Report and
Financial Statements
2015
Sterling Energy plc
Report and
Financial Statements
Year ended 31 December 2015
CONTENTS
OVERVIEW
Chairman’s Statement
Chief Executive’s Review
2015 Summary
STRATEGIC REPORT
Operations Review
Schedule of Interests
Reserves Summary
Financial Review
Business Risk
CORPORATE GOVERNANCE
Board of Directors
Audit Committee Report
Nominations Committee
Remuneration Committee Report
Communications with Shareholders
Internal Controls
Conflicts of Interest
Extractive Industries Transparency Initiative (‘EITI’)
Directors’ Report
Statement of Directors’ Responsibilities
GROUP ACCOUNTS
Independent Auditors’ Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes In Equity
Consolidated Statement of Cash Flows
Company Statement of Financial Position
Company Statement of Changes In Equity
Company Statement of Cash Flows
Notes to the Financial Statements
Definitions and Glossary of Terms
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Professional Advisers
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Sterling Energy plc (‘Sterling’ or
the ‘Company’), together with its
subsidiary undertakings (the ‘Group’),
is an upstream oil and gas company
listed on the AIM market of the London
Stock Exchange. The Company is an
experienced operator of international
licences, with a primary focus on
Africa. The Group has high potential
exploration projects in Mauritania,
Madagascar, Somaliland and
Cameroon together with a production
interest in Mauritania.
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015 OVERVIEW
Chairman’s Statement
$98.7 million
CASH RESOURCES
We shall continue to act cautiously with regard
to our own investments in new ventures with
a bias towards projects that can be appraised
and developed via our existing resources.
At the beginning of 2015 few would have predicted
In February 2015, we acquired a 40.5% interest in
Also in Madagascar, Sterling, and ExxonMobil, our joint
to date spans 30 years of exploration, new ventures
a sustained decline in the global oil price and an E&P
production sharing contract (‘PSC’) C-3, a shallow
venture partner in the Ampasindava PSC, completed a
and business development roles in many of the world’s
sector severely affected with developments being
water project offshore Mauritania. Tullow Mauritania
review of the Sifaka prospect and concluded that the
key petroleum basins. Upon Eskil’s appointment, I
delayed, exploration deferred and licences being handed
Limited (‘Tullow Oil’), the operator, had just completed
technical and commercial risks too great to justify the
relinquished the role of Interim CEO.
back to host governments. As 2015 progressed the
the acquisition of a 1,600km 2D seismic programme.
drilling of an exploration well; in May 2015 the joint venture
speculation of a near term rebound in the oil price
We have completed the integration of the new seismic
partners elected to withdraw from the Ampasindava PSC.
On 13 March 2015 Dr Philip Frank stepped down from
diminished to be replaced with the forecast of a ‘lower
data with the existing sub-surface data-set and failed
the Board and left the Company. Matthew Bowyer was
for longer downturn’. Many outside of our sector have
to mature any leads to drill-ready prospects. In January
In the Odewayne PSC, onshore Somaliland, where Genel
appointed as Sterling’s Exploration Manager.
benefitted from the lower cost of energy; however, inside
2016 we elected to withdraw from the PSC rather than
Energy Somaliland Limited (‘Genel Energy’), the operator,
the upstream oil and gas sector we have seen a real slow
fund our share of a 3D program and exploration well we
carries us for the costs of a seismic programme and one
OUTLOOK FOR 2016 AND BEYOND
down in activity and a re-alignment of ambitions.
considered as high risk.
exploration well, the planning for the seismic continues to
There appear to be no tangible indications of how the
progress whilst the Government of Somaliland; establishes
continued volatility in the global oil price may positively
In my statement last year I made reference to smaller E&P
We acquired a further interest offshore Mauritania during
a trained and equipped Oil Protection Unit (‘OPU’).
impact the capital market that traditionally invested in the
companies moving away from their previous business
2015, a 13.5% interest in PSC C-10, again with Tullow
oil and gas sector. We shall continue to act cautiously
model of acquiring material acreage positions and then
Oil as the operator. The C-10 block has good legacy 3D
In Cameroon, we continue to hold our 100% interest in
with regard to our own investments in new ventures
farm-out, on a promoted basis, to a larger player who
seismic coverage and the joint venture (‘JV’) is actively
the Ntem block. We maintain our claim of force majeure,
with a bias towards projects that can be appraised and
would be expected to fund more expensive exploration
working towards identifying a drill ready prospect as a
declared in May 2014 as a result of the border dispute
developed via our existing resources. We will then have
activities. We had already adapted our Group strategy
step towards fulfilling the outstanding work commitment
between Cameroon and Equatorial Guinea. We continue
the option to accelerate and/or expand these cash flow
and become more cautious about our ability to farm-out
of one exploration well.
to seek the best way to progress the exploration activity
generative ventures via third party project finance.
what are sometimes, very large financial commitments.
in the Ntem block.
During 2015, we further refined our strategy when
Also in Mauritania, we retain our financial interest in the
it became evident that the capital markets were not
Chinguetti oil field in Mauritania. At the prevailing oil
FINANCIAL
In addition to our strategy for growth, the Group has, via
a combination of our own funds and carried interests, the
supporting even the appraisal and development activity
price, production from Chinguetti is loss making and the
The Group had cash resources of $98.7 million at the
resources to see our existing projects advance during 2016.
associated with exploration success; we concluded we
relevant stakeholders are collectively working towards
end of 2015, including $1.1 million of partner funds, and
should prioritise smaller, value driven opportunities that
cessation of production through a compliant, safe and
we remain free of debt. Our work programme for 2016 is
I would like to thank all our stakeholders for their continuing
we could progress with our own finances to the point
cost effective decommissioning and abandonment plan.
fully funded and we have resources available to progress
support for our strategy and all of our management and
where the early production could be used to financially
justify project debt.
In Madagascar we completed the acquisition of 1,175km2
of 3D seismic on the Ambilobe block and are now
BOARD AND MANAGEMENT CHANGES
both our existing portfolio and add new venture activity.
staff for their diligent efforts during 2015.
Despite the market downturn, we have made some
interpreting the new data in preparation for making a ‘drill
On 23 March 2015 the Company announced the
progress within our existing portfolio of exploration assets,
or drop’ decision due in July 2016; the obligation in the
appointment of Eskil Jersing as Chief Executive Officer
Alastair Beardsall
Chairman
however the progress has been slow and cautious.
next exploration phase includes the drilling of a well.
(‘CEO’) and a Director of the Company. Eskil’s career
10 March 2016
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OVERVIEW
Chief Executive’s Review
Through the last year, Sterling has continued to
mature, actively manage and grow our portfolio
in a disciplined manner, to succeed in and
adapt to, a sustained lower oil price landscape.
MARKET LANDSCAPE
ASSET ACTIVITY
ranked prospect, prior to end November 2017. We
Subsequent to a detailed subsurface re-assessment of
Over the last year, we have witnessed the continuation
We have worked diligently at both maturing and
maintain the view that the world class gas discoveries
the prospectivity of the Ampasindava block, offshore
of a severe supply driven crude oil price downturn. This
refreshing our existing portfolio in a disciplined manner.
made by Kosmos on the Mauritania – Senegal border
Madagascar, by the JV and after discussions with the
has led to a broad acceptance of a “lower for longer”
Our forward business model remains focused on the
further emphasise the infancy and potential upside of
Office des Mines Nationales et des Industries Stratégiques
price doctrine by the industry as a whole. Market volatility
exploration and appraisal phase of the E&P lifecycle, with
the analogous hydrocarbon plays in C-10, with both low
(‘OMNIS’), ExxonMobil and Sterling relinquished the
has continued into 2016, with oil and gas prices at multi-
a bias towards capital efficient opportunities in fiscally
cost entry exposure and flexible exit options.
block in May 2015. We are highly appreciative of the
year lows, rising geopolitical tensions, mounting defaults,
advantageous jurisdictions with lower lifecycle risk,
productive and collaborative nature of our relationship
supply overhang, debt restructuring efforts and steep
breakeven commodity prices and offering nearer term
The Group has a Funding and Royalty Agreement
with ExxonMobil and OMNIS throughout the JV project life
reductions in corporate work program and budgets.
options for commerciality.
based economic interest in the offshore Chinguetti oil
and relinquishment process. The Group does not expect
Importantly, however, the opportunity landscape has also
field in Mauritania, amounting to ca. 9% of production.
to have any liabilities associated with the relinquishment.
opened up for buyers, with regards entry and significantly
In Mauritania, we increased our exposure to an emerging
At prevailing oil prices, revenues from Chinguetti are
reduced seismic acquisition and drilling costs.
and underexplored petroleum province, with recent world
insufficient to cover field operating costs and hence no
RENEWED STRATEGY
Cairn (Senegal) through ground floor entries into the C-3
costs. The JV participants (led by the operator, Petronas)
class oil and gas discoveries by Kosmos (Mauritania) and
longer cover the Company’s administrative overhead
During May 2015, Sterling successfully operated a
1,175km2 discretionary 3D seismic survey on time, on
budget and without incident over the Ambilobe block,
Through the last year, Sterling has continued to mature,
and C-10 offshore blocks, both operated by Tullow Oil.
and relevant stakeholders are collectively working towards
offshore Madagascar. The final processed dataset will
actively manage and grow our portfolio in a disciplined
These decisions were predicated on the inboard C-3
cessation of production through a safe, compliant and
be available in early March 2016. The costs of this 3D
manner, to succeed in and adapt to, a sustained lower
block providing upside dependent running room for the
cost effective decommissioning and abandonment plan.
seismic survey have been carried by Sterling’s JV partner
oil price landscape.
immature, but technically attractive shelfal Cretaceous
Pura Vida Mauritius (‘Pura Vida’). The JV is working to
and Jurassic plays recognised in C-10. However,
In Somaliland, we are hopeful that a regional 2D seismic
secure an extension to the current second exploration
Smaller exploration focused players such as Sterling,
subsequent to detailed in-house evaluation of the 2014
acquisition program in H2 2016 will help de-risk this
phase, (due to expire in July 2016) with a view to farming
can no longer rely on leveraged cover to execute and
2D seismic data over C-3, we concluded that the new
frontier exploration block. The results of a 2015 surface
out the block post 3D evaluation from Q2 2016.
monetise assets in the early part of the value cycle.
data had not sufficiently de-risked the block to enter
seep study re-confirmed the outstanding potential offered
Equally, our Chinguetti oil field Funding and Royalty
into Phase 2 of the PSC, due to begin June 2016. We
by this basin scale acreage position, by validating all
We are very pleased with the progress of a corporate
Agreement revenue no longer provides cover for general
therefore took the prudent and disciplined stance to exit
elements of a working petroleum system. Sterling is fully
social responsibility (‘CSR’) program that the Ambilobe
and administrative (‘G&A’) costs at current oil prices, and
the C-3 block, effective end of February 2016, subject to
carried by the operator Genel Energy for all exploration
JV is executing over three separate initiatives, namely:
the joint venture works towards end of field life decisions.
Government approval; with no additional cost exposure
costs during the current third and subsequent fourth
the Nosy Be and Ambanja fish market rehabilitation and
In response, our capital resources will be allocated to limit
to the Group.
exploration period, covering the 2D seismic survey and
Beramanja school projects. We must not forget our
first well commitment. Planning and tendering for the
‘licence to operate’ and be cognisant of the differences
or defer our liability exposure and focus on repositioning
We continue to work diligently with the operator Tullow
2D survey continues to progress whilst the Government
we can make to local communities through such projects.
our portfolio to secure above average returns in the near
Oil and with Société Mauritanienne Des Hydrocarbures
of the Republic of Somaliland establishes a trained and
to mid-term. Our aspiration over the next few years will
et de Patrimoine Minier (‘SMHPM’), to technically
equipped OPU that can provide the level of security
In Cameroon, we continue to believe that, in accordance
be to gain exposure to a core asset, and execute on a
quantify and rank the existing C-10 prospect portfolio,
required by in-country operators to ensure all future
with the terms of the Ntem Concession, the declaration
portfolio with low cost, long-life and investment flexibility.
with a view to drilling an exploration well on the top
seismic and drilling operations can be conducted safely.
of force majeure on 6 May 2014 remains valid, pending
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OVERVIEW
Chief Executive’s Review (cont.)
formal resolution of the overlapping maritime border
Sterling is fully funded for our current asset level
claims with Equatorial Guinea.
commitments, through a strong balance sheet with cash
resources of $98.7 million as at 31 December 2015.
We will work with the Ministry of Industry, Mines and
Technological Development of Cameroon to determine
We are well placed to mature our portfolio, using our
a forward plan for the Ntem block, given the declaration
existing resources and continue to maintain a disciplined
of force majeure. In the interim, we maintain our “reserve
approach to growth, only acquiring and executing
our rights” position on the Ntem block and continue to
accretive projects the Company believes will ultimately
seek a collaborative, fair and equitable outcome.
deliver value for shareholders.
OUTLOOK
Overall, the Sterling portfolio still has the potential to
deliver material exploration outcomes in Mauritania,
Eskil Jersing
Chief Executive Officer
Madagascar, Somaliland, and Cameroon. We continue
10 March 2016
to mature our top ranked assets to drill-ready status, or
commercialise our positions as appropriate.
On the growth front, we have completed screening
exercises on a significant number of opportunities
through 2015. However, beyond the Mauritania C-3 and
C-10 block entries, a number of technically attractive
projects suffered through unacceptable commercial
or above-ground risks and were not taken forward to
acquisition stage.
We have strongly refocused our efforts to proactively
evaluate shorter cycle executable opportunities that fit
our revised strategy, to benefit from a sector recovery.
2015 SUMMARY
Production, net to the Company (including royalty barrels) from the Chinguetti field, averaged 310
barrels of oil per day (‘bopd’) (2014: 432 bopd).
Adjusted Earnings before Interest, Tax, Depreciation, Amortisation and Exploration Expense
(‘EBITDAX’) loss for the Group of $6.3 million (2014: $5.1 million earnings).
Board and Management appointment of Eskil Jersing as CEO in March 2015.
Transfer of Murphy’s 50% interest in the Ntem block to Sterling (now 100% and operator),
offshore Cameroon, completed in April 2015.
Ampasindava block, Madagascar, exit (30% interest) in May 2015.
Completed 1,175km2 3D seismic acquisition safely, on time and budget over the Ambilobe block,
offshore Madagascar, in June 2015, final processed data expected in-house Q1 2016.
Acquisition from Tullow Oil of a 40.5% interest in PSC C-3 exploration block, offshore Mauritania,
completed in July 2015. Exited block in February 2016.
Acquisition from Tullow Oil of a 13.5% interest in PSC C-10 exploration block, offshore
Mauritania, completed in November 2015.
Working with Chinguetti oil field stakeholders on a safe, cost effective and technically robust
decommissioning and abandonment plan.
Cash resources at 31 December 2015 of $98.7 million (2014: $108.1 million), including joint
venture partner funds of $1.1 million.
The Group remains debt free, with sufficient cash resources to fund all outstanding firm
commitments.
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9
Sterling Energy plc
Strategic Report
Year ended 31 December 2015
STRATEGIC REPORT
Operations Review
The Group’s African focused asset portfolio provides exposure to exploration
opportunities within a number of under-explored basins that have the potential
to deliver material hydrocarbon reserves. These frontier and emerging areas
have historically seen little activity but offer significant encouragement for the
presence of commercially viable, working hydrocarbon systems.
(ca. 9% economic
MAURITANIA
Chinguetti
interest through
Funding and Royalty Agreements). The Group has
economic interests in the Chinguetti oil field through
a Funding Agreement with SMHPM, Mauritania’s
national oil company, and a Royalty Agreement
with Premier Oil (‘Premier’), through the Group’s
wholly owned subsidiary Sterling North West Africa
Holdings Limited.
