Gas & Oil: Sterling Energy Announces its 2009 Interim Financial Results – Cameroon what’s in it for you?

Nick Hasell  – Times Online -
9/23/09

Sterling Energy has been devalued sharply: shares in the oil and gas explorer have fallen by 87 per cent over the past three years (click here for full reports).

The Chinguetti field off Mauritania, its brightest hope, did not live up to hopes (it is scheduled to be abandoned in 2011) and income from its traditional cash cow, a portfolio of gas wells in the Gulf of Mexico, was hit hard by the credit crunch. With natural gas prices in the United States down by 80 per cent at their low and Sterling’s bank borrowings pegged to the value of its assets, the company was unable to service its debts.

But its crisis has passed. After a £63 million share placing last month, the company can keep its lenders at bay while it sells off its US interests.

More intriguing, that fundraising has brought in a new chairman and a cornerstone shareholder, Alastair Beardsall and Michael Kroupeev, of Russia, respectively, who have enviable form in extracting value in oil and gas: initially, from First Calgary Petroleums, sold to Eni, of Italy, and, more recently, Emerald Energy, which last month agreed a £530 million bid from Sinochem, of China.

Sterling’s immediate attraction is the Sangaw North prospect in the Kurdish region of Iraq, which is estimated to contain 800 million barrels. Sangaw is adjacent to large discoveries by Heritage Oil and Addax Petroleum and, geologically, is thought to be more conducive to drilling than other parts of the region.

Sterling said yesterday that it had secured a rig and would begin drilling before the end of the year. Further out, the company has sizeable prospects in Cameroon and Madagascar, which, at the very least, suggest that, should Sangaw North disappoint, the shares should not be worthless. At 4p, higher-risk investors should buy Sterling.