anyone got any ideas about the block trades that went through today?

website: http://www.sterlingenergyplc.com/



weather: www.nhc.noaa.gov/refresh/graphics_at4+shtml/084938.shtml?50wind120

SWW, thanks for the last post, nice article, sums things up quite well. Oilbarrel article this morning:

12.05.2005
Sterling Posts Record Results And Highlights Its Position In Mauritania
Sterling Energy, which has posted record full-year financial results for 2004 that were largely in line with analysts expectations, illustrates the balancing act many E&P companies try to pull off, that of backing high risk/high reward exploration in frontier territories with a solid base of profitable production in proven oil provinces. The AIM-quoted company has established its solid base on the US Gulf coast, which represents its sole source of cash flow, while the frontier exploration lies in Africa, where the company has interests across the continent stretching from Mauritania to Madagascar.

The exploration hotspot of Mauritania represents one of Sterlings key assets but until this weeks results presentation many investors were confused as to what exactly the company had negotiated there. In October 2004, Sterling signed a deal with the Mauritanian government, positioning itself as a strategic partner to the fledging oil state. Under the terms of the deal, Sterling will fund the countrys new state oil company, GPC, as it takes up its 12 per cent share in the Chinguetti oilfield, which, when it comes onstream at a rate of 75,000 barrels per day in the first quarter of 2006, will be that countrys first oil production. Sterling paid a signature bonus of US$15.5 million to the Mauritanian government and has made a US$130 million letter of credit available to GPC. This deal gives Sterling an eight per cent economic inertest in the field.

Its been quite difficult to get to the bottom of the deal they had done in Mauritania but it seems to work out as an eight per cent interest in the Chinguetti field, which does give us a bit more guidance, said Richard Slape, oil analyst with Seymour Pierce. Given what theyve paid, it doesnt seem to be a bad deal.

The company will also, through an existing sliding scale royalty agreement with Premier Oil, benefit from revenues from Chinguetti and the other developments lined up offshore Mauritania. When the Tiof field, for example, some 25 km north of Chinguetti, is declared commercial, as seems increasingly likely, Sterling will receive a bonus of US$2 million plus royalty payments when the field then comes onstream.

Elsewhere in Africa, the company is keen to make progress on its two licences in the AGC, the joint zone between Senegal and Guinea-Bissau. Earlier this year, Sterling farmed out 55 per cent of its interest in the Dome Flore permit in the shallow waters of the AGC, which holds two significant heavy oil discoveries with around 800-1,000 million barrels in place. A one year study is planned for the heavy oil while light oil prospects identified on the seismic data could be tested by exploration drilling in 2006/7.

Progress has been suspended on the companys Ntem concession in Cameroon pending resolution of a boundary dispute with neighbouring Equatorial Guinea.
In Gabon, where Sterling has interests in two shallow water permits, Iris Marin and Themis Marin, the Iboga-1 exploration well is due to spud later this year.
Backing up this exploration work are the companys holdings in the US, where it exited 2004 with production of 10.2 million cubic feet of gas per day. It expects to double that number this year as a result of new drilling - and if ever there was a place to be a gas producer then the energy-hungry US, with its booming gas market, is that place.

Sterling is one of the few UK E&P companies with exposure to the US natural gas market, said its broker Evolution Securities in a briefing note. Gas production doubled in 2004, and is expected to double again in 2005. The US gas price continues to show strength and is currently up 25 per cent compared to levels a year ago.

This rising tide helped the company post record results for 2004. Revenues doubled to hit 11.5 million, while net profit was up 87 per cent to stand at 2.97 million.

As well as its growing production streams in the US, the company expects to enjoy a monthly revenue by selling access to its operated pipelines and facilities to third parties. In all, Sterling has interests in 12 fields along the Gulf coast and it operates eight of them along with 21 offshore structures, over 68 miles of pipe and two onshore storage bases. This is no insignificant business although some analysts expect to see it increasingly overshadowed once Chinguetti starts to pump next year and progress is made on some of the other projects in West Africa.

It does seem that the focus going forward is going to be West Africa and, if that strategy is successful, its probable that the Gulf of Mexico business will be marginalised, said Slape of Seymour Pierce.

Thanks for the reply, Gav.

As I stated previously, I do see US growth this year as being the key issue which is likely to drive the share price in the short term. It probably goes without saying that if they had doubled their production by 1st Jan, then revenue growth (and therefore eps growth) would be around 100%, but if they aren't able to double it until December, growth will only be around 10% or 20%. Revenue growth for 2006 and beyond will likely come from Chinguetti, so US production increases then are not so critical.

Re the high oil prices, I'm not sure to what degree that will affect SEY as they are forward selling their production to guarantee a fixed and stable revenue. 2005 production looks to have been forward sold, although the 2003 accounts don't seem to show the price at which 2004 production was forward sold for comparison. They will, however, have got a significantly better price for 2005 production than they did for 2004 which was probably sold at around $4.70 or $4.80. This alone could account for a 25% or 30% increase in revenue for 2005.

As we did in 2004, for 2005 we have used the futures markets to 'sell' approximately $10 million of gas at prices averaging $6.20/mcfge. We intend to continue to use such contracts to cover part of our forecast production as part of our risk management.

I did notice that they were adversely affected by the fall in the greenback throughout the course of the year from $1.79 to $1.92. Cable is currently around $1.87, so any further weakening of sterling could presumably help them this current year.