Chinguetti oil field (ca. 9% economic interest)
Overview
Gross production for the Chinguetti field during 2015
averaged 5,083 bopd (2014: 5,512 bopd). Average
production net to the Group, from the Group’s economic
interests during 2015, was 310 bopd (2014: 432 bopd).
Production was in steady decline throughout the year,
reflecting the maturity of the field, but benefited from a
limited requirement for sub-sea or top side interventions.
No infill drilling or workover activity took place during 2015.
The Group estimates that at the end of 2015, net entitlement
2P reserves stood at 173k barrels of oil equivalent (2014:
292k barrels of oil equivalent).
In February 2015, Premier exited from each of PSC A,
PSC B (excluding Chinguetti) and PSC C-10 in Mauritania.
The Group would have benefited, through the Royalty
Agreement with Premier, from any future development on
any of the three aforementioned PSC’s. However given
Premier’s withdrawal, the Group does not expect any future
benefits to materialise. Premier’s exit from these PSC’s does
not affect the royalties currently received by the Group over
Premier’s interest in production from the Chinguetti field.
Outlook
The Chinguetti joint venture (Petronas, Tullow Oil, SMHPM,
Premier, Kufpec) are evaluating how best to manage the
Chinguetti field in a low oil price environment and with end
of field life challenges. Formative discussions continue to
be held with the Government of Mauritania and relevant
stakeholders on how best to manage current operations
and agree on a plan for a safe, cost effective and technically
robust, decommissioning and abandonment phase.
A summary of Chinguetti interests and Group resource
summary are provided on pages 17 and 23 of the Strategic
Report.
its Mauritanian
In 2015, the Group bolstered
footprint via low cost ground floor entries into two
exploration blocks, C-3 and C-10. The rationale
underlying the C-3 and C-10 entries was that both
blocks provided flexibility on work programme
commitment decisions, as well as offering exposure
to material exploration upside in a re-emerging
petroleum province on the West African margin.
The entry into block C-3 was predicated on it being
protection acreage in the event of a commercial
discovery on block C-10, however subsequent work
on C-3 following receipt of new 2D seismic data
in 2015 ultimately did not support further capital
expenditure on a proposed 3D survey. As a result
a swift disciplined, data-driven exit decision was
made to limit further capital exposure.
C-10 (WI 13.5%) Exploration block
Overview
Block C-10 covers an area of approximately 8,025km² and
lies in water depths of 50 to 2,400m within the Nouakchott
sub-basin, offshore Mauritania, surrounding the Chinguetti
field. The C-10 block PSC is held by the Company’s wholly
owned subsidiary Sterling Energy Mauritania Limited
(‘SEML’) (13.5% working interest), Tullow Oil (76.5%
working interest and operator) and SMHPM (10% working
interest). SMHPM is carried by SEML and Tullow Oil,
pro-rata to their working interests, during the exploration
phases. The PSC is in the second phase of the exploration
period, which is due to expire on 30 November 2017 and
has a minimum work obligation of one exploration well.
The block is fully covered by legacy 3D seismic coverage
and lies within a proven petroleum basin offering exposure to
multiple play-types from under-explored Jurassic and lower
Mauritania
Cameroon
Somaliland
Madagascar
Cretaceous shelfal carbonates to Cretaceous and Tertiary
clastic plays. Within the block confines a successful exploration
campaign in 2000-2003 targeting the Miocene play, yielded
four oil and gas discoveries, including the Chinguetti oil field.
term) with a minimum work obligation of a further two
exploration wells.
A summary of the C-10 asset is provided on page 18 of
the Strategic Report.
Since 2014, Kosmos Energy, in deep water block C-8,
immediately outboard of C-10 has discovered and appraised
several world class LNG scale gas discoveries of Albian to
Cenomanian age, with the Tortue West (Ahmeyim) structure
alone reported to have Pmean gas resources of ca.15 Tcf.
Further south in Senegal, the Albian clastic shelf margin
play has also been successful with commercial oil and gas
discovered at the SNE field, currently being appraised with
best estimate 2C contingent resources of 385 million barrels
of oil per Cairn Energy’s press release in March 2016.
In the C-10 block, Tullow Oil and the JV have matured a
drill ready, Lower Cretaceous Neocomian age carbonate
prospect, Lamina, located in water depths of approximately
100m. The joint venture anticipates that an exploration well
to test this prospect in 2017 would have a gross dry hole
cost in the order of $50 million ($7.5 million net to SEML),
substantively lower than the originally proposed $77 million
in 2015.
Outlook
Following entry into the C-10 block in mid-2015, Sterling
and its JV partners have been maturing and ranking
the technical description of the play, prospect and lead
portfolio on the merged, reprocessed and depth-migrated
3D seismic dataset. The joint venture will work towards
selecting the prospect for drilling in 2017, with Lamina
the currently highest ranked option, to meet the minimum
work obligations. Sterling will continue to work on de-
risking and ranking the remaining prospectivity within the
three key remaining plays on block, through 2016.
Should the joint venture not fulfil the minimum work
obligations, the gross liability owing to the Mauritanian
government would be $7.5 million ($1.1 million net to
SEML). Following the completion of Phase 2 the joint
venture may elect to enter into Phase 3 (with a 3 year
C-3 (WI 40.5%) Exploration block
Overview
Block C-3 is located in shallow water within the Nouakchott
sub-basin, offshore Mauritania and covers an area of
9,825km². The PSC for block C-3 is held by SEML (40.5%
working interest), Tullow Oil (49.5% working interest and
operator) and SMHPM (10% working interest). SMHPM is
carried by SEML and Tullow Oil, pro-rata to their working
interest, during the exploration phases. The PSC is in the
first phase of the exploration period, which runs to June
2016, with a minimum work commitment of acquiring
1,600km of 2D seismic data. The C-3 block was acquired
as protection acreage for the adjacent C-10 block in the
case of success on C-10, given that similar promising
plays cover both blocks.
In late 2014, the operator acquired 1,600km of regional and
infill 2D seismic data over block C-3 satisfying the minimum
work obligations for the current phase. During 2015 SEML
completed a detailed interpretation of the newly acquired
2D data. The resulting technical evaluation of the remaining
play and lead potential was deemed by Sterling to be
insufficiently de-risked by the 2D to justify entering into
Phase 2 of the PSC; entailing a commitment to acquire
700km² of 3D seismic and drill one exploration well.
Outlook
In January 2016, SEML submitted a notice of withdrawal
to Tullow Oil and SMHPM to reassign to Tullow Oil its
40.5% working interest share of block C-3 effective end
February 2016. Completion of the withdrawal remains
subject to approval by the Government of the Islamic
Republic of Mauritania.
A summary of the C-3 asset is provided on page 19 of the
Strategic Report.
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13
STRATEGIC REPORT
Operations Review (cont.)
MADAGASCAR
The Group’s Ambilobe block is located in the
Ambilobe deep water basin, offshore north-west
Madagascar. In May 2015, the Group relinquished the
offshore Ampasindava block, located in the Majunga
basin, north-west Madagascar.
Ambilobe (WI 50% & operator) Exploration block
Overview
The Ambilobe block covers some 17,650km² and is
located in the Ambilobe basin, offshore north-west
Madagascar. Water depths across the block range from
shoreline to 3,000m. The Ambilobe PSC is in the second
phase of the exploration period and all work commitments
have been fulfilled.
Sterling Energy (UK) Limited (‘SE(UK)L’) completed a farm-
out agreement in December 2013 with Pura Vida under
which Pura Vida assumed a 50% interest in the Ambilobe
PSC and paid all costs associated with a discretionary 3D
seismic survey subsequently acquired in 2015. Following
the farm-out, SE(UK)L retained a 50% interest in the PSC
and remains as operator.
The Ambilobe block is covered by an extensive database
of vintage 2D data that led to the identification of a number
of Cretaceous and Tertiary aged plays and leads, located
in both shallow and deep waters. In June 2015 SE(UK)L as
operator of the Ambilobe PSC completed a 1,175km2 3D
seismic survey to improve the technical description of the
high graded lead area prior to a “drill or drop” decision mid-
2016. The 3D survey acquired by CGG Services SA was
completed on time and budget, without incident and fully
compliant with all environmental regulatory requirements.
Processing of the seismic data by ION Geophysical
Company commenced in the second half of 2015, with
interim products having been made available and reviewed
in-house prior to year-end.
Corporate Social Responsibility
Affiliated with the Ambilobe 3D survey, the Ambilobe JV has
worked closely with the local communities and authorities
of the region to undertake three CSR projects, one in
each of the districts of Nosy Be, Ambanja and Ambilobe.
In the Ambilobe district, the Ambilobe JV will support the
renovation and rebuilding of two primary school classrooms.
In each of Nosy Be and Ambanja districts, the Ambilobe
JV will support the construction of a new fish market. The
existing facilities for the local fisherman in these areas are
currently inadequate and overcrowded. Building new,
dedicated markets, will improve local traffic and sanitary
conditions, contribute towards a safer environment for the
local population and ultimately improve the livelihoods of
the local fishermen. The Ambilobe JV will work in close
collaboration with the local communities, with the aim of
delivering the completed projects by mid-2016.
Outlook
Continued processing of the 2015 3D seismic to Pre Stack
Depth Migration stage with final deliverables expected in Q1
2016. Interpretation of interim data products is progressing
and will focus on high-grading the lead inventory to help
inform the decision on entry into Phase 3, which carries a
one well commitment.
With Phase 2 of the Ambilobe PSC due to expire in July
2016, the joint venture will seek an extension to give
sufficient time to complete the subsurface technical
description and seek a farm-in partner prior to a decision
whether to enter into Phase 3.
A summary of the Ambilobe asset is provided on page 20
of the Strategic Report.
Ampasindava (WI 30%) Exploration block
Overview
Following a detailed subsurface
re-assessment of
the prospectivity of the Ampasindava block and after
discussions with OMNIS, the joint venture, ExxonMobil
(70% working interest) and Sterling (30% working interest),
relinquished the Ampasindava block in May 2015.
SOMALILAND
The onshore basins of Somaliland offer one of the last
opportunities to target an undrilled Mesozoic basin
in Africa. The Odewayne block is ideally located to
explore this play covering a large area of a completely
unexplored onshore rift basin. Geophysical data and
geological field studies indicate that the sedimentary
basin underlying the block has encouraging evidence
of a working hydrocarbon system.
Odewayne (WI 40%) Exploration block
Overview
This large, unexplored frontier acreage position comprises
an area of 22,840km2. Exploration to date has been limited
to the acquisition of airborne gravity and magnetic data, with
no seismic coverage and no wells drilled on block. Extensive
geological field data provide strong encouragement for the
presence of a deep sedimentary basin and has highlighted
the presence of oil seeps at the surface indicating a working
hydrocarbon system is present.
The Odewayne production sharing agreement (‘PSA’) was
awarded in 2005, and is in the Third Period with an outstanding
minimum work obligation of 500km of 2D seismic. The Third
Period was recently extended by two years (to 2 November
2016) in order to allow time for an OPU to be established. The
minimum work obligation during the Fourth Period of the PSA
(also extended by 2 years to May 2018) is for 1,000km of 2D
seismic and one exploration well.
The Company’s wholly owned subsidiary, Sterling Energy
(East Africa) Limited (‘SE(EA)L’), currently holds a 40% working
interest in the PSA. SE(EA)L acquired an original 10% from
Petrosoma Limited (‘Petrosoma’) in November 2013 and an
additional 30% from Jacka Resources Somaliland Limited
(‘Jacka’) in two transactions during 2014. In aggregate, as
consideration, SE(EA)L has paid $17.0 million to date and a
further $8.0 million is to be paid to Petrosoma when certain
operational milestones are reached.
SE(EA)L is fully carried by Genel Energy for its share of the
costs of all exploration activities during the Third Period
and Fourth Period of the PSA.
Outlook
Operational activities in Somaliland have been delayed while
the Government of the Republic of Somaliland establishes
a trained and equipped OPU that can provide the level
of security required by in-country operators to ensure all
future seismic and drilling operations are conducted safely.
A 2D seismic acquisition program is currently scheduled to
commence in H2 2016.
A summary of the Odewayne asset is provided on page 21
of the Strategic Report.
CAMEROON
Ntem is a large deep water concession in the southern
Douala Basin. The Douala Basin of Cameroon is a
proven oil and gas producing province with multiple
discoveries made within the shallower water shelf
area to the east of the Ntem Concession and multiple
deep water discoveries to the north.
Ntem (WI 100% & operator) Exploration block
Overview
The Ntem Concession lies adjacent to the southern maritime
border of Cameroon. Water depths range from 400 to 2,000m
across this 2,319km² block. This block is well positioned with
respect to both Tertiary and Upper Cretaceous play potential,
both of which have proved commercially successful in
Cameroon and Equatorial Guinea.
The Ntem Concession was subject to force majeure from
June 2005 to January 2014, as a result of overlapping
maritime border claims (referred to as the ‘Affected
Area’) by the Republic of Cameroon and the Republic of
Equatorial Guinea. Following the lifting of force majeure,
the current exploration period (‘First Renewal Period’)
of the Ntem Concession re-commenced on 22 January
2014. At that date, the remaining term of the First Renewal
Period was approximately 15 months (expiring April 2015).
The minimum work obligation (one exploration well) was
satisfied by the drilling of the Bamboo-1 exploration well
in February 2014.
On 6 May 2014, the Ntem joint venture partners notified
Société Nationale des Hydrocarbures
the
national oil company of Cameroon, of the joint venture’s
declaration of force majeure pending formal resolution of
the overlapping maritime border claims. SNH has advised
that “Cameroon does not recognise that any situation of
force majeure exists in the Ntem Permit”.
(‘SNH’)
In April 2015, Murphy Cameroon Ntem Oil Co. Ltd
(‘Murphy’) and Sterling Cameroon Limited
(‘SCL’)
completed the transfer of Murphy’s 50% interest in, and
operatorship of the Ntem Concession, to SCL.
SCL received written notice, dated 22 April 2015, from
SNH that it considered the First Renewal Period of the
Ntem Concession to have expired on 22 April 2015 and
the Ntem Concession to have lapsed.
The Group believes that, in accordance with the terms of
the Ntem Concession, the declaration of force majeure on 6
May 2014 remains valid. As such, the First Renewal Period
has been suspended since 6 May 2014 and therefore has
not expired.
In December 2015, SCL became aware that SNH publicised
the Ntem Concession as an “open block”, SCL disputes
this claim and reserves its rights to the Ntem Concession.
Outlook
SCL will work with the Ministry of Industry, Mines and
Technological Development of Cameroon to determine
a forward plan for the Ntem Concession, given the
declaration of force majeure, the 22 April 2015 notice from
the Ministry and the listing of the Ntem Concession as an
open block.
A summary of the Ntem asset is provided on page 22 of
the Strategic Report.
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15
STRATEGIC REPORT
Schedule of Interests
Year ended 31 December 2015
Location
Size
(km²)
Licence
Name
Sterling
Working
Interest %
Sterling
Net Revenue
Interest %
Operated/
Non-operated
Mauritania: Offshore
29
PSC B -
Chinguetti Field
n/a
Sliding scale royalty
from 6% WI 1
Non-operated
Economic interest for
approximately 8% of
Chinguetti project 2
Mauritania: Offshore
Mauritania: Offshore
Cameroon: Offshore
9,825
8,025
2,319
PSC C-3 3
PSC C-10
Ntem 4
Madagascar: Offshore
17,650
Ambilobe
Somaliland: Onshore
22,840 Odewayne Block 5
40.5%
13.5%
100%
50%
40%
Non-operated
Non-operated
Operated
Operated
Non-operated
1 The Company’s royalty interest derives from Premier’s working interest of 6% in PSC B. The Company’s royalty is up to 6% of Premier’s working
interest.
2 The Company’s interest derives from the Funding Agreement with SMHPM.
3 On 29 January 2016, the Group notified its joint venture partners and the Government of Mauritania of its withdrawal from PSC C-3, which remains
subject to Mauritanian Ministerial approval.
