News

June 03, 2009

Sterling Energy’s Preliminary Results for 2008 Emphasise The Fight For Financial Survival Continues

On the face of it, AIM Quoted Sterling Energy has an attractive profile for a small cap E & P company. It has some production in the US and some exciting upside potential with acreage in frontier areas like Kurdistan and Madagascar. Kurdistan is currently causing great interest because of exploration success for a number of Sterling’s peer group.

But the company was unlucky in its timing. It bought assets in the US when commodity prices were high and then ran into the credit crunch. It has so far been unable to sell the US assets. This resulted in a funding or debt gap. Earlier in the year the lead bank in the syndicate lending to the company, Natixis, warned that Sterling’s borrowing base, would be US$76 million leaving a funding or debt gap of US$28 million.

In April the company agreed a waiver on loan repayments.  But...