Hope that helps.

seawallwalker,

The problem with articles like the one from the Times is that the journalist has not read the results properly. No financial journalist ever does, unfortunately. If he could read results properly, he would not be wasting his life writing for a newspaper.

He neglected to mention that last year's doubling of revenues from the US was as a result of acquisition and was wholly inorganic. Organically, revenues actually declined. Instead he gave the false impression that the doubling of revenues was about to be repeated again this year.

Morning Team

I see from the Traders Thread that the Questor column in the Telegraph rates Sterling as avoid, whereas the Times rates it as a buy. Curious. Hope more people read the latter than the former.

Average net production for the 1st Q was only 10.5mmcfge/d, and even if they reach 20 by year end, they will struggle to exceed 5bcfge for 2005 imho(3.4 for 2004). With the dilutive effect of the extra shares in 2005, the EPS could still be in the region of 0.4p, leaving a pretty pricey P/E unless higher prices/pipeline usage add significantly to profitability.
But surely this share is a play around 2006/2007 when the Mauritania assets start producing , when the P/E should fall to single figures and we will be hoping for EPS of 1p to 2p+ . The cash flow from the US assets is more about funding their exploration programmes. Providing it can do that and the African production comes on stream on time and ramps up quickly to expected rates, this share should be a good bet imho, dyor.
Any Comments?

just read the Times article. looks great to me. hopefully the Sundays will have something good to say as well.

And oil price has been above $50 all this year...$ recovered from it's lows + oil reserves are limited, so oil price cannot loose too ground regardles of growth etc...All IMO DYR

canary9 - ................But surely this share is a play around 2006/2007 when the Mauritania assets start producing , when the P/E should fall to single figures and we will be hoping for EPS of 1p to 2p+ . The cash flow from the US assets is more about funding their exploration programmes.

Correct.

You lads seem to have missed a bit of news that cetainly cheered me up


news from Dow Jones





12-05-2005 09:01:39

DJ MARKET TALK: Sterling Energy Should Trade Close To 26p


--------------------------------------------------------------------------------

0801 GMT [Dow Jones] Sterling Energy (SEY.LN) should trade closer to
26p/share on a combination of its core value and risk upside, says Evolution.
Feels stock currently trades closer to only core value owing to the market's
poor understanding of the value of the Gulf of Mexico assets, the company's
royalty interests and funding deal in Mauritania. "In '06, the boost to volumes
from Chinguetti production will transform profits and cash flow," Evolution
says. Maintains buy rating. Shares unchanged at 15.75p. (DWE)

Contact us in London. +44-20-7842-9464
Markettalk.eu@dowjones.com


(END) Dow Jones Newswires

12-05-05 0801GMT

051205 08:01 -- GMT
regards

Nice one Sheba.

goal! which reminds me 7-0 to the arsenal. i was there and it WAS seventh heaven (that must be the Sun's headline today!). One more year, one more year, one more year. Love ya Dennis.

evo note is positive but it seems to be having no affect.- but at least they are consistent with its rating.

Excellent results from SEY & of course Arsenal, personally I love the way Dennis plays & if he has the legs, give him two years. I trust Arsens judgment so we have to wait & see.

Prop

i thought the best song was to Everton - "Champions League - youre having a laugh"

As for SEY, results to me were as good as I expected and as most of us here know, this is not a share that we are looking to short term trade but one to tuck away, certainly till 2006 and probably beyond. As far as I see the building blocks are continually being put in place

Hilary,

Many thanks for sharing your thoughts the other day, much appreciated as always. I wonder if I could pick your brains briefly as to where you think cable might head over the next 6 months or so. I'm looking at a 12 month daily chart on Netdania and it shows cable trading in a range between around 22/11/04 to date. From the highs of around 1.9550, it seems to have fallen to around 1.8530, today's price, from where it has bounced a few times back up to what seems to be its current trading range. Would just be interested to hear your thoughts as to whether this is likely to continue for the rest of the year. TIA

Cheers

Gav

Fundy, what was funnier was they sang it right back to us!

the amusing song was 7 nil to the arsenal, 7 nil to the arsenal...

may not sing that again for a few years if not decades!!

Gav,

It's probably not a lot of use to you, but I only really look at cable with a view to where it's going today and I'm totally open minded on a longer term view.

Although it's off it's 1.95 high, it's spent the year so far oscillating + or - 5 cents around 1.90. That's not a fantastic range and reflects a degree of uncertainty within the market. Commentators are pointing to a break of the longer term support and the possible start of declines, but there are several factors which drive the FX market which could easily change between now and year end.

Underpinning everything else is the interest rate differential between the UK and the US. There is an expectation that the UK might cut rates soon to stave off recession, which would weaken GBP. There is also evidence that the US economy is not as bad as first feared and that US rates might rise further in the near future. Those expectations are driving the greenback up. I suspect that the economic data comprises much smoke and mirrors and it will be a while before a clear picture really starts to emerge.

You've also got a possible revaluation of the Chinese Yuan to digest short term and if oil is high going into the US driving season, that will weaken the dollar.

I would expect cable to find chart support at around 1.85 which is roughly where it's at now. If it goes over the next few days, there's thin air down to 1.78 where it was at last October. It's not an exact science though and doesn't say where it'll be by year end.

Hope that helps.

They got well and truly thumped! A bit embarrassing to say the least for all Evertonians!

Got the last Evo's note, if anyone wants a copy then email me off board.

Be nice if it's the cup final.

too true...a 7-0 victory....maybe that would put the willies up Glazer (so to speak)...