4 Force majeure was lifted on 22 January 2014 in order to drill the Bamboo-1 well, as a result the current phase was extended to 22 April 2015.
On 6 May 2014 force majeure was re-declared; SNH, however, has not accepted this as valid and together with the Ministry considers the Ntem
Concession to have expired on 22 April 2015.
5 Carried for the minimum work obligation of current period and next period of PSA.
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17
STRATEGIC REPORT
Mauritania
We increased our exposure
to an emerging and
underexplored petroleum
province, with recent world
class oil and gas discoveries.
Block C-10 (WI 13.5%)
PSC
27 October 2011
30 November 2011
8,025km2
76.5%
13.5%
10%*
CONTRACT SUMMARY
Contract type
Contract signed
Contract effective date
Contract area
Participants
Tullow Mauritania Limited (Operator)
Sterling Energy Mauritania Limited
Société Mauritanienne Des Hydrocarbures
Et De Patrimoine Minier
Exploration term
Current Phase 2: To 30 November 2017
Phase 2 work commitment:
One well
Phase 3 (optional): To 30 November 2020
Phase 3 work commitment:
Two wells
Production term
Twenty five years
State participation
The State may back in for up to a maximum of 14% participating interest
(to include their 10% carried interest in the exploration phase) in any
development and production area
Licence status
In November 2015, Sterling Energy Mauritania Limited completed the
acquisition of a 13.5% working interest in PSC C-10.
18
Sterling Energy plc Report and Financial Statements 2015
* Carried through exploration
Block C-3 (WI 40.5%)
CONTRACT SUMMARY
Contract type
Contract signed
Contract effective date
Contract area
PSC
17 April 2013
30 June 2013
9,825km2
Participants
Tullow Mauritania Limited (Operator)
Sterling Energy Mauritania Limited
Société Mauritanienne Des Hydrocarbures
Et De Patrimoine Minier
49.5%
40.5%*
10%**
Exploration term
Current Phase 1: To 30 June 2016
Phase 1 work commitment:
1,600km 2D seismic acquisition (completed)
Phase 2 (optional): To 30 June 2019
Phase 2 work commitment:
One well and 700km2 of 3D seismic
Phase 3 (optional): To 30 June 2022
Phase 3 work commitment:
One well
Production term
Twenty five years
State participation
The State may back in for up to a maximum of 18% participating interest
(to include their 10% carried interest in the exploration phase) in any
development and production area
Licence status
In July 2015, Sterling Energy Mauritania Limited completed the
acquisition of a 40.5% working interest in block C-3. In January 2016,
Sterling Energy Mauritania Limited submitted a notice of withdrawal
to Tullow Oil and SMHPM to reassign to Tullow Oil its 40.5% working
interest share of block C-3.
* Subject to withdrawal notice issued by Sterling in January 2016
** Carried through exploration
Sterling Energy plc Report and Financial Statements 2015
19
STRATEGIC REPORT
Madagascar
Sterling operated
1,175 km2 3D
seismic survey
over untested
frontier basin.
STRATEGIC REPORT
Somaliland
Sterling is fully carried
by the operator Genel
Energy for all exploration
costs during the current
third and subsequent
fourth exploration period.
Ambilobe (WI 50%)
CONTRACT SUMMARY
Contract type
Contract signed
Contract effective date
Contract area
PSC
15 July 2004
28 November 2004
17,650km2
Participants
Sterling Energy (UK) Limited (Operator)
Pura Vida Mauritius
50%
50%
Exploration term
Originally an eight year period (in four phases) with possible two year
extension, but suspended between February 2009 and November 2012
Current Phase 2:
To July 2016
Phase 2 work commitment:
Completed
Phase 3 (optional):
One year duration
Phase 3 work commitment:
Drill one exploration well
Production term
Twenty five year period with possible extensions
Licence status
The joint venture will seek an extension to the current phase to give
sufficient time to complete the subsurface technical description and to
seek a partner prior to the decision whether to enter into Phase 3.
Odewayne (WI 40%)
CONTRACT SUMMARY
Contract type
Contract signed
Contract effective date
Contract area
PSA
6 October 2005
6 October 2005
22,840km2
Participants
Genel Energy Somaliland Limited (Operator)
Sterling Energy (East Africa) Limited
Petrosoma Limited
50%
40%
10%
Exploration term
Current Period 3: To 2 November 2016
Period 3 work commitment:
500km 2D seismic acquisition
Period 4 (optional): To 2 May 2018
Period 4 work commitment:
1,000km 2D seismic acquisition and one exploration well
Period 5 (optional): To 2 May 2019
Period 5 work commitment:
500km 2D seismic acquisition and one exploration well
Period 6 (optional): To 2 May 2020
Period 6 work commitment:
500km 2D seismic acquisition and one exploration well
Production term
Twenty five years, renewable for ten years
State participation
State may back in for up to a 20% participating interest in any
development and production area
Licence status
The block is in Period 3 of the exploration period with an outstanding
work commitment of 500km of 2D seismic. The Group’s costs associated
with the Period 3 and 4 work programmes are carried by Genel Energy.
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21
STRATEGIC REPORT
Reserves Summary
Year ended 31 December 2015
2015
Oil
(000 boe)
2015
Gas
(mcf)
2015
Reserves
(000 boe)
2014
Oil
(000 boe)
2014
Gas
(mcf)
2014
Reserves
(000 boe)
Volumes of Proven plus Probable
Reserves
At 1 January
Revision – Chinguetti (1-3)
Production
At 31 December
292
(6)
(113)
173
-
-
-
-
292
(6)
(113)
173
559
(109)
(158)
292
-
-
-
-
559
(109)
(158)
292
1 The reserves stated are for the Company’s net interests in the Chinguetti field only and are based on the Company’s own assessment of reserves, as
at 31 December 2015. The Group’s interest in the Chinguetti field is through its Funding Agreement and Royalty Agreement; The Company does not
have a direct equity participation in the Chinguetti field. The assessment was made in accordance with the definitions as set out on pages 98 - 100.
2 The Group has not booked reserves relating to other Mauritanian discoveries, on the basis that there are no approved development plans for these
discoveries.
3 In accordance with the guidelines of the AIM Market of the London Stock Exchange, Mr Matthew Bowyer, Exploration Manager of Sterling Energy
plc, who has been involved in the oil industry for over 20 years, is the qualified person that has reviewed the technical information set out above.
Matthew Bowyer
Exploration Manager
10 March 2016
STRATEGIC REPORT
Cameroon
We continue to
seek the best way
to progress the
exploration activity
in the Ntem block.
Beramanja primary school CSR project
Ntem (WI 100%)
CONTRACT SUMMARY
Contract type
Contract signed
Contract effective date
Contract area
Concession
14 March 2001
3 September 2002
2,319km2
Participants
Sterling Cameroon Limited (Operator)
100%
Exploration term
Current First Renewal Period:
On 6 May 2014 the joint venture declared force majeure pending formal
resolution of the conflicting maritime border claims
Minimum work commitment:
Drill one exploration well (completed by drilling Bamboo-1)
Second Renewal Period (optional):
Two years duration
Second Renewal Period work commitment:
Drill two exploration wells
Production term
Twenty five years, renewable for ten years
State participation
State may back in for a 10% participating interest in any development
and production area
Licence status
The Company will work with the Government of Cameroon to determine
a forward plan for the Ntem Concession, given the declaration of force
majeure by SCL, the Governments’ non-acceptance of the declaration
of force majeure and the Government’s listing of the Ntem Concession
as an open block.
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23
STRATEGIC REPORT
Financial Review
Year ended 31 December 2015
Selected Financial Data
Chinguetti production 1
Year end 2P reserves 1
Revenue
Adjusted EBITDAX 1
Loss after tax
Net cash investment in oil & gas assets
bopd
kboe
$million
$million
$million
$million
Year-end cash (including share of partner funds)
$million
Average realised oil price
Total cash operating costs (produced)
Year-end share price
Share price change 1
Debt
1 Key performance indicators (‘KPIs’)
$/bbl
$/bbl
Pence
%
$million
2015
310
173
5.0
(6.3)
(16.0)
4.8
98.7
50.3
75.3
15
(26)
–
2014
432
292
16.0
5.1
(12.3)
14.1
108.1
94.2
57.4
20
(55)
–
A summary of revenue, cost of sales and lifting volumes are provided below:
Liftings (bbls) 1
Revenue ($million)
Revenue/bbl ($)
Lifting cost ($million)
Lifting cost/bbl ($)
1 Net Sterling production during the year totalled 113,085 (2014: 157,751)
Loss for Year
The 2015 loss totalled $16.0 million (2014: loss $12.3 million).
Loss for year 2014
Decrease in revenue
Decrease in operating costs (excluding other obligations for 2014)
Revenue and Cost of Sales
Currently, all of the Group’s production is from the Chinguetti field and totalled 266 bopd for the month of December
2015 (December 2014: 388 bopd).
2015 Chinguetti production, net to the Group, averaged 310 bopd, including royalty barrels, a decrease of 28% from the
432 bopd averaged in 2014; the reduced volumes reflect the lower oil price realised and increased production decline rates.
Gross volumes lifted and sold during the year from the Chinguetti field were down by 29% to 1.5 million barrels (2014:
2.1 million barrels).
The lifting cost per barrel has increased in 2015 by $24.2 to $94.2 (2014: $70.0). This was principally due to low levels
of production consistent with a mature field production profile.
Increase in G&A
Impairment of Ntem (2015)
Impairment of Chinguetti FA and RA (2014)
Impairment of Ampasindava (2014)
Chinguetti cessation costs
Increase in other obligations (2015)
Other obligations (2014)
Decrease in finance net expense
Loss for year 2015
2015
2014
99,948
169,699
5.0
50.3
(9.4)
(94.2)
16.0
94.2
(11.9)
(70.0)
$ (million)
(12.3)
(11.0)
2.5
(0.3)
(8.2)
6.0
1.9
2.2
(0.3)
3.4
0.1
(16.0)
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25
STRATEGIC REPORT
Financial Review (cont.)
Year ended 31 December 2015
Cost of sales for the Group for 2015 (excluding the onerous commitment of $3.4 million) decreased by $2.5 million mainly
due to a per unit decrease in depletion & amortisation, following the full impairment of the Chinguetti asset in 2014.
During 2015, the Group fully impaired the Ntem block, in Cameroon, resulting in a charge of $8.2 million.
The Group has made a provision of $3.7 million in the 2015 accounts to recognise anticipated future net onerous
commitments for 2016 under the Chinguetti Funding Agreement (2014: $3.4 million). This reflects the expectation of an
ongoing gap between unit revenues and costs on the field in 2016.
Group administrative overhead increased during the year to $2.3 million (2014: $2.1 million). Included within this charge
is $297k (2014: $659k) with respect to share-based payment charges.
In 2015, a portion of the Group’s staff costs and associated overheads have been recharged to joint venture partners
($452k), expensed as pre-licence expenditure ($2.0 million), or capitalised ($1.1 million) where they are directly assigned
to capital projects. This totals $3.6 million in the year (2014: $4.1 million).
A summary of these movements are provided below.
Group administrative overhead (page 61)
Costs capitalised
Costs recharged to JV partners
Pre-licence expenditure
Share based payment expense
Other non-cash expenditure
Group cash G&A expense
2015
$ (million)
2014
$ (million)
(2.3)
(1.1)
(0.5)
(2.0)
(3.6)
0.3
0.1
(5.5)
(2.1)
(1.5)
(0.6)
(2.0)
(4.1)
0.7
0.1
(5.4)
Adjusted EBITDAX and Net Loss
Group Adjusted EBITDAX (as defined within the Definitions and Glossary of Terms on pages 98 - 100) loss totalled $6.3
million (2014: $5.1 million earnings).
Net loss after tax totalled $16.0 million (2014: loss $12.3 million). The basic loss per share was $0.07 per share (2014:
loss $0.06 per share).
Interest received and finance expenses result in a net expense of $712k (2014: $878k) which includes exchange losses
of $89k (2014: $181k) on GBP cash deposits held at 31 December 2015 reported in US dollars, a non-cash finance
expense of $1.0 million (2014: $1.1 million) relating to the unwinding of the Chinguetti decommissioning provision (see
Note 9 on page 81 and Note 21 on page 88), interest received totalled $356k (2014: $398k) and other finance expenses
totalling $13k (2014: $16k).
No dividend is proposed to be paid for the year ended 31 December 2015 (2014: $nil).
Cash Flow
Net Group cash outflow generated from operating activities was $4.9 million (2014: $1.4 million inflow); a full reconciliation
of which is provided in the Consolidated Statement of Cash Flows.
Net cash investments in oil and gas assets totalled $4.8 million (2014: $14.1 million) and are summarised below:
Mauritania
Somaliland
Madagascar
Cameroon
2015
$ (million)
2014
$ (million)
4.0
0.1
0.6
0.1
4.8
-
12.4
1.0
0.7
14.1
Statement of Financial Position
At the year end, cash and cash equivalents totalled $98.7 million (2014: $108.1 million) of which $1.1 million (2014: $1.1
million) were held on behalf of partners, leaving a cash balance of $97.6 million (2014: $107.0 million). There are currently
no restricted funds in the Group.
At the end of 2015, net assets/total equity stood at $86.8 million (2014: $102.4 million), and non-current assets totalled
$25.1 million (2014: $28.5 million). Net current assets reduced to $94.1 million (2014: $96.6 million).
The Group’s Chinguetti decommissioning provision increased during the year by $9.7 million to $32.4 million (2014:
$22.7 million) reflecting an increase in the Group’s estimate of gross decommissioning costs based on a provisional plan
presented to the JV by the operator, further provided to the Group by SMHPM.
Cautionary Statement
This financial report contains certain forward-looking statements that are subject to the usual risk factors and uncertainties
associated with the oil and gas exploration and production business. Whilst the Directors believe the expectation
reflected herein to be reasonable in light of the information available up to the time of their approval of this report, the
actual outcome may be materially different owing to factors either beyond the Group’s control or otherwise within the
Group’s control but, for example, owing to a change of plan or strategy. Accordingly, no reliance may be placed on the
forward-looking statements.
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27
STRATEGIC REPORT
Business Risk
PRINCIPAL BUSINESS RISKS
The long-term commercial success of the Group depends on its ability to manage its existing asset portfolio and to find,
acquire, develop and commercially produce oil and natural gas reserves.
The Directors regularly monitor all risks to the Company using information obtained or developed from external and internal
sources, and will take actions as appropriate to mitigate these. The Group has developed a risk management system that
identifies key business risks and measures to mitigate these risks. The Company proactively implements such measures
considered appropriate on a case by case basis. Other significant elements of the risk management approach include
regular Board review of the business, a defined process for preparation and approval of the annual work programme and
budget, monthly management reporting, financial operating procedures, HSSE and anti-bribery management systems.
The relative importance and impact of risks faced by the Group can, and are likely to change with progress in the Group’s
strategy and developments in the external business environment. As such the Group reviews its business risks and
management systems on a regular basis.
The Directors have identified the following principal risks and mitigants in relation to the Group’s future performance.
Category
Financial
Risk
Mitigation
Change
• Low oil & gas commodity prices and
• Group maintains a strong balance
• Low commodity
• Difficulty in capital raising for
market volatility.
prices
• Market volatility
• Counterparty
distress
new acquisitions and/or to fund
development activities.
• Counterparty default.
• Cost escalation and budget
overruns (including Chinguetti
decommissioning).
• Fiscal stability.
• Foreign currency risk.
• Financial control of operated and non-
operated assets.
• Fraud and corruption / increased third
party exposure.
sheet and remains fully funded for its
existing commitments.
• Continually assess all existing asset
and proposed new acquisitions in
light of future capital requirements
from a disciplined lifecycle investment
perspective.
• Regularly monitor and amend cost
structure, investment strategy and
tactics to include countercyclical
investments and leverage low service
costs for seismic and drilling.
