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Monday, January 29, 2018
Sterling Energy terminated the funding agreement with the government of Mauritania and state-run SMHPM asregards the Chinguetti oil field. The company said that in light of the cessation of production from the field, all three parties have agreed to terminate the Funding Agreement through a Deed of Termination.
The Deed of Termination provides for a payment by Sterling to the government and SMHPM of a fixed sum to settle any and all claims under the Funding Agreement, including Sterling’s obligation to pay for its share of abandonment and decommissioning (A&D) costs and outstanding 2018 operational expenditures. The fixed sum payment will be made forthwith and Sterling will have no residual exposure to the A&D costs.
Sterling has held an economic interest in the Chinguetti oil field through a funding agreement with the government since 2004, it had no direct equity interest in Chinguetti. However, through the Funding Agreement the company and SMHPM share in the revenue and costs related to SMHPM’s 12% equity interest in Chinguetti.
The Chinguetti oil field has been in production since February 2006. In the year ended December 31, 2016, Sterling recognized a loss of $2.0million in respect of the Chinguetti Field and a loss of $0.97million in the period to September 30, 2017. The Chinguetti oil field is now in the process of being decommissioned and abandoned. The A&D project is awaiting the final approval of the government. The A&D plan consists of two phases – the cessation of production and temporary well suspension, to be undertaken in Q1 and Q2 2018, and the final plugging and abandonment of the well stock in 2019-2020.
Eskil Jersing, the company’s CEO commented:“Sterling has had a long standing and robust relationship with the Government of Mauritania and SMHPM on the Chinguetti oil field, since 2004. Sterling has additionally been a partner in the C3 and C10 offshore exploration blocks in Mauritania. Sterling would like to thank both the Government of Mauritania and SMHPM for the opportunity to be involved in all of those projects. The Company wishes them every success in the future development of the oil and gas industry in Mauritania.For Sterling, this is the final part of a strategic exit from Mauritania; the settlement of the A&D costs for a fixed amount with no exposure to future operational risk and/or cost overruns creates certainty for the business as it plans for 2018 and beyond.”
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