Oil and gas explorer Sterling Resources is facing renewed financial pressure after a further 90-day delay in the Breagh development project in the North Sea.
The firm, which has a 30% stake in the gas field, has had to resort to a series of refinancing deals since delays and cost overruns started at the project last year. These included a loan from Dutch group Vitol, which in February made an unsolicited bid to take over the Canada-listed explorer.
The latest delays, announced by field operator RWE Dea, of Germany, have increased project costs for the first 10-well phase of the development by £16million to £648million, of which £194million is net to Sterling. RWE Dea said earliest gas would be mid-July, with possible slippage to the final week of August.
An Amec construction team has been pulled in to complete the project’s commissioning and an alternative and less costly development plan is being considered to lower the number of wells to seven.
The delays were blamed on 28 days of unaccounted for bad weather, reworking of pipes and poor project forecasting.
Sterling chief executive Mike Azancot said: “Despite our deep disappointment with the further delays to the onshore plant modifications the fundamentals of the whole Breagh project remain robust, with good well results so far. Having completed our recent equity financing of (Canadian) $63million (£40.9million) we have repaid the Vitol loan of US$12million (£7.9million) and provided sufficient operating funds until August.”
He added that the firm hoped to announce soon how it would refinance its current bank credit line.
Initial production at Breagh is anticipated to range from 150million to 180million standard cubic feet per day.