• Regularly review business plans, G&A
expenses, ongoing strategy reviews,
monthly reporting and regular Board
meetings.
• Regularly engage with partners
to influence cost effective capital
expenditure and decommissioning
expenditure.
▲
External
• The Group’s assets are located in
• Country risk
• Climate change
• Legal
compliance
non-OECD countries. Governments,
regulations, and the security
environment may adversely change,
including the use of tax claims, real or
not. The Group’s assets in Cameroon,
Madagascar, Somaliland and
Mauritania have been or are affected
by country-specific situations.
• The regulation of the energy industry
to address climate change is
increasingly international in scope
and application. The Group’s activity
focuses on finding and producing
carbon based fuels often with long
investment and production lifecycles.
• Legal compliance, regulatory or
litigation risk.
Strategic
• Concentration
of portfolio
• Competition
Operational
• Exploration Risk
• Operator &
Partner Risk
• Group’s assets remain concentrated
on early stage frontier and emerging
basin exploration within the African
continent.
• Reduction
interest to promote/
carry early stage exploration assets –
making it more difficult to farm-out the
Group’s early stage exploration assets.
• Competitors have significantly greater
in
financial and technical resources.
• Exploration activities may not result
in a commercial discovery. Producing
wells may lead to a financial loss.
• For some assets,
is
dependent on other operators for the
performance of E&P activities.
the Group
• Counterparty misalignment.
• Operations under-insured.
▲ Increased ▼ Decreased ► Unchanged
• Regular monitoring of political,
regulatory and HSSE changes.
Engaging in constructive discussions
where and when appropriate and
introducing third-party expertise as
required. The Group has objectives
to acquire additional core assets, to
assist in diversifying country risk.
• New investments are considered in
the light of changing environmental
regulations.
• The Company accords the highest
importance to corporate governance
matters and upholding the highest
ethical standards.
• Activities are subject to various
different jurisdictional laws, customs,
fiscal and administrative regulations.
• The Company employs suitably
experienced and qualified staff and,
when required, external advisors to
ensure full compliance. Legal risk
assessment and due diligence (where
appropriate) is undertaken for all
counterparties the Company deals with.
• The Board has and will consider
diversifying the current exploration
portfolio risk, using existing financial
resources of the Group.
• Retain and acquire lower cost ground
floor flexible positions (low exit costs)
and where possible, carried positions.
• Highly selective in choosing where
and when to deploy its business
development resources and New
Ventures focus.
• Diversify and manage risk across a
portfolio of assets. Apply the Group’s
experience and expertise and
appropriate technology to minimise
risk.
• The Group carefully considers
the technical, HSSE and financial
capabilities of operators and potential
partners during any joint venture farm-
out or new acquisition.
▲
►
►
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Sterling Energy plc Report and Financial Statements 2015
29
STRATEGIC REPORT
Business Risk (cont.)
OTHER BUSINESS RISKS
In addition to the principal risks above and general business risks, the Group’s business is subject to risks inherent in
oil and gas exploration, development and production activities. A number of potential risks and uncertainties, could
have a material impact on the Group’s long-term performance causing actual results to differ materially from expected
and historical results.
The Group has identified certain risks pertinent to its business including:
Category
Risk
Strategic and Economic
Operational
Commercial
• Inappropriate or poorly conceived strategy and plans
• Failure to deliver on strategy and plans
• Business environment changes
• Failure to access new opportunities
• Shareholder concentration
• HSSE incident or non-compliance under local rules and/or laws
• Poor field production (revenue) performance and end of field life decisions
• Licences, permits and/or approvals may be difficult to sustain
• Delays in conducting exploration work programmes
• Failure to maximise value from existing interests
• Loss of control of key assets
• Dissatisfied stakeholders
• Failure to negotiate optimal contract terms
• Inexact reserve and production determinations
• Complex regulatory compliance
Human Resources and
Management Processes
• Failure to recruit and retain key personnel / human capital deficit
• Human error or deliberate negative action(s)
• Bribery and corruption
• Inadequate management processes
• Insufficient timely information available to the management and the Board
COMPANY POLICIES
The Directors are mindful of the impact of the Company’s business on its employees and contractors, the environment
and on the wider community. In particular, it notes the following with respect to corporate responsibility, business integrity,
community responsibility, employees and HSSE.
HEALTH, SAFETY, SECURITY AND ENVIRONMENT (‘HSSE’)
It is an objective of the Group that every individual is aware of his/her responsibility towards providing for a safe and
secure working environment. HSSE and social responsibility leadership are core competencies throughout the Group’s
organisation. The Group’s HSSE risks are managed in a systematic way by utilising procedures and appropriate training
of staff, with the aim to reduce these risks to as low as is reasonably practical. The Group ensures that appropriate
emergency response systems are in place to reduce and mitigate the impact and losses of any incident and any residual
risks and that it is in compliance with all relevant laws, regulations and industry standards.
The Group maximises its influence with joint venture partners to share its HSSE and social responsibility values.
Contractors are required to demonstrate and deliver a credible HSSE and social responsibility programme. In order to
achieve continual improvement, the Group is committed to reviewing its HSSE and social responsibility performance at
least each quarter.
The Group is committed to minimising its impact on the environment in both field operations and within its offices. All
staff share responsibility for monitoring and improving the performance of its environmental policies with the objective of
reducing our impact on the environment on a year-on-year basis.
CORPORATE RESPONSIBILITY
The Group is committed to conducting its business in a responsible and sustainable way. The Group has corporate,
environmental and social responsibilities to the indigenous communities in the areas in which it operates, to its partners,
to its employees and to its shareholders. In pursuing its business objectives it undertakes not to compromise it’s
corporate and social responsibilities with any of these stakeholders. In 2015, the Group commenced three CSR projects
in Madagascar, as described in the Operations Review (page 14).
BUSINESS INTEGRITY
The highest ethical standards are a cornerstone of the Group’s business. The Group is committed to conducting its
business with integrity, honesty and fairness. All business activities are reviewed to ensure they meet these standards.
The Group also seeks to ensure that similar standards are applied by its business partners, contractors and suppliers.
All members of staff are individually accountable for their actions to ensure that they apply and maintain these standards.
COMMUNITY RESPONSIBILITY
The Company and its subsidiary undertakings are committed to being a good partner in all communities in which it
operates. Engagement and dialogue with local stakeholders is essential in ensuring, that where possible, projects benefit
both the Group and the communities in which the project is located.
EMPLOYEES
The Group is committed to providing a workplace free of discrimination where all employees are afforded equal
opportunities and are rewarded on merit and ability. In the implementation of this policy the Group is committed to
ensuring that all employees are given contracts with clear and fair terms. Staff are offered access to relevant training
and encouraged to join professional bodies to enhance their knowledge, competencies, career development and
opportunities for progression.
The Group is committed to achieving the highest possible standards of conduct, accountability and propriety and to
a culture of openness in which employees can report legitimate concerns without fear of penalty or punishment. The
Group has a whistleblowing policy which empowers employees to be proactive, to report any failure to comply with legal
obligations or the Group’s regulations, dangers to health and safety, financial malpractice, damage to the environment,
criminal offences and actions which are likely to harm the reputation of the Group. The whistleblowing policy allows
employees to make anonymous reports directly to a non-executive Director.
The Strategic Report was approved by the Board of Directors on 10 March 2016 and signed on its behalf by:
Tony Hawkins
Company Secretary
Eskil Jersing
Chief Executive Officer
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31
Sterling Energy plc
Corporate Governance
Year ended 31 December 2015
CORPORATE GOVERNANCE
Board of Directors
Alastair Beardsall, executive Chairman, aged 62
Alastair joined the Company in September 2009. He has been involved in the oil industry for over 35 years. For the first
12 years Alastair worked on international assignments with Schlumberger, the oil-field services company. From 1992
he began working for exploration and production operators, with increasing responsibility for exploration, development
and production ventures. Between September 2003 and October 2009, Alastair was executive Chairman of Emerald
Energy plc (Emerald). In October 2009 Emerald was acquired by Sinochem Resources UK Limited, for £7.50 per share
in a transaction that valued Emerald at £532.0 million. Alastair is a non-executive Director of Jupiter Energy Limited and
advises other private companies in the oil and gas industry. Alastair was appointed executive Chairman of Gulfsands
Petroleum in April 2015.
Eskil Jersing, Chief Executive Officer, aged 52
Eskil joined the Company on 23 March 2015. He holds a BSc in Geophysics from University College Cardiff and an
MSc in Petroleum Geology from Imperial College London. He started his career in the oil and gas industry in 1985 as a
Field Seismologist with SSL in Papua New Guinea. From 1993 to 2009 he worked for Enterprise Oil (London, Aberdeen,
Houston, and Brazil), and following the takeover, Shell International (Houston); initially as a Senior Geophysicist, moving
on to be the Gulf of Mexico Exploration Strategy and Planning Manager and finally as the Gulf of Mexico Paleogene
Exploration Manager. In 2009, Eskil joined Marathon Oil (Houston) as their Exploration Manager (Conventional New
Ventures) Worldwide and subsequently Apache Corporation (Perth) as Director Worldwide Exploration and New Ventures
Asia Pacific. Most recently he was Head of New Ventures and Co-Head of Mergers & Acquisitions at Petrobras Oil & Gas
BV (Rotterdam).
Nicholas Clayton, non-executive Director, aged 52
Nicholas was appointed a non-executive Director of the Company in October 2009. Nicholas is chairman of the Audit
Committee and a member of the Remuneration and Nomination Committees. Nicholas has provided strategic and corporate
finance advice to a number of public and private oil and gas companies since January 2007. Between August 2005 and
December 2006 he was Global Co-Head of Oil and Gas Corporate Finance for Canaccord Adams. For the previous 5 years
he held the position of Global Head of Oil and Gas Corporate Finance for Dresdner Kleinwort Benson, the investment bank,
having previously been Global Head of Oil and Gas Research between 1997 and 2000. Nicholas obtained a first class
honours degree in Business Studies, from Portsmouth Polytechnic in 1985. Nicholas serves as a non-executive Director of
Alpha Petroleum Resources Limited and Circle Oil plc, where he is chairman of the Remuneration Committee.
Keith Henry, non-executive Director, aged 71
Keith was appointed a non-executive Director of the Company in September 2009. He chairs the Remuneration
Committee and is a member of the Audit and Nominations Committees. He has over 35 years of international business
experience in the development, ownership, design and construction of major facilities worldwide. He was with Brown
& Root Limited for 23 years, the last five of which were as Chief Executive responsible for Europe, Africa and the
FSU region. From 1995 to 1999 he was Chief Executive of National Power plc, and then Chief Executive of Kvaerner
Engineering and Construction Ltd until June 2003. Keith serves as Chairman of Regal Petroleum plc as well as serving
as a non-executive Director and advisor to a number of companies in the engineering, services and energy sectors. He
is a Fellow of the Royal Academy of Engineering.
Malcolm Pattinson, non-executive Director, aged 72
Malcolm was appointed a non-executive Director of the Company in November 2010. Malcolm is Chairman of the
Nomination Committee and a member of the Audit and Remuneration Committees. Malcolm is a geoscientist with 40
years of experience and joined the Company in November 2010. Until 2001 he was the vice-president of exploration for
Ranger Oil (subsequently CNR); and prior to this he was exploration vice-president for Hamilton Brothers Oil (subsequently
BHP). From 2001 to 2006 Malcolm was a consultant for Tullow Oil. Malcolm is an honorary life member and former
chairman of the Petroleum Exploration Society of Great Britain, and was awarded the medal for outstanding achievement
in 1996 by the Petroleum Group of the Geological Society. He is the chairman of GTO Limited and was formerly a non-
executive Director of Aurelian Oil and Gas plc.
APPLICATION OF UK CORPORATE GOVERNANCE CODE PRINCIPLES
Throughout the year ended 31 December 2015 the Board has sought to comply with a number of the provisions of the
UK Corporate Governance Code (‘the Code’) in so far as it considers them to be appropriate to an entity of the size
and nature of the Group. The Directors make no statement of compliance with the Code overall and do not explain in
detail any aspect of the Code with which they do not comply. The Group continues to keep its overall system of internal
controls under review.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board Composition, Operation and Independence
The Board currently comprises the executive Chairman, one executive Director and three non-executive Directors. Each
of the executive Directors has extensive knowledge of the oil and gas industry combined with general business and
financial skills. All of the Directors bring independent judgement to bear on issues of strategy, performance, resources,
key appointments and standards. The Board meets regularly throughout the year and all the necessary information is
supplied to the Directors on a timely basis to enable them to discharge their duties effectively.
The Board is responsible to the shareholders for the proper management of the Company. A Statement of Directors’
Responsibilities in respect of the financial statements is set out on page 57.
The Board has a formal schedule of matters specifically reserved for its decision. These include strategic planning,
business acquisitions or disposals, authorisation of major capital expenditure and material contractual arrangements,
changes to the Group’s capital structure, setting policies for the conduct of business, approval of budgets, remuneration
policy of Directors and senior management, and taking on debt and approval of financial statements. Other matters are
delegated to the Committees of the Board and executive Directors, supported by policies for reporting to the Board.
Keith Henry is the Senior Independent Director. The Senior Independent Director is available to shareholders if they have
concerns which, through the normal channels of contact with the Chairman and CEO, have not been resolved or for
which such contact is inappropriate.
The Group maintains Directors’ and Officers’ liability insurance cover and provides the Directors with indemnity, the level
of which is reviewed annually.
Meetings and Attendance
The following table summarises the number of Board and committee meetings held during the year and the attendance
record of the individual Directors:
Number of meetings in year
Alastair Beardsall
Eskil Jersing (appointed 23 March 2015)
Philip Frank (resigned 13 March 2015)
Keith Henry
Nicholas Clayton
Malcolm Pattinson
Board
Meetings
Audit
Committee1
Remuneration
Committee
Nominations
Committee2
9
9
8
1
9
9
9
4
-
-
-
4
4
4
3
-
-
-
3
3
3
-
-
-
-
-
-
-
1 In addition to the Audit Committee meeting to discuss the annual audit and full year results, the Committee also meets in advance of announcements
of a financial disclosure, including the Interim Results at 30 June and Q1 and Q3 Interim Management Statements.
2 There were no separate Nominations Committee meetings held in the year as Nominations Committee matters were handled by the Directors during
Board Meetings.
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CORPORATE GOVERNANCE
Board of Directors (cont.)
Audit Committee Report
Induction and Training
New Directors, on their appointment to the Board, are briefed by the Board and management on the activities of the
Group and its key business and financial risks, the Terms of Reference of the Board and its Committees, the list of Board
reserved matters, and the latest financial information about the Group. The Chairman ensures that Directors update
their skills, knowledge and familiarity with the Group to fulfil their roles on the Board and on Board Committees. Ongoing
training is available as necessary and includes updates from the Company Secretary on changes to the AIM rules, the
Code, requirements under the Companies Act and other regulatory matters. Directors may consult with the Company
Secretary at any time on matters related to their role on the Board. All Directors have access to independent professional
advice at the Company’s expense.
Evaluation of the Board’s Performance
Performance evaluation takes place for individual Directors, the Board and its Committees and includes assessing the
effectiveness of the Board as a whole. The evaluation of the performance of Directors is carried out using peer appraisal
questionnaires which combine business and personal performance and includes discussions with the Senior Independent
Director. Aspects of performance include attendance and participation at Board meetings, quality of involvement in
Committees, commitment and effectiveness of their contribution to Board activities (including the AGM and shareholder
communications), the adequacy of training and non-executive Directors’ independence. The process is conducted and
reviewed by the Senior Independent Director, on behalf of the Nominations Committee; the Company Secretary is
advised of its completion. The performance of the Chairman is reviewed annually in a meeting of the non-executive
Directors, led by the Senior Independent Director. This review takes into account the views of executive Directors.
