Sterling Resources has inked a contract for the sale of all its operations in Romania to Carlyle International Energy Partners (CIEP) for 42.5 million dollars in cash, according to a release of the Canadian society. The transaction requires the purchase by CIEP of Midia Resources, the local company that Sterling Resources holds.
CIEP is a 2.5 billion dollars investment fund which puts money into exploration and production of oil and gas, refining, transportation, storage and marketing of petroleum and petroleum products and related oil services in Europe, Africa, Latin America and Asia.
The sale includes the transfer of concession rights of perimeters XIII Pelican (65% ownership and operator), XV Midia (65% ownership and operator), EX-25 Luceafărul (50% ownership and operator) and EX-27 Muridava (40% stake). The company hopes to complete the transaction in the second quarter of this year, after obtaining approvals from authorities and from other participants in the said concessions.
UK and the Netherlands, more attractive for Sterling than the Black Sea
“Sterling has had a presence in the Romanian Black Sea since 1997. As operator, we discovered the Ana gas field in 2007 and built up further contingent and prospective resources through further drilling, seismic acquisition and interpretation, and gaining new licenses. While we believe firmly in the significant future potential of these assets, we face material ongoing well commitments on our licenses and potentially very material development costs which are inappropriate for a company of our size.
We believe that the full value can only be realized by a company with much greater financial strength and with a longer term investment horizon. We have therefore decided to sell in order to focus our financial resources on the UK North Sea. Our team in Romania has served Sterling well and we wish them every success for the future under CIEP’s ownership. The sale will leave Sterling as a predominantly UK business focused on the high quality Breagh field, plus contingent resources with very minor ongoing costs in the Netherlands. We expect that this refocusing and simplification of our portfolio will make the company a more attractive candidate for a merger or corporate sale, benefitting all stakeholders”, said Jake Ulrich, Sterling’s CEO.
In 2014, Mark Beacom, Sterling Resources Vice President, gave an interview for energynomics.ro Magazine in which he argued that 2015 will continue to be in Romania about offshore hydrocarbon exploration.
Gemini Oil & Gas gets 10 million dollars and Sterling shares worth 7.5 million dollars
A feature of Sterling withdrawal from Romania involves the payment in cash of 10 million dollars of the 42.5 million received from the CIEP towards Gemini Oil & Gas Fund II, LP, for termination of an investment agreement between Sterling Resources and this firm in 2007. Also, Sterling will issue in favor of Gemini a number of 60,372,876 ordinary Sterling shares with a market value of 7.5 million dollars.
Sterling’s entitlement to further contingent payments from the completed sale of its 65 percent interest in a portion of the Midia Block in the Romanian Black Sea (the “Carve-out Portion”) to ExxonMobil Exploration and Production Romania and OMV Petrom S.A., which was announced on January 29, 2014, is unaffected by the Romanian Sale Agreement. These contingent payments relate to future exploration and development success occurring in the Carve-out Portion, and comprise 29.25 million dollars upon a commercial discovery being made and an additional 19.5 million dollars upon first production, also inform the Canadian company based in Calgary, Alberta.
CIEP wants to transform Midia Resources into an important regional producer gas
Carlyle Group argues that the transaction will lay the foundation to achieve a regional platform for developing oil and gas resources. Marcel Van Poecke, Head of Carlyle’s international energy team, said: “We are investing in the future of energy for South East Europe. Our team’s expertise and resources can help deliver the production capacity and infrastructure needed to ensure the company becomes a significant regional gas producer.”
“In addition to the initial consideration paid for the acquisition of Midia, Carlyle International Energy Partners (CIEP) will also fund the future development of the assets, which is expected to constitute a sizable inward investment into Romania. The development project will focus on drilling, infrastructure construction, production and sale of gas to market. The current Midia team will remain in place, with additional resources added to deliver this important project, with the aim of the company becoming a significant regional energy player in the near term”, says the leadership at Carlyle Group.