more shennagins. I did call this completely wrong after reading that RNS this am. Such a massive dilution, half this placing going to pay off existing deb't, potential take over bidder thrown out, more fund raising to come plus 2 for 9 free shares - yet the price goes up!

More than 30M shares traded in the first 30 minutes must mean some of the placees sold straight into market - but for every seller there is a buyer, buyers who know more than we do!. Maybe, like GKP, putting up with fishy smells will pay dividends but right now I am staying out.

tt.

In reply to tiswas (post #4)

Number of Ordinary Shares in issue following Admission | 7,132,825,585
And that is before shareholders offer of another 1.54bn which makes the market cap at 3p something like £260m!! Can that be right?

Not quite, because the present shares will carry rights to the Open Offer (the price of which hasn't been disclosed yet AFAICS on a quick look).

Anyway, I suspect there will be other shares that offer a bigger bang for the buck than SEY does at present market prices.....but it will nevertheless be interesting to see what happens - especially as the Emerald people will have "a bit of a following".

In reply to emptyend (post #6)

By mid November the Company intends to undertake an open offer to raise
approximately GBP20.6 million at the Placing Price

The placing price is defined as 1.3p. Very tempted to short this once the initial excitement dies down. Sure, gives the company breathing space
and some smart people coming in but £250M??????

djpreston

In reply to tiswas (post #7)

Alphaville reporting that SEY had a lot Short and people were looking to cover their positions with their allocations. they got left a but err short themselves so have bought to cover.

In reply to djpreston (post #8)

Hi Darron,

Price stalled now while people work it all out. Does the fact that less than 1/3 of the volume has gone through SETS mean anything? Does it imply off market insto trades or a lot of retail trades or both or neither? 8:)

In reply to tiswas (post #9)

I wouldnt reead anything at all into where the volume was conducted.

This was a "must do" deal and has tied in nicely with the demise of EEN. Sure SEY now looks a much more interestign company but as you say, the pricing seems a tad rich for me. Still, Im not complaining, another solid set of figs from BNK and theyve just given me a 700% gain on the cheapest stock bought in Dec.

tony9i9i9i

In reply to djpreston (post #10)

I’ve not got anything to add really but why not waste some virtual ink.

I’d follow the Emerald people and would have loved to have brought in at the 1.3p I even phoned Evolution to try and register for the placing not realising they don’t let private shareholders in on these things and they only announce the offer once its done and dusted, you live and learn.

This does look like a similar situation to when Alastair Beardsall and Waterford came on board EEN and does look like this kills any lingering hope (I had) of the EEN deal falling through.

According to III the SEY’s market cap is £71 million at about 3p that’s about 2.3 billion shares, plus the 4.8 billion from the placing that’s raising £62.5 million, say the open offer is at 1.3p that would be about another 1.5 billion shares.

So as Tiswas said around 8.6 billion shares in an SEY with an extra £80 million cash, at 3p market cap around £256 million, is this a bit over the top for now?

From what I can see they will have £110 million debt, £99 million at the end of June plus £11 million they are taking now, should 2p be a bit more like?

Tony.

PS, If they follow the EEN model this will be followed by a consolidation (100:1 in EEN’s case) 100:1 getting it down to circa 86 million shares, but what’s it worth?

In reply to tony9i9i9i (post #11)

Hi Tony

Not followed SEY for a long time but, like you, I just cant see how the numbers stack up at present., especially when you allow for the debt they have. Granted the GOM asets will go but what price now? Theyve certainly not had any luck in flogging htem off todate. That speaks volumes. So whats left? Kurdistan, Cameroon, Gabon, the Mauritania royalties.... Ireally need to bring myself up to speed on the company but gut tells me that its way overvalued at present.

FLChamp

It's worth noting that the details of the placing are in £ but the company's debt is quoted in $

17th Aug '09

In reply to FLChamp (post #13)

http://www.advfn.com/p.php?pid=nmona&cb=1250495301&article=39067914&symbol=L^SEY

The Board of Westmount announces today that it has subscribed for
42,446,786 million new ordinary shares in Sterling Energy Plc

Blimey, thats a lot of shares! 8:)

23rd Sep '09

Sterling's results out today

This bit will be of more general interest:

Chinguetti Production Decline

No in-fill drilling or work-over activity took place during the first half of 2009. Field production declined quite steeply over the six-month period, from around 16,500 bo/d down to around 9,500 bo/d prior to the planned FPSO annual maintenance shutdown on 26 June. This decline was as a result of increasing water production in most wells, particularly in wells C-19 and C-20 which were drilled in 2008. The field has performed better since being returned to production on 1 July, with a reduced decline rate, partly due to an optimisation of the subsea system.

Sterling estimates that, at the end of June 2009, Chinguetti held a remaining 7.6 mmbbl of gross 2P reserves to be accessed with the existing wells. Evaluation work continues to be carried out in 2009 to optimise the reservoir model and investigate the potential for a Phase 3 drilling campaign to access contingent resources in 2010/11. However, given the current commodity price environment, the Phase 3 programme may not be economic and the Chinguetti Field could be abandoned as early as 2011.

During the first half of 2009, Sterling's share of production was 1,028 bo/d from its interests in the Chinguetti field through the funding agreement and its Royalty Interest. Currently Chinguetti net production is 714 bo/d. This generated over $12.4 million gross revenue ($16.2 million after the effect of hedges) from four cargo liftings.

IIRC Sterling bankrolled the Mauritanian government when the field was developed. Does any shareholder know what the current status of that loan is? What are the chances they will be writing part of it off if the field gets abandoned - or have they recovered it all by now?

Betasurfer

20th Oct '09

Sale of US business announced this morning - http://www.stockopedia.com/news/announcement/SEY/091020sey000501.htm/Sterling+Energy+PLC+Agreed+Sale+of+USA+Business

So, who is this masked buyer?

monkeynuts

25th Oct '09

For those that are interested, I have written a summary article on Sterling here - http://www.stockopedia.com/article/view/32578/sterling-energy-no-longer-a-busted-flush - although it must be said that I remain sceptical on Kurdistan.

26th Oct '09

Nice article. Must say that I wasn't aware that the cost of the planned Madagascar well would exceed their agreed carry. I'd guess that blocks operated by the majors also come with a "gold-plated" cost structure. Nevertheless, East Africa (and the Mozambique Channel in particular) is potentially a very interesting place to be at present, with at least 7 wells planned in the region in the next few months.

30th Nov '09

A couple of updates from Sterling today: http://www.stockopedia.com/news/announcement/SEY/091130sey001360.htm

Some apparent progress re: Kurdistan...

And the US sale trundles on but is expected is to be completed very shortly...

Where to now?

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Emptyend

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