Retirement and Re-election
The Company’s Articles of Association require that any Director who has been a Director at the preceding two Annual
General Meetings and who was not been appointed or re-appointed by the Company, retire and stand for re-election.
All new Directors appointed since the previous Annual General Meeting need to stand for election at the following
Annual General Meeting.
An important part of the role of the Audit Committee is its responsibility for reviewing the effectiveness of the Group’s
financial reporting, internal control policies, and procedures for the identification, assessment and reporting of risk. The
latter two areas are integral to the Group’s core management processes and the Committee devotes significant time to
their review. Further information on risk management and internal control systems is provided within the Strategic Report
on pages 28 - 31 and also on page 51.
One of the key governance requirements of a group’s financial statements is for the report and accounts to be fair,
balanced and understandable. The co-ordination and review of the Group-wide input into the Annual Report and
Accounts is a sizeable exercise performed within an exacting time-frame which runs alongside the formal audit process
undertaken by the external Auditors. Arriving at a position where, initially, the Audit Committee and then the Board, is
satisfied with the overall fairness, balance and clarity of the document and is underpinned by the following:
• comprehensive guidance issued to contributors at operational levels;
• a verification process dealing with the factual content of the reports;
• comprehensive reviews undertaken at different levels that aim to ensure consistency and overall balance; and
• comprehensive review by the senior management team.
The Audit Committee has also championed efforts to remove unnecessary items from the Report and Financial Statements
by stripping out duplication and sequencing information in a consistent and reasonable manner without compromising
compliance with UK regulatory and accounting requirements.
An essential part of the integrity of the financial statements is the key assumptions and estimates or judgments that
have to be made. The Committee reviews key judgments prior to publication of the financial statements at both the end
of the financial year and at the end of the six month interim period, as well as considering significant issues throughout
the year. In particular, this includes reviewing any subjective material assumptions within the Group’s activities to enable
an appropriate determination of asset valuation and provisioning and the accounting treatment thereof. The Committee
reviewed and was satisfied that the judgments exercised by management on material items contained within the Report
and Financial Statements are reasonable.
Additionally, the Committee also considered the management’s assessment of going concern with respect to the Group’s
cash position and its commitments for the next 12 months and was satisfied that the Group continues to be able to fund
its liabilities from existing cash reserves which totalled $98.7 million at 31 December 2015.
The Audit Committee has considered the Group’s internal control and risk management policies and systems, their
effectiveness and the requirements for an internal audit function in the context of the Group’s overall risk management
system. The Committee is satisfied that the Group does not currently require an internal audit function; however, it will
continue to periodically review the situation.
The Committee also considered the Group’s whistleblowing procedures to ensure that its employees are able to raise
concerns, in confidence, about possible wrongdoing in financial reporting and other matters. Whistleblowing was a
standing agenda item at all Board meetings and the Audit Committee met several times during the year to consider
these matters.
The external audit function plays an important part in assessing the effectiveness of financial reporting and internal
controls and the effectiveness and quality of audit is of key importance. Our Auditors, BDO LLP have been in place since
2010 and, in line with the audit profession’s own ethical guidance, the current audit engagement partner is due to rotate
off the Company’s account in the year ending 31 December 2020 having served for a period of five years.
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Audit Committee Report (cont.)
Nominations Committee
There were no separate Nominations Committee meetings held in the year, as Nominations Committee matters were
handled by either the non-executive Directors prior to or by the Directors during Board Meetings. These discussions
addressed the following topics:
• appointment of CEO/Director,
• succession planning,
• annual retirement and re-election of Directors,
• review of skills/experience on the board etc.
The members of this Committee are currently Nicholas Clayton, Keith Henry and Malcolm Pattinson under the
Chairmanship of Malcolm Pattinson. The Nominations Committee considers the composition of the Board and makes
recommendations on the appointment of new Directors and those candidates presenting themselves for re-election at
the 2016 AGM. The Senior Independent Director coordinates the annual performance evaluation of Directors.
The Nominations Committee was central to the search process for a CEO which culminated in the appointment on 23
March 2015 of Eskil Jersing; the Committee was involved in preparation of the search brief, compilation of short-lists for
interviews by the Board and the final selection of the appointed candidate. The Remuneration Committee was involved
in the recommendation of the package offered to the CEO prior to appointment.
Keith Henry and Nicholas Clayton will retire by rotation and offer themselves for re-election at the 2016 AGM. Their
biographical details, provided on page 34, demonstrate the range of experience and skill they bring to the Group. The
Nominations Committee and the Board considers that their performance continues to be effective and that they have the
necessary commitment to fulfil their respective roles.
The Committee reviews the Auditors’ independence and monitors the nature and level of non-audit fees payable to them
on an annual basis. The Committee believes that certain work of a non-audit nature is best undertaken by the external
Auditors, and believes that it is not appropriate to limit the level of such work by reference to a set percentage of the
audit fee, as this does not take into account important judgments that need to be made concerning the nature of work
undertaken to help safeguard the Auditors’ independence. Details of fees payable to the Auditors are set out in Note 5
on page 79.
The Committee has reviewed the UK Corporate Governance Code including the best practice for companies to put
the external audit contract out to tender at least every ten years. Having considered the Financial Reporting Council’s
(‘FRC’s’) guidance on aligning the timing of such re-tenders with the audit engagement partner rotation cycle, the
Committee’s current intentions are that it will initiate a re-tendering process prior to 2020. This policy will be kept under
review and the Committee will use its regular reviews of Auditor effectiveness to assess whether an earlier date for such a
re-tender would be desirable. Such regular reviews are used to assess the effectiveness of the external audit process
and the Auditors’ performance, with the Committee undertaking an internal assessment of the audit effectiveness and
performance which is mapped against audit appointment criteria. The Committee has recommended to the Board that
it recommend that shareholders support the re-appointment of BDO LLP at the 2016 AGM.
Nicholas Clayton
Chairman of the Audit Committee
10 March 2016
MEMBERS
This Committee comprises:
• Nicholas Clayton (Chairman)
• Keith Henry
• Malcolm Pattinson
SUMMARY OF RESPONSIBILITIES
• Reviewing the effectiveness of the Group’s financial reporting, internal control policies and procedures for the
identification, assessment and reporting of risk;
• monitoring the integrity of the Group’s financial statements, including a review of the management report issued by the
executive management to the Board each month;
• monitoring the effectiveness of the internal control environment;
• making recommendations to the Board on the appointment of the Auditors;
• making recommendation to the Board on Auditors’ fees;
• agreeing the scope of the Auditors’ annual audit programme and reviewing the output;
• ensuring the independence of the Auditors is maintained;
• assessing the effectiveness of the audit process; and
• developing and implementing policy on the engagement of the Auditors to supply non-audit services.
The Auditors have unrestricted access to the Chairman of the Audit Committee. Audit Committee meetings are attended
by the Auditor where and when appropriate and, by invitation, the executive Chairman, other Directors and senior
management.
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Remuneration Committee Report
The Remuneration Committee convened several times during the year and has been actively engaged on all matters of
corporate remuneration.
The committee awarded no bonuses to the executive Directors during the year:
Over the past year, the Committee has considered the following matters:
• the terms of the 2009 All Staff LTIP, NED LTIP and HMRC Approved schemes and, if in the current economic conditions
being experienced in the natural resources sector, whether or not they retain the ability to motivate, incentivise and
retain the calibre of staff and management required to promote future success for the Group;
• the 2015 review of achievement of certain corporate objectives (KPIs); and subsequently
• the setting of 2016 corporate objectives (KPIs); and
• the proposed basic salary uplift for 2016 to reflect general inflation and merit awards for staff and executive management.
The safe operation of our activities, the management and maturation of the Group’s assets, and the selective pursuit of
new business opportunities, are the main performance criteria on which the Company’s executive team and employees
are judged when considering remuneration matters.
In Madagascar, the Ampasindava licence was relinquished with no liabilities to the Group in 2015; the Ambilobe licence
that previously experienced very limited operational progress saw significant activity in 2015 with the completion and
processing of a 1,175km2 3D seismic survey. In Mauritania, the acquisition of a 40.5% interest in block C-3 and the
acquisition of a 13.5% interest in block C-10 was completed and added to the Group’s asset portfolio. Refer to the
Operations Review for details on current assets.
New venture identification, appraisal, and subsequent delivery, continues to be challenging in a competitive market
where there are a limited number of commercially attractive opportunities to selectively pursue that are a strategic fit for
the Company. The Committee was satisfied with the number of opportunities reviewed by management throughout the
year and who continue to work hard to short-list and appraise ventures, with a view to only pursuing those where they
see material value upside for shareholders.
The Committee, when reviewing base salaries for staff and executive Directors, consider matters of retention, motivation,
the economic climate (CPI/RPI), the challenges facing the business and appropriate industry benchmarks of remuneration
in peer companies. The annual base salary levels for executive Directors were as follows:
Director
Alastair Beardsall 1
Eskil Jersing
2015 salary
2014 salary
% change
£100,000
£275,000
£193,400
decrease 48%
n/a
n/a
1 Alastair Beardsall’s Interim CEO 2015 salary was initially £197,300, this was subsequently reduced following the appointment of Eskil Jersing as CEO.
As the Company’s executive Chairman, Alastair Beardsall has executive responsibilities, but remains a part-time employee.
The non-executive fees are determined by the Board with no Director voting on his own remuneration. For 2015 the fees
for each non-executive individual were £35,700 (2014: £35,000).
The rules of the Company’s Staff Bonus Scheme permit the award of an annual bonus to executive Directors where:
• The total annual bonus is capped at a maximum of 100% of the base salary;
• up to 50% may be awarded for achieving certain corporate objectives, for 2015 these objectives included HSSE
performance, new ventures and farming out certain assets;
• up to 50% may be awarded for exceptional personal performance; exceptional is performance above and beyond that
expected under the individual’s job description.
Director
Alastair Beardsall
Eskil Jersing
Philip Frank
2015 bonus
2014 bonus
% change
-
-
-
-
n/a
-
n/a
n/a
n/a
Annual bonuses are also granted to eligible UK staff under the same rules; the maximum percentage that can be
awarded reflects the individual’s skills and experience. Bonuses are not awarded to non-executive Directors.
The Committee awarded the following options under the All Staff LTIP schemes:
Director
Alastair Beardsall
Eskil Jersing
Philip Frank
2015 LTIP Award
2014 LTIP Award
% change
-
-
-
727,100
n/a
936,100
n/a
n/a
n/a
Alastair Beardsall is considered by the Panel on Takeovers and Mergers (‘Panel’) to be a concert party with Waterford
Finance and Investment Limited. Consequently, any LTIP award would require a Rule 9 Waiver granted by the Panel
and approved by the shareholders at a general meeting and Alastair Beardsall has therefore declined to accept any
LTIP awards since 2009 to avoid this necessity. However, in recognition of Alastair Beardsall’s significant executive role
during the past five years, the Committee wished to better align his incentive package with the interests of shareholders
and, accordingly, considered that the awards totalling 2,384,600 options for 2013 and 2014 was appropriate. These
represent the aggregate of the awards that would have been made to him for the period 2010-2014 had he accepted the
awards offered previously for these years. These awards remain subject to the granting of a Rule 9 Waiver by the Panel
being approved by the shareholders at a general meeting.
Under the vesting criteria of the All Staff LTIP, options granted will only vest if the Company Share Price meets the criteria
set out in Note 25 on pages 94 - 96. Under these criteria, if the Company Share Price underperforms the FTSE 350 Index
(‘Index’), by more than 10% then no options will vest. For 100% of the options to vest the Company Share Price must
outperform the Index by more than 50%. No LTIPs vested in the year.
The Company also utilises an HMRC approved Company Share Option Plan (‘CSOP’) that allows both the Company and
the employee to benefit from some tax savings offered on the exercise of qualifying options. The specific details of the
scheme can again be found in Note 25. Where appropriate, Directors, senior management and other employees have
been issued options under the HMRC Sub-Plan in preference to the non-approved All Staff LTIP; the sum of the awards
to all individuals under the HMRC Sub-Plan and All Staff LTIP is equal to the number that would have been issued under
the All Staff LTIP if the HMRC Sub-Plan had not been approved and implemented.
Given the current economic climate in the natural resources sector, the Committee is to consider whether or not the All
Staff LTIP and HMRC approved CSOP schemes retain the ability to motivate, incentivise and retain the calibre of staff
and management required to promote future success for the Group.
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CORPORATE GOVERNANCE
Remuneration Committee Report (cont.)
The Company made considerable progress during 2015 which will hopefully act as the springboard for future success
in 2016 and beyond. In recognition of this, the Committee believes that the recommendations it has made to the Board
on executive and staff remuneration have been fair, balanced and reflective of the corporate objectives that were met
during the year.
Keith Henry
Chairman, Remuneration Committee
10 March 2016
MEMBERS
This Committee comprises:
• Keith Henry (Chairman)
• Nicholas Clayton
• Malcolm Pattinson
SUMMARY OF RESPONSIBILITIES
• Agreeing a policy for the remuneration of the Chairman, executive Directors and other senior executives;
• within the agreed policy, determining individual remuneration packages for the Chairman, executive Directors and
senior employees;
• agreeing the policy on terms and conditions to be included in service agreements for the Chairman, executive Directors,
and other senior executives, including termination payments and compensation commitments, where applicable; and
• the approval of any employee incentive schemes and the performance conditions to be used for such schemes
including share performance targets.
OPERATION OF THE COMMITTEE
The Remuneration Committee makes recommendations to the Board, within its agreed terms of reference, on the structure and
overall remuneration package for executive Directors and reviews the remuneration for other senior employees. The Committee
consists entirely of non-executive Directors and, where appropriate, will invite executive Directors or senior managers to attend
meetings to provide suitable context for its discussions. Only members of the Committee participate in discussions and reach
conclusions on matters with which the Committee is responsible. No member or attendee is authorised to participate in
matters relating to their own remuneration. Non-executive Directors’ fees are considered and agreed separately by the Board.
The Committee has not engaged the services of any remuneration consultants during the year.
REMUNERATION STRATEGY
The Company remuneration strategy is to provide a remuneration package that:
• helps to attract, retain and motivate;
• is aligned to shareholders’ interests;
• is competitive within the appropriate market;
• encourages and supports a performance culture aligned to the achievement of the Company’s strategic objectives; and
• is fair and transparent.
REMUNERATION POLICY
The Company’s policy on Directors’ remuneration is that the overall remuneration package should be sufficiently
competitive to attract, retain and motivate high quality executives capable of achieving the Group’s objectives and
thereby enhancing shareholder value. The package consists of salary, performance related bonus, pension provision,
other benefits such as private medical cover, life assurance and share options awarded under the All Staff LTIP. The
balance between these components is targeted at base salary levels around the middle of the range for peer companies
with material additional remuneration linked to performance and results that add materially to shareholder value.
The Company acknowledges the benefit of the executive Directors accepting appointments as non-executive Directors
of other companies; however, if they accept more than two such appointments, they are required to deduct such fees
for those appointments from their Company executive remuneration.
Details of individual components of executive remuneration are:
Elements of package Purpose and link to strategy
How element is reviewed
Base salary and fees
To recognise market value of the
role, reflecting the individual’s
skills, experience, authorities and
responsibilities, to ensure the business
can attract and retain the appropriate
Directors, both executive and non-
executive.
Reviewed annually. The Committee uses comparator data
collected from published accounts and industry surveys of
peer companies to determine the base salary for each of the
executive Directors. No executive remuneration consultants
were used during the year. The executive Directors use
peer group data to determine the level of fees for the non-
executive Directors.
Performance related
bonuses
To incentivise and reward, on an
annual basis, the performance of
individuals and the Group on both
financial and non-financial metrics.
All Staff LTIP, NED LTIP,
HMRC Approved
schemes
To reward delivery of sustained long-
term total shareholder returns (TSR)
performance aligned to the interests of
shareholders.
