Given the current state of the oil market, Sterling Energy is becoming more confident in executing a deal with an onshore low-cost operator.
The company has $44.9 million of cash and has whittled down its commitments, now holding a non-operated role in a Somaliland block. Holding this cash gives it leverage to acquire production and low-risk exploration, Sterling’s CEO David Marshall said.
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It has a primary focus on Africa and the Middle East but would consider new regions for the right opportunity.
The company considered more than 50 opportunities in 2019 placing five bids and with a number still under consideration. Last year, sellers had higher expectations of value, which made deals harder.
The oil price plunge, driven by a coronavirus, has weakened “highly leveraged oil companies, who will see the benefit of partnering with a cash-rich entity”, Marshall said. The company expects to benefit from the companies it considered in 2019, in addition to new opportunities.
The Somaliland government granted an extension for the Odewayne production-sharing agreement (PSA) in 2019.
The block is operated by Genel Energy, which reprocessed the entire 2D seismic data set during 2019, with final products being delivered in January 2020. Sterling intends to review the 2D seismic in the second quarter of this year, while also planning a surface seep study in order to plan next steps.
The hope is to determine whether a Mesozoic sedimentary basin is present in the area. Sterling has a 34% working interest in the block, which covers 22,840 square km.
Once interpretation work has been completed, Genel may opt to proceed into the fourth exploration period. This will require the acquisition of 1,000 km of 2D seismic and the drilling of an exploration well.
About Sterling Energy plc
Sterling Energy plc is an upstream oil and gas company, which is focused primarily on material exploration opportunities in Africa. The Company is engaged in the exploration, development, and production of commercial oil and gas. The Company operates in the Africa segment.
The Africa segment includes its exploration and development activities. It has exploration projects in Mauritania, Madagascar, Somaliland, and Cameroon, together with a production interest in Mauritania. Its Ambilobe block covers an area of approximately 17,650 square kilometers and is located in the Ambilobe Basin, offshore north-west Madagascar. Water depths across the Ambilobe block range from the shoreline to over 3,000 meters.
Its Odewayne Exploration block comprises an area of over 22,840 square kilometers. Its Ntem Concession lies adjacent to the southern maritime border of Cameroon and covers an area of approximately 2,320 square kilometers. Water depths range from 400 to 2,000 meters across the Ntem block.
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