Delays to the UK North Sea Breagh project have had a severe and immediate impact on oil and gas firm Sterling Resources, it said yesterday.
Estimated costs for the first phase of the project have grown to £632million, from the £623million reported in August.
Announcing third-quarter results, Sterling, which has UK offices in Aberdeen and London, said it had been deeply affected by the postponement of first gas from Breagh. The Toronto-listed company abandoned plans recently to sell more than £28million of new shares; less than 48 hours after launching the fundraising effort.
Sterling has a 30% stake in Breagh – operated by RWE Dea – but first gas has been put back from July 2012 to an estimated date at the end of March, and this could slip to the end of May. It said yesterday the impact of the delays had led to the recent need to seek additional funding of up to £28million with a process led by RBC Capital Markets, but added: “With a dramatic drop in share price on announcement it was not possible to agree suitable terms and the offering was terminated.
“Alternative short-term funding options already reviewed before the offering are now being pursued as well as efforts to negotiate revisions to some of the terms of the Breagh reserves-based loan facility, or to refinance it entirely.”
The company said last week it also expected to cash in from the sale of offshore Romanian assets, but added it could not be sure these sources of funding would be available before it incurred costs on Breagh.
Sterling said the overruns were a source of major concern, adding: “We will continue to do all that we can as the non-operated partner in the joint venture to ameliorate the unacceptable outcomes on this critical part of the project.”
The third-quarter results showed net losses of £6.3million, compared with a deficit of £4.5million a year earlier.