Pension provision
To provide competitive retirement
benefits commensurate with schemes
offered by peer companies.
Other benefits
To provide competitive cost-effective
benefits through leveraging the
Group’s size and scale.
Objectives (KPIs) are set, prior to the year under review,
to align near-term goals with the longer term sustainable
future of the Group. At the end of each year the Committee
considers if the KPIs have been achieved in addition to
individual performance and contribution to the Group. The
maximum level of performance related bonus for executive
Directors is capped at 100% of annual salary; non-executive
Directors do not participate in the bonus scheme.
The All Staff and NED LTIP scheme options are equity
settled and have a vesting period of three years. If options
remain unexercised after a period of five years from the
date of grant, the options expire. Options are forfeited if the
employee or Director leaves the Group before the options
vest or are exercised, however, the Committee may exercise
discretionary powers in certain circumstances. All Staff LTIPs
are subject to the performance conditions set out in Note
25. NED LTIPs have no performance conditions attached
to them. The maximum value to which options may be
granted in any one year is capped, the cap is based upon
the individual’s role and responsibilities, for the executive
Directors the cap is 100% of annual base salary.
The Group operates a number of defined contribution
pension schemes pursuant to which it contributes 10%
of pensionable salary per eligible member. Scheme
membership and contribution is linked to the member’s base
salary (see above).
The Group subscribes to a number of benefits for
employees and Directors which include life assurance,
income protection; subsidised fitness centre membership
and private medical insurance, some of these benefits are
linked to base salary.
The Company operates no defined benefit schemes and no material changes to the benefits have been made during
the year.
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Remuneration Committee Report (cont.)
The principles and criteria used in the remuneration of executive personnel do not differ materially from those listed
above. The Committee may incentivise the engagement of new employees by way of uplift to the LTIPs awarded in the
first year of employment. No upper limit to the size of the uplift to the LTIP award has been set as the Committee will
consider sign-on awards on a case-by-case basis. No cash settled sign-on payments are made.
Notice periods for Directors are in line with Code guidance, none are currently greater than six months with Code
guidance being none greater than twelve months.
Termination payments made to Directors on loss of office that are not provided for within their service contracts are only
made if the Committee considers them appropriate, has recommended them to the Board and the Board has granted
their approval.
Following the remuneration policy set out above the Remuneration Committee has determined the following packages
for 2016:
• Alastair Beardsall, Executive Chairman, will receive a base salary, effective 1/1/2016, of £100,000, a 10% non-
contributory pension contribution paid directly to Alastair Beardsall and other benefits as set out above.
• Eskil Jersing, Chief Executive Officer, will receive a base salary, effective 1/1/2016, of £277,800, a 10% non-contributory
pension contribution paid to Eskil Jersing’s personal pension scheme and other benefits as set out above.
• For Alastair Beardsall and Eskil Jersing any award under the performance related bonus scheme will be determined at
the end of 2016 and will be based on achievement of certain corporate KPIs and individual performance, the principles
of the bonus scheme are set out on page 43. The Company considers the specifics of the KPIs to be commercially
sensitive as they reflect the Company’s commercial strategy; in general the KPIs are focused on HSE, new ventures and
managing the Companies financial exposure to its existing assets.
• The award of options under the Companies All Staff LTIP plan to Alastair Beardsall and Eskil Jersing will be determined
by the Remuneration Committee during the year in accordance with the principles as set out on page 43, and disclosed
at the time of any award.
Following the remuneration policy set out above the executive Directors have determined the fees for the non-executive
Directors for 2016 is set at £36,057.
All Staff and NED LTIPs
Directors’ interests in LTIPs are accounted for under International Financial Reporting Standards (‘IFRS’) 2 - Share-Based
Payments; accounting charges in the period are detailed in Note 25 on pages 94 - 96.
The Directors’ interests in the All Staff LTIP scheme, which was approved by shareholders at the EGM held on 22
December 2009, are as follows (audited):
1 January
2015
Lapsed
Granted Exercised
31 December
2015
Exercise
price
Earliest
exercise
date 1
Latest
exercise
date 1
No gains were made on the exercise of options during the year (2014: nil).
The non-executive Directors’ interests in the NED LTIP, which was approved by shareholders at the EGM held on 22
December 2009, are as follows (audited):
1 January
2015 2
Lapsed
Granted Exercised
31 December
2015
Exercise
price
Earliest
exercise
date 1
Latest
exercise
date 1
Nicholas Clayton
Keith Henry
103,150
103,150
-
-
Malcolm Pattinson
186,483
(83,333)
392,783
(83,333)
-
-
-
-
-
-
-
-
103,150
103,150
103,150
309,450
1 If the Company is in a closed period, the earliest and latest date of exercise may vary.
2 Awards approved by shareholders on 22 December 2009, 28 April 2011 and 19 April 2013.
No LTIPs vested in the year as the performance conditions were not met.
40p
40p
40p
01.10.15
30.09.17
01.10.15
30.09.17
01.10.15
30.09.17
The rules of the LTIP schemes and a full list of performance conditions and vesting criteria are summarised in Note 25
on pages 94 - 96.
Service contracts
Directors’ service contracts are reviewed annually at the end of each calendar year with any changes taking effect from
1 January of the following year. The 2015 salary review was implemented on 1 January 2016 and is incorporated within
the numbers below:
Director
Alastair Beardsall
Eskil Jersing
Commencement of
appointment
Date of current
contract
Base annual
salary
Notice
period
8 September 2009
1 January 2011
£100,000
6 months
23 March 2015
23 March 2015
£277,800
6 months
Non-executive Directors do not have service contracts, but instead each has a letter of appointment setting out the
terms and conditions of their appointment, details of which are as follows:
Director
Nicholas Clayton
Keith Henry
Commencement of
appointment
Date of current
contract
Base fees
per annum
1 October 2009
1 October 2009
8 September 2009
8 September 2009
£36,057
£36,057
£36,057
Alastair Beardsall
2,384,600
2,384,600
40p
01.11.16
30.09.19
Malcolm Pattinson
15 November 2010
15 November 2010
Eskil Jersing
Philip Frank
Philip Frank
-
-
-
2,337,350 (2,337,350)
69,500
(69,500)
4,791,450 (2,406,850)
-
-
-
-
-
-
-
-
-
-
-
-
-
n/a
40p
43p
n/a
n/a
01.10.15
30.09.19
10.12.16
09.12.18
2,384,600
Save for the fees outlined above and the share options awarded under the NED LTIP, the non- executive Directors are
not entitled to any other benefits or arrangements.
Except as disclosed above, there are no service contracts or letters of appointment in force between any Director with
the Company or the Group as at the date of this document.
1 If the Company is in a closed period, the earliest and latest date of exercise may vary.
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CORPORATE GOVERNANCE
Remuneration Committee Report (cont.)
Directors and their interests (audited)
The Directors, who served during the year and subsequently, together with their beneficial interests in the issued share
capital of the Company, were as follows:
Ordinary shares
of 40p each
Alastair Beardsall 1
Eskil Jersing 1 (appointed 23 March 2015)
Philip Frank 1 (resigned 13 March 2015)
Keith Henry 2
Nicholas Clayton 2
Malcolm Pattinson 2
1 Executive Director.
8 March
2016
1,062,500
-
n/a
500,000
132,500
62,810
31 December
2015
31 December
2014
1,062,500
1,062,500
-
n/a
500,000
132,500
62,810
n/a
132,204
500,000
132,500
62,810
2 Non-executive Director, member of the Audit, Remuneration and Nominations Committees.
Beneficial shareholdings include the shareholdings of a Director’s spouse and infant children.
The Company has granted an indemnity to its Directors (including subsidiary undertakings) under which the Company
will, to the maximum extent possible, indemnify them against all costs, charges, losses and liabilities incurred by them
in the performance of their duties.
2014 Remuneration
Executive Directors:
Alastair Beardsall
Philip Frank
Non-executive Directors:
Nicholas Clayton
Keith Henry
Malcolm Pattinson
Aggregate remuneration 2014 (£)
Aggregate remuneration 2014 (US$)
1 Includes pension contributions paid as cash.
Fees and
basic salary
£
212,740 1
249,000
35,000
35,000
35,000
566,740
933,728
Bonus
£
-
-
-
-
-
-
-
Defined
contribution
pension
£
Benefits
in kind
£
Single figure
remuneration
Total 2014
£
-
24,900
7,061
8,880
219,801
282,780
-
-
-
-
-
-
35,000
35,000
35,000
24,900
41,024
15,941
26,264
607,581
1,001,015
Fees and basic salary
Base fees and salary remain the foundation of the Directors’ remuneration packages which determine the levels of other
elements such as pension contributions and bonus payments. When setting base salaries for executive Directors, the
Remuneration Committee will take into account:
The Company provides limited Directors’ and Officers’ liability insurance, at a cost of approximately $27k in 2015 (2014:
$26k).
• the Director’s performance, individual responsibilities, authorities and experience; and
• comparisons with salary levels in peer group companies gathered from disclosure in various public documents such as
Aggregate Remuneration
The single figure of total remuneration paid to Directors in 2015 and 2014 is summarised below (audited):
2015 Remuneration
Executive Directors:
Alastair Beardsall
Fees and
basic salary
£
163,515 1
Eskil Jersing (appointed 23 March 2015)
213,654
Philip Frank (resigned 13 March 2015)
70,176
Non-executive Directors:
Nicholas Clayton
Keith Henry
Malcolm Pattinson
Aggregate remuneration 2015 (£)
Aggregate remuneration 2015 (US$)
1 Includes pension contributions paid as cash.
35,700
35,700
35,700
554,445
847,518
Bonus
£
-
-
-
-
-
-
-
-
Defined
contribution
pension
£
Benefits
in kind
£
Single figure
remuneration
Total 2015
£
-
21,365
7,018
-
-
-
9,413
5,521
3,693
-
-
-
28,383
43,386
18,627
28,473
172,928
240,540
80,887
35,700
35,700
35,700
601,455
919,377
peer group annual reports and accounts.
The basic salary is used to determine the level of pension contributions. The level of fees for the non-executive Directors
is set by the executive Directors with reference to the fees paid to non-executive Directors in peer group companies.
Bonus
The Remuneration Committee administers the bonus scheme for the Company and considers whether executive
Directors are eligible for an annual and/or interim bonus payment; the Committee also has an oversight for bonus
awards to staff. The bonus scheme comprises two parts, (i) corporate performance as measured against pre-determined
objectives (KPIs), and (ii) individual performance; refer to page 43 for further details. If so, performance conditions will
be relevant to the award, stretched and designed to enhance shareholder value and to promote the long term success
of the Company. Upper limits are set and disclosed by the Remuneration Committee. The Remuneration Committee
reviewed the outcome of the Company’s performance with regard to its 2015 KPIs and noted that it had not met any
of its key objectives and accordingly no executive bonuses were awarded to the executive Directors in 2015. As a
comparison, in 2014 the Remuneration Committee noted that it had not met any of its key objectives and accordingly
no executive bonuses were awarded to the executive Directors. The Company considers the KPIs to be commercially
sensitive as they reflect the Company’s commercial strategy; in general the KPIs are focused on HSE, new ventures and
managing the Companies financial exposure to its existing assets. The KPIs for 2015 are similar to those adopted in
2014. Non-executive Directors are not eligible to receive bonus payments.
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CORPORATE GOVERNANCE
Remuneration Committee Report (cont.)
Defined Contribution Pension
The defined contribution pension scheme is an employer contribution scheme calculated at 10% of base salary. Such
payments are made into individual Director personal pension plans as chosen by each individual Director. On retirement,
such contribution payments cease from the effective date of cessation of employment. Contributions to Philip Frank’s
pension scheme ceased following his departure from the Company. Non-executive Directors are not eligible to receive
pension contributions.
Benefits in Kind
Taxable benefits in kind for executive Directors include Company paid private medical health schemes and associated
cash plans; the latter is subject to an annual limit. In addition the Company pays for life insurance, travel insurance,
Directors and Officers insurance and disability cover; such benefits are not taxable benefits for individual Directors.
The table below sets out the total remuneration for the Company’s CEO for the past six years:
Year
CEO
% change
CEO single
figure of total
remuneration
(£)
Annual bonus
pay-out against
maximum
opportunity
(%)
Long-term
incentive
vesting rates
against
maximum
opportunity
(%)
2015
2014
2013
2012
2011
2010
Alastair Beardsall 1 / Eskil Jersing
290,184
32.0%
Alastair Beardsall 1
219,801
(51.3%)
Angus MacAskill 2 / Alastair Beardsall 1
451,417
52.4%
Angus MacAskill
Angus MacAskill
296,169
(18.9%)
365,004
(0.4%)
Graeme Thomson / Angus MacAskill
366,377
(51.2%)
-
-
-
-
23%
-
-
-
-
-
-
-
1 Part-time.
2 Includes £74,745 paid as compensation for loss of office.
Since August 2013, Alastair Beardsall had acted as interim CEO (until Eskil Jersing’s appointment) in addition to being
executive Chairman (his remuneration as relating to his appointment in 2013 had been prorated accordingly).
The annual percentage change in CEO single figure remuneration for years 2010 to 2015 compares with that of all
employees: 1.3%, (23.9%), (20.5%), 8.5%, (19.8%) and 11.1% respectively.
The graphs below show the value of the executive Director packages for 2015 together with minimum and maximum
remuneration attainable:
Alastair Beardsall (executive Chairman and interim CEO)
Eskil Jersing (Chief Executive)
Maximum
Actual
Minimum
£0
£100,000
£200,000
£300,000
£400,000
£500,000
Philip Frank (Exploration Director)
Maximum
Actual
Minimum
Basic salary
Bonus
Pension provision
Other benefits
Basic salary
Bonus
Pension provision
Other benefits
£0
£100,000
£200,000
£300,000
£400,000
£500,000
Performance Graph
The graph below shows a comparison between the TSR for the Company’s shares for the five-year period to 31 December
2015 and the TSR for the companies comprising the Index over the same period. This Index has been selected to provide
a relevant comparator to the Company. The TSR measure is based on the weighted average share price for December.
Total Shareholder Return
Based on weighted average share price for December
SEY
FTSE 350
January 10
December 10 December 11 December 12 December 13 December 14 December 15
140%
120%
100%
80%
60%
40%
20%
0%
Maximum
Actual
Minimum
48
Basic salary
Bonus
Pension provision
Other benefits
The table below shows the total Group remuneration compared to the total distribution to shareholders:
Total Group
remuneration (£)
Total distribution
to shareholders
£0
£100,000
£200,000
£300,000
£400,000
£500,000
2015
2014
2,011,139
1,810,941
-
-
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015 CORPORATE GOVERNANCE
Communications with Shareholders
Internal Controls
The Board is directly accountable to the Company’s shareholders and as such it is important for the Board to appreciate
the aspirations of the shareholders and equally that the shareholders understand how the actions of the Board and short-
term financial performance relate to the achievement of the Group’s longer term goals.
The Board reports to the shareholders on its stewardship of the Company through the publication of interim
and final results each year. Press releases are issued throughout the year and the Company maintains a website
(www.sterlingenergyplc.com) on which press releases, corporate presentations and the Report and Financial Statements
are available to view. Additionally this Report and Financial Statement contains extensive information about the Group’s
activities. Enquiries from individual shareholders on matters relating to the business of the Company are welcomed.
Shareholders and other interested parties can subscribe to receive notification of news updates and other documents
from the Company via email. In addition the executive Directors meet with major shareholders to discuss the progress
of the Company.
The executive Chairman provides periodic feedback to the Board following meetings with shareholders. The Senior
Independent Director also attends some shareholder meetings to ensure the Board is appraised of all feedback provided
by such meetings.
The Annual General Meeting provides an opportunity for communication with all shareholders and the Board encourages
the shareholders to attend and welcomes their participation. The Directors attend the Annual General Meeting and are
available to answer questions. Details of resolutions to be proposed at the Annual General Meeting, to be held on 25 April
2016, can be found in the notice of the meeting on the Company’s website.
