Given the current state of the oil market, Sterling Energy is becoming more confident in executing a deal with an onshore low-cost operator.
The company has $44.9 million of cash and has whittled down its commitments, now holding a non-operated role in a Somaliland block. Holding this cash gives it leverage to acquire production and low-risk exploration, Sterling’s CEO David Marshall said.
It has a primary focus on Africa and the Middle East, but would consider new regions for the right opportunity.
The company considered more than 50 opportunities in 2019 placing five bids and with a number still under consideration. Last year, sellers had higher expectations of value, which made deals harder.
The oil price plunge, driven by coronavirus, has weakened “highly leveraged oil companies, who will see the benefit of partnering with a cash rich entity”, Marshall said. The company expects to benefit from the companies it considered in 2019, in addition to new opportunities.
The Somaliland government granted an extension for the Odewayne production-sharing agreement (PSA) in 2019.
The block is operated by Genel Energy, which reprocessed the entire 2D seismic data set during 2019, with final products being delivered in January 2020. Sterling intends to review the 2D seismic in the second quarter of this year, while also planning a surface seep study in order to plan next steps.
The hope is to determine whether a Mesozoic sedimentary basin is present in the area. Sterling has a 34% working interest in the block, which covers 22,840 square km.
Once interpretation work has been completed, Genel may opt to proceed into the fourth exploration period. This will require the acquisition of 1,000 km of 2D seismic and the drilling of an exploration well.