Sterling Energy reduces loss after Chinguetti project exit

Sterling Energy reported a narrowed first half losses but saw revenues take a hit from the divestment of the loss-making Chinguetti project in Mauritania.

The exploration and production company saw pre-tax losses reduced to $1.1m from $2.2m, driven by a 21% cut in expenses to $1.5m as the company cut down on administrative expenditure.

Meanwhile, revenue for the first half of the year, generated by activities in the Chinguetti offshore field in Mauritania, fell 76% to $0.5m.

In 2016, Sterling reported recognised a loss of $2m in respect of the Chinguetti Field and a loss of $0.97m in the six month period to 30 September 2017, leading to the project’s abandonment.

The company had no direct equity interest in Chinguetti, but through a funding agreement with the Mauritanian government, the company and Société Mauritanienne Des Hydrocarbures et de Patrimoine Minier (SMHPM) shared the revenue and costs related to SMHPM's 12% equity interest in the project.

“Through the termination of its funding agreement for the Chinguetti oil field in Mauritania, Sterling now has a cleaner and simpler platform from which to grow the business. We have a sizeable cash position, are free of abandonment liabilities and have no debt,” said chairman Michael Kroupeev.

The firm has a net cash position of $46.9m as of 30 June, compared to $83.5m at the same point in 2017.

The company said it is “very optimistic” about the possibility of finding new acquisitions in the second half of the year, with chief executive David Marshall saying activity had doubled on opportunity and asset screening.

He added that the company was "gaining deal traction due to the renewed focus and simplicity of the group's financial position”.

Sterling Energy shares were down 2.60% at 12.97p at 0942 BST.