In September 1999 the Turnbull Guidance (Internal Control: Guidance for Directors on the Combined Code) was
published, and revised in October 2005. In September 2012 the UK Corporate Governance Code was published for
reporting periods beginning on or after 1 October 2012 and subsequently revised in September 2014 for reporting
periods beginning on or after 1 October 2014.
The Directors acknowledge their responsibility for establishing and maintaining the Group and the Company systems
of internal control. These are designed to safeguard the assets of the Group and to ensure the reliability of financial
information for both internal use and external publication.
The Group’s internal control procedures include Board approval for all significant projects. All major expenditures require
either senior management or Board approval at the appropriate stages of each transaction. A system of regular reporting
covering both technical progress of projects and the state of the Group’s financial affairs provides appropriate information
to management to facilitate control. The Board reviews, identifies, evaluates and manages the significant risks that face
the Group.
Any systems of internal control can only provide reasonable, and not absolute, assurance that material financial
irregularities will be detected or that the risk of failure to achieve business objectives is eliminated. The Directors, having
reviewed the effectiveness of the system of internal financial, operational and compliance controls and risk management,
consider that the system of internal control operated effectively throughout the financial year and up to the date the
financial statements were signed.
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015 CORPORATE GOVERNANCE
Conflicts of Interest
Extractive Industries Transparency Initiative (‘EITI’)
The Group and the Company has in place procedures for the disclosure and review of any conflicts, or potential conflicts
of interest, which the Directors may have and for the clearance or otherwise of such conflicts by the Board. In deciding on
a conflict, or a potential conflict, the Directors must have regard to their general duties under the Companies Act 2006.
In accordance with the Transparency Criteria as set out by the EITI, the Group has made the following payments to
Government bodies during the year ended 31 December 2015:
Madagascar: Ambilobe
Madagascar: Ampasindava 1
Cameroon 2
Mauritania 3
Somaliland 4
2015
$000
166
-
-
104
75
345
2014
$000
146
108
500
104
75
933
1 Payment in 2014 made by Exxon Mobil.
2 Payment in 2014 made by Murphy Oil Corporation.
3 Included within payments made to SMHPM under the terms of the Chinguetti Funding Agreement, relating to Chinguetti field operating costs and
PSC obligations, totalling $8.8 million in 2015 (2014: $9.5 million).
4 Payments made by Genel Energy.
52
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015 CORPORATE GOVERNANCE
Directors’ Report
The Directors present their Annual Report and Financial Statements on the affairs of the Company and its subsidiaries,
together with the independent Auditors’ Report for the year ended 31 December 2015.
DIRECTORS
The Directors who served during the year were as follows:
PRINCIPLE ACTIVITY AND BUSINESS REVIEW
The principal activity of the Group and Company throughout the year remained the exploration for and production of oil
and gas in Africa. The significant developments during 2015 and the other activities of the Group, as well as the future
strategy and prospects for the Group, are reviewed in detail in the Chairman’s Statement, Chief Executive’s statement
and the Strategic Report section of this report.
Mr. Alastair Beardsall
Mr. Eskil Jersing (appointed 23 March 2015)
Dr. Philip Frank (resigned 13 March 2015)
Mr. Keith Henry
Mr. Nicholas Clayton
Mr. Malcolm Pattinson
The Group operates through overseas branches and subsidiary undertakings as appropriate to the fiscal environment.
Subsidiary undertakings of the Group are set out in Note 17 to the financial statements.
Biographical details of serving Directors can be found in the Board of Directors section of this report on page 34.
The Group uses a number of key performance indicators to assess the business performance against strategy. Some
of these relate to net debt ($), reserves (million boe). Adjusted EBITDAX ($), production (bopd) and share price growth.
Analysis of the KPIs can be found in the Financial Review on pages 24 - 27.
RESULTS AND DIVIDENDS
The Group loss for the financial year was $16.0 million (2014: loss $12.3 million). This leaves an accumulated Group
retained deficit of $440.9 million (2014: deficit $425.2 million) to be carried forward. The Directors do not recommend the
payment of a dividend (2014: $nil).
GOING CONCERN
The Group business activities, together with the factors likely to affect its future development, performance and position are
set out in the Operations Review on pages 12 - 15. The financial position of the Group and Company, its cash flows and
liquidity position are described in the Financial Review on pages 24 - 27. In addition, Note 24 to the financial statements
includes the Group’s objectives, policies and processes for managing its capital financial risk: details of its financial
instruments and its exposures to credit risk and liquidity risk.
The Group has sufficient cash resources for its working capital needs and its committed capital expenditure programme
at least for the next 12 months. As a consequence, the Directors believe that both the Group and Company are well
placed to manage their business risks successfully despite the uncertain economic outlook.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence
for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual
financial statements.
CAPITAL STRUCTURE
Details of the issued share capital, together with details of the movements in the Company’s issued share capital during
the year, are shown in Note 19 to the financial statements. The Company has one class of ordinary share which carries
no right to fixed income. Each share carries the right to one vote at general meetings of the Company.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the
general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements
between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights.
Details of the employee share schemes are set out in Note 25. No person has any special rights of control over the
Company’s share capital and all issued shares are fully paid.
DIRECTORS AND ELECTION ROTATION
With regard to the appointment and re-election of the Directors, the Company is governed by its Articles of Association,
the Code, the Companies Acts and related legislation. The powers of Directors are described within this report.
In accordance with article 106 of the Company’s Articles of Association, Keith Henry and Nicholas Clayton retire by
rotation and offer themselves for re-election at the forthcoming AGM on 25 April 2016.
SUBSTANTIAL SHAREHOLDINGS
Except for the holdings of ordinary shares listed below, the Company has not been notified by or become aware of
any persons holding 3% or more of the 220,053,520 issued ordinary shares of 40 pence each of the Company at 10
March 2016:
Waterford Finance & Investment Ltd
Mistyvale Limited
YF Finance Limited
Denis O'Brien
Banque Heritage
Sprott Asset Management
Number
65,785,517
34,467,790
26,387,105
15,750,000
14,930,358
6,871,638
%
29.90
15.66
11.99
7.16
6.78
3.12
BUSINESS RISK
A summary of the principle and general business risks can be found within the Strategic Report on pages 28 - 31.
FINANCIAL INSTRUMENTS
Information about the use of financial instruments, the Group’s policy and objectives for financial risk management is
given in Note 24 to the financial statements.
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CORPORATE GOVERNANCE
Directors’ Report (cont.)
Statement of Directors’ Responsibilities
AUDITORS
Each of the persons who are a Director at the date of approval of this Report and Financial Statements confirms that:
The Directors are responsible for preparing the Directors Report, Strategic Report and Financial Statements in accordance
with applicable law and regulations.
• so far as the Director is aware, there is no relevant audit information of which the Company’s Auditors are unaware; and
• the Directors have taken all the steps that they ought to have taken as a director in order to make themselves aware
of any relevant audit information and to establish that the Company’s Auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies
Act 2006.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
have elected to prepare the Group and Company financial statements in accordance with International Financial
Reporting Standards (‘IFRS’) as adopted by the European Union. Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group
and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial
statements in accordance with the rules of the London Stock Exchange for companies trading securities on the
Alternative Investment Market.
BDO LLP has expressed its willingness to continue in office as Auditors and a resolution to appoint BDO will be proposed
at the forthcoming Annual General Meeting to be held on 25 April 2016.
In preparing these financial statements, the Directors are required to:
Eskil Jersing
Chief Executive Officer
10 March 2016
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any
material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group’s transactions and disclose with reasonable accuracy at any time, the financial position of the Company and
enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are
also responsible for safeguarding the assets of the Group and thus for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
WEBSITE PUBLICATION
The Directors are responsible for ensuring the Report and Financial Statements are made available on a website. Financial
statements are published on the Company’s website in accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the financial statements contained therein.
DIRECTORS’ RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge that the financial statements, prepared in accordance with International
Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position
and profit or loss of the Group and Company and the undertakings included in the consolidation taken as a whole; and
the Report and Financial Statements include a fair review of the development and performance of the business and the
position of the Company and the undertakings included in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
For and on behalf of the Board.
Eskil Jersing
Chief Executive Officer
10 March 2016
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015
Sterling Energy plc
Group Accounts
Year ended 31 December 2015
Independent Auditors’ Report
to the members of Sterling Energy plc
We have audited the financial statements of Sterling
Energy plc for the year ended 31 December 2015 which
comprises the consolidated and Company statement
of financial position, the consolidated statement of
comprehensive income, the consolidated and Company
statement of cash flows, the consolidated and Company
statement of changes in equity and the related notes. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company financial
statements, as applied in accordance with the provisions
of the Companies Act 2006.
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s
members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
responsible
RESPECTIVE RESPONSIBILITIES OF DIRECTORS
AND AUDITORS
As explained more fully in the Statement of Directors’
responsibilities,
for
the Directors are
the preparation of the financial statements and for
being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Financial
for
Reporting Council’s
Auditors. The company voluntarily prepares a Directors’
Remuneration Report in accordance with the provisions
of the Companies Act 2006 that would have applied
had the company been a quoted company. We have
agreed to audit the part of the Directors’ Remuneration
Report that we would have been required to audit under
the Companies Act 2006 if the company was a quoted
company.
(‘FRC’s’) Ethical Standards
SCOPE OF THE AUDIT OF THE FINANCIAL
STATEMENTS
A description of the scope of an audit of financial statements
is provided on the FRC’s website at:
www.frc.org.uk/auditscopeukprivate
60
OPINION ON FINANCIAL STATEMENTS
In our opinion:
• the financial statements give a true and fair view of the
state of the Group’s and the parent Company’s affairs
as at 31 December 2015 and of the Group’s loss for the
year then ended;
• the Group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
• the parent Company financial statements have been
properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance
with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
OPINION ON OTHER MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion the information given in the Strategic Report
and Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the
financial statements.
OPINION ON DIRECTORS’ REMUNERATION REPORT
WHICH WE HAVE AGREED TO REPORT
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent Company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified
by law are not made; or
• we have not received all the information and explanations
we require for our audit.
Scott McNaughton (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London, United Kingdom
10 March 2016
BDO LLP is a limited liability partnership registered in
England and Wales.
Consolidated Statement of Comprehensive Income
Year ended 31 December 2015
Note
31 December 2015
$000
31 December 2014
$000
Revenue
Cost of sales
Gross (loss)/profit
Other administrative expenses
Impairment of oil and gas assets
Pre-licence costs
Onerous contract
Chinguetti cessation costs
Total administrative expenses
Loss from operations
Finance income
Finance expense
Loss before tax
Tax
Loss for the year attributable to the owners of the parent
Other comprehensive income
Currency translation adjustments
Total other comprehensive income for the year
Total comprehensive expense for the year attributable to
the owners of the parent
Basic loss per share (US cents)
Diluted loss per share (US cents)
4
6
3
21
7
5
9
9
10
13
13
5,031
(6,028)
(997)
(2,305)
(8,183)
(2,212)
(3,700)
2,159
(14,241)
(15,238)
356
(1,068)
(15,950)
-
(15,950)
6
6
(15,944)
(7.25)
(7.25)
15,991
(11,873)
4,118
(2,069)
(7,903)
(2,196)
(3,390)
-
(15,558)
(11,440)
398
(1,276)
(12,318)
-
(12,318)
24
24
(12,294)
(5.60)
(5.60)
61
Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015GROUP ACCOUNTSGROUP ACCOUNTS Consolidated Statement of Financial Position
Year ended 31 December 2015
Consolidated Statement of Changes in Equity
Year ended 31 December 2015
At 1 January 2014
Loss for the year
Currency translation adjustments
Total comprehensive expense for the year
attributable to the owners of the parent
Share option charge for the year
At 31 December 2014
Loss for the year
Currency translation adjustments
Total comprehensive expense for the year
attributable to the owners of the parent
Share option charge for the year
Share capital
Share
premium
$000
$000
Currency
translation
reserve
$000
Retained
deficit 1
Total
$000
$000
149,014
378,863
(249)
(413,550)
114,078
-
-
-
-
-
-
-
-
-
24
24
-
(12,318)
(12,318)
-
24
(12,318)
(12,294)
659
659
149,014
378,863
(225)
(425,209)
102,443
-
-
-
-
-
-
-
-
-
6
6
-
(15,950)
(15,950)
-
6
(15,950)
(15,944)
297
297
At 31 December 2015
149,014
378,863
(219)
(440,862)
86,796
1 The share option reserve has been included within the retained deficit reserve and is a non-distributable reserve.
Non-current assets
Intangible royalty assets
Intangible exploration and evaluation assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Equity
Share capital
Share premium
Currency translation reserve
Retained deficit
Total equity
Non-current liabilities
Long-term provisions
Current liabilities
Trade and other payables
Short-term provisions
Total liabilities
Total equity and liabilities
Note
31 December 2015
$000
31 December 2014
$000
14
15
16
18
19
21
22
21
-
25,074
34
25,108
1,320
550
98,653
100,523
125,631
149,014
378,863
(219)
(440,862)
86,796
32,395
32,395
2,740
3,700
6,440
38,835
125,631
-
28,426
72
28,498
2,223
3,294
108,148
113,665
142,163
149,014
378,863
(225)
(425,209)
102,443
22,667
22,667
13,663
3,390
17,053
39,720
142,163
The financial statements of Sterling Energy plc, registered number 1757721, were approved by the Board of Directors
and authorised for issue on 10 March 2016.
Signed on behalf of the Board of Directors.
Eskil Jersing
Chief Executive Officer
10 March 2016
62
63
Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015GROUP ACCOUNTSGROUP ACCOUNTS Consolidated Statement of Cash Flows
Year ended 31 December 2015
Company Statement of Financial Position
Year ended 31 December 2015
2015
$000
2014
$000
Note
31 December 2015
$000
31 December 2014
$000
(15,950)
(12,318)
Property, plant and equipment
Non-current assets
Note
14,16
3
16
15
Operating activities
Loss before tax
Depreciation, depletion & amortisation
Impairment expense
Chinguetti cessation costs
Onerous provision
Finance income and gains
Finance expense and losses
Share-based payment charge
Operating cash flow prior to working capital movements
Decrease in inventories
Decrease/(Increase) in trade and other receivables
Decrease in trade and other payables
Cash (outflow)/generated from continuing operations
Cash outflow from discontinued operations
Net cash flow (used in)/generated from operating activities
Investing activities
Interest received
Purchase of property, plant and equipment
Exploration and evaluation costs
Net cash used in investing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
54
8,183
(2,159)
310
(356)
1,056
297
(8,565)
903
2,744
(2)
(4,920)
(4,877)
(43)
(4,920)
356
(16)
(4,831)
(4,491)
(9,411)
108,148
(84)
98,653
2,358
7,903
-
3,390
(398)
1,265
659
2,859
523
(359)
(1,669)
1,354
1,814
(460)
1,354
398
(32)
(14,102)
(13,736)
(12,382)
120,755
(225)
108,148
Investments
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Equity
Share capital
Share premium
Retained deficit
Total equity
Non-current liabilities
Long-term provisions
Current liabilities
Trade and other payables
Short-term provisions
Total liabilities
Total equity and liabilities
16
17
18
19
21a
22
21
-
29,113
29,113
1,320
20,478
97,483
119,281
148,394
149,014
378,863
(451,885)
75,992
32,395
32,395
36,307
3,700
40,007
72,402
148,394
-
28,890
28,890
2,223
19,773
106,473
128,469
157,359
149,014
378,863
(447,839)
80,038
22,667
22,667
51,264
3,390
54,654
77,321
157,359
The financial statements of Sterling Energy plc, registered number 1757721, were approved by the Board of Directors
and authorised for issue on 10 March 2016.
Signed on behalf of the Board of Directors
Eskil Jersing
Chief Executive Officer
10 March 2016
64
65
Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015GROUP ACCOUNTSGROUP ACCOUNTS
Company Statement of Changes in Equity
Year ended 31 December 2015
Company Statement of Cash Flows
Year ended 31 December 2015
At 1 January 2014
Total comprehensive expense for the year
Share option charge for the year
At 31 December 2014
Total comprehensive expense for the year
Share option charge for the year
At 31 December 2015
Share
capital
$000
Share
premium
$000
Retained
deficit 1
$000
Total
$000
149,014
378,863
(364,232)
163,645
-
-
-
-
(84,266)
(84,266)
659
659
149,014
378,863
(447,839)
80,038
-
-
-
-
(4,343)
(4,343)
297
297
149,014
378,863
(451,885)
75,992
1 The share option reserve has been included within the retained deficit reserve and is a non-distributable reserve.
Note
16
16
Operating activities
Loss before tax
Depreciation, depletion & amortisation
Impairment expense
Impairment of investment
Chinguetti cessation costs
Onerous provision
Finance income and gains
Finance expense and losses
Share-based payment charge
Operating cash flow prior to working capital movements
Decrease in inventories
(Increase)/decrease in trade and other receivables
Decrease in trade and other payables
Decrease in provisions
Net cash flow used in operating activities
Investing activities
Interest received
Net cash generated from investing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
2015
$000
(4,344)
-
-
-
(2,159)
310
(356)
1,036
22
(5,491)
903
(705)
(4,018)
(18)
(9,329)
356
356
(8,973)
106,473
(17)
97,483
2014
$000
(84,266)
1,567
3,979
79,604
-
3,390
(398)
1,241
30
5,147
522
5,569
(22,936)
(533)
(12,231)
398
398
(11,833)
118,498
(192)
106,473
66
67
Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015GROUP ACCOUNTSGROUP ACCOUNTS 1.
ACCOUNTING POLICIES
a) General Information
Sterling Energy plc is a public company incorporated in the United Kingdom under the UK Companies Act 2006.
The address of the registered office is 85 Fleet Street, London, EC4Y 1AE. The Company and the Group are
engaged in the exploration, development and production of commercial oil and gas.
These financial statements are presented in US dollars as this is the currency in which the majority of the Group’s
revenues and expenditure are transacted and the functional currency of the Company.
b) Basis of Accounting and Adoption of New and Revised Standards
The Group and Company financial statements have been prepared in accordance with IFRSs as adopted
by the EU.
(i) New and amended standards adopted by the Group:
No standards adopted this year had a material affect.
(ii) Standards, amendments and interpretations, which are effective for reporting periods beginning after the date
of these financial statements which have not been adopted early:
Standard
IFRS 11
Description
Accounting for Acquisitions of Interests in Joint Operations
(Amendments)
IAS 16 and IAS 38
Acceptable Methods of Depreciation and Amortisation
(Amendments)
Effective date
1 January 2016
1 January 2016
IAS 16 and IAS 41
Agriculture: Bearer Plants (Amendments)
1 January 2016
IAS 27
Equity Method in Separate Financial Statements (Amendments) 1 January 2016
Annual Improvements
to IFRSs
(2012–2014 Cycle)
IAS 1
IAS 19
Disclosure Initiative (Amendments)
Defined Benefit Plans (Amendments)
Annual Improvements
to IFRSs
(2010-2012 Cycle)
1 January 2016
1 January 2016
1 February 2015
1 February 2015
The Directors have not fully assessed the impact of all standards but do not expect them to have a material impact.
c) Going Concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparation of the financial statements. Further detail is contained in the
Directors’ Report.
d) Basis of Consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled
by the Company (its subsidiaries) made up to 31 December each year. Control is recognised where an investor is
exposed, or has rights, to variable returns from its investment with the investee and has the ability to affect these
returns through its power over the investee.
The results of subsidiaries acquired, or disposed of, during the year are included in the Statement of Comprehensive
Income from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies
used into line with those used by the Group.
(ii) Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
As a consolidated Group statement of comprehensive income and expense is published, a separate statement of
comprehensive income and expense for the parent Company has not been published in accordance with section
408 of the Companies Act 2006.
e) Jointly Controlled Operations
The Group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over
the relevant activities of the arrangement to the Group and at least one other party. Joint control is assessed under
the same principles as control over subsidiaries. The Group classifies its interest in joint arrangements as joint
operations as the Group has both the rights to assets and obligations for the liabilities of the joint arrangement.
In assessing the classification of interests in joint arrangements, the Group considers:
• the structure of the joint arrangement;
• the contractual terms of the joint arrangement; and
• any other facts and circumstances.
The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues and
expenses in accordance with its contractually conferred rights and obligations.
f) Revenue
Sales of oil and gas are recognised, net of any sales taxes, when risks and rewards of ownership have passed to
the customer; typically this is at the point of physical lifting. See also section r) below. Royalties and tariff income
are recognised as earned on an entitlement basis.
g) Oil and Gas Interests
Exploration and Evaluation Assets:
Capitalisation
Pre-acquisition costs on oil and gas assets are recognised in the Income Statement when incurred. Costs
incurred after rights to explore have been obtained, such as geological and geophysical surveys, drilling and
commercial appraisal costs, and other directly attributable costs of exploration and appraisal including technical
and administrative costs, are capitalised as intangible exploration and evaluation (‘E&E’) assets. The assessment
of what constitutes an individual E&E asset is based on technical criteria but essentially either a single licence
area or contiguous licence areas with consistent geological features are designated as individual E&E assets.
Costs relating to the exploration and evaluation of oil and gas interests are carried forward until the existence, or
otherwise, of commercial reserves have been determined.
68
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS
E&E costs are not amortised prior to the conclusion of appraisal activities. Once active exploration is completed
the asset is assessed for impairment. If commercial reserves are discovered then the carrying value of the
E&E asset is reclassified as a development and production (‘D&P’) asset, following development sanction, but
only after the carrying value is assessed for impairment and where appropriate its carrying value adjusted. If it
subsequently assessed that commercial reserves have not been discovered, the E&E asset is written off to the
Income Statement.
Impairment
The Group’s oil and gas assets are analysed into cash generating units (‘CGU’) for impairment reporting purposes,
with E&E asset impairment testing being performed at an individual asset level. The current CGU consists of the
Group’s whole E&E portfolio. E&E assets are reviewed for impairment when circumstances arise which indicate
that the carrying value of an E&E asset exceeds the recoverable amount. The recoverable amount of the individual
asset is determined as the higher of its fair value less costs to sell and value in use. Impairment losses resulting
from an impairment review are written off to the Income Statement. Any impairment loss is separately recognised
within the Statement of Comprehensive Income.
commercial reserves. Impairment resulting from the impairment testing is charged to a separate line item under
total administration expenses within the Statement of Comprehensive Income.
The pre-tax future cash flows are adjusted for risks specific to the cash-generating unit and are discounted using
a pre-tax discount rate. The discount rate is derived from the Group’s post-tax weighted average cost of capital
and is adjusted where applicable to take into account any specific risks relating to the country where the cash-
generating unit is located, although other rates may be used if appropriate to the specific circumstances. The
discount rates applied in assessments of impairment are reassessed each year.
The cash-generating unit basis is generally the field, however, oil and gas assets, including infrastructure assets,
may be accounted for on an aggregated basis where such assets are economically inter-dependent.
h) Property, Plant and Equipment Assets other than Oil and Gas Assets:
Property, plant and equipment other than oil and gas assets are stated at cost, less accumulated depreciation,
and any provision for impairment. Depreciation is provided at rates estimated to write off the cost, less estimated
residual value, of each asset over its expected useful life as follows:
Impaired assets are reviewed annually to determine whether any substantial change to their fair value amounts
previously impaired would require reversal.
Computer and office equipment depreciation – 33% straight line.
As previously recognised, impairment loss is reversed if the recoverable amount increases as a result of a change
in the estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount
that would have been determined (net of depletion or amortisation) had no impairment loss been recognised in
prior periods. Reversal of impairments and impairment charges are credited/(charged) to separate line items under
total administration expenses within the statement of comprehensive income.
Refer to Note 2 and Note 3 for detailed disclosure of the results of impairments and impairment reviews performed.
Development and Production Assets:
Capitalisation
Costs of bringing a field into production, including the cost of facilities, wells and sub-sea equipment together with
E&E assets reclassified in accordance with the above policy, are capitalised as a D&P asset within property, plant
and equipment. Normally each individual field development will form an individual D&P asset but there may be
cases, such as phased developments, or multiple fields around a single production facility when fields are grouped
together to form a single D&P asset.
Depreciation
All costs relating to a development are accumulated and not depreciated until the commencement of production.
Depreciation is calculated on a unit of production basis based on the proven and probable reserves of the asset.
Any re-assessment of reserves affects the depreciation rate prospectively. Significant items of plant and equipment
will normally be fully depreciated over the life of the field. However these items are assessed to consider if their
useful lives differ from the expected life of the D&P asset and should this occur a different depreciation rate would
be charged. The key areas of estimation regarding depreciation and the associated unit of production calculation
for oil and gas assets are recoverable reserves and future capital expenditures.
Impairment
A review is carried out for any indication that the carrying value of the Group’s D&P assets may be impaired.
The impairment review of D&P assets is carried out on an annual, asset by asset basis and involves comparing
the carrying value with the recoverable value of an asset. The recoverable amount of an asset is determined
as the higher of its fair value less costs to sell and value in use. The value in use is determined from estimated
future net cash flows, being the present value of the future cash flows expected to be derived from production of
i) Decommissioning
Provisions for decommissioning costs are recognised in accordance with IAS 37 Provisions, Contingent Liabilities
and Contingent Assets. Provisions are recorded at the present value of the expenditures expected to be required
to settle the Group’s future obligations.
Provisions are reviewed at each reporting date to reflect the current best estimate of the cost at present value. Any
change in the date on which provisions fall due will change the present value of the provision. These changes are
treated as an administrative expense.
The unwinding of the discount is reflected as a finance expense. A decommissioning asset is also established,
since the future cost of decommissioning is regarded as part of the total investment to gain access to future
economic benefits, and included as part of the cost of the relevant development and production asset. Depletion
on this asset is calculated under the unit of production method based on commercial reserves.
j) Intangible Royalty Interests
The carrying value of each individual royalty interest is initially stated at cost, and amortised on the unit of production
basis relative to the underlying asset. Each royalty asset is assessed individually for impairment when there is an
indication that an impairment event may have occurred. See also Impairment of assets – Details of these can be
found in Note 2.
k) Foreign Currencies
The US dollar is the functional and reporting currency of the Company and the reporting currency of the Group.
Transactions denominated in other currencies are translated into US dollars at the rate of exchange ruling at
the date of the transaction. Assets and liabilities in other currencies are translated into US dollars at the rate of
exchange ruling at the reporting date. All exchange differences arising from such translations are dealt with in
current year comprehensive income.
The results of entities with a functional currency other than the US dollar are translated at the average rates of
exchange during the period and their statement of financial position at the rates ruling at the reporting date.
Exchange differences arising on translation of the opening net assets and on translation of the results of such
entities are dealt with through the currency translation reserve.
70
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS
l) Taxation
Current Tax:
Tax is payable based upon taxable profit for the year. Taxable profit differs from net profit as reported in the statement
of comprehensive income because it excludes items of income or expense that are taxable or deductible on other
years and it further excludes items that are never taxable or deductible. Any Group liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred Tax:
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary
differences and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset is realised. Deferred tax is charged or credited in the statement of comprehensive income, except when
it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
The Group has the following financial liabilities; all are classified as held at amortised cost. The Group holds no
other categories of financial liability.
Trade Payables:
Trade payables are stated at their amortised cost.
Financial Liabilities and Equity:
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the asset of the Group after
deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received
net of direct issue costs.
p) Pension Costs
The Group operates a number of defined contribution pension schemes. The amount charged to the Statement
of Comprehensive Income for these schemes is the contributions payable in the year. Differences between
contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in
the Statement of Financial Position.
q) Share-Based Payments
The Company and Group have applied the requirements of IFRS 2 Share-based payments. The Company issues
equity share-based payments to certain employees. The fair value of these awards has been determined at the
date of the grant of the award allowing for the effect of any market-based performance conditions. This fair value,
adjusted by the estimate of the number of awards that will eventually vest as a result of non-market conditions, is
expensed uniformly over the vesting period.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
The fair values are calculated using an option pricing model with suitable modifications to allow for employee turnover
before vesting and early exercise. The inputs to the model include: the share price at the date of grant; exercise price;
expected volatility; expected dividends; risk-free rate of interest; and patterns of exercise of the plan participants.
m) Investments (Company)
Non-current investments in subsidiary undertakings are shown in the Company’s Statement of Financial Position
at cost less any provision for permanent diminution of value.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the
options, measured immediately before and after the modification, is also charged to the Consolidated Statement
of Comprehensive Income over the remaining vesting period.
n) Operating Leases
Rentals under operating leases are charged on a straight-line basis over the lease term.
o) Financial Instruments
The Group’s Financial Instruments comprise of cash and cash equivalents, loans and receivables. There are no
other categories of financial instrument.
Trade Receivables:
Trade receivables are measured at amortised cost, unless the effect of the time value of money is immaterial.
Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective
evidence that the asset is impaired.
Cash and Cash Equivalents:
Cash and cash equivalents comprise demand deposits, and other short-term highly liquid investments, with an
original maturity of less than three months, and are readily convertible to a known amount of cash and are subject
to an insignificant risk of change in value.
r) Over/(Under) Lift of Inventories
Lifting or off take arrangements for oil and gas produced in certain of the Group’s operations are such that each
participant may not receive and sell its precise share of the overall production in each period. The resulting
imbalance between cumulative entitlement and cumulative liftings is ‘underlift’ or ‘overlift’. Underlifts and overlifts
are valued at the lower of cost and net realisable value. Adjustments are made to cost of sales and balances
included within receivables and payables as appropriate.
s) Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable
that the Group would be required to settle that obligation. Provisions are measured at the management’s best
estimate of the expenditure required to settle the obligation at the reporting date, and are discounted to present
value where the effect is material.
t) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision makers. The chief operating decision makers have been identified as the executive Board members.
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS
The operating results of each of the geographical segments are regularly reviewed by the Group’s chief operating
decision makers in order to make decisions about the allocation of resources and to assess their performance.
Africa has exploration and development activities, the Middle East has exploration activities (discontinued) and the
United Kingdom office is an administrative cost centre.
u) Contingent Consideration
Contingent consideration is an obligation of the acquiring entity to transfer additional assets or equity interests to
the former owners of an acquiree. The terms, under which this consideration will be calculated and paid, is part of
the acquisition agreement. The consideration will only be paid if specified future events occur or conditions are met.
2.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 1, the Directors are required
to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and future periods.
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are discussed below.
Company – Investment
If circumstances indicate that impairment may exist, investments in subsidiary undertakings of the Company are
evaluated using market values, where available, or the discounted expected future cash flows of the investment. If
these cash flows are lower than the Company’s carrying value of the investment, an impairment charge is recorded
in the Company. Evaluation of impairments on such investments involves significant management judgement and
may differ from actual results - see Note 17.
Onerous commitment provision
A provision for an onerous commitment is made where the unavoidable costs of meeting the obligations under
the contract exceed the economic benefits expected to be received under the said contract - Details of these can
be found in Note 21.
Onerous commitments on future oil and gas activities are only recognised where such commitments are certain.
No recognition is given for onerous work programme commitments for specific assets where there remains
uncertainty on the outcome of discussions between respective oil and gas operators, government bodies and/or
other stakeholders.
Commercial Reserves
Commercial reserves are proven and probable oil and gas reserves, calculated on an entitlement basis. Estimates
of commercial reserves underpin the calculation of depletion and amortisation on a unit of production basis.
Estimates of commercial reserves include estimates of the amount of oil and gas in place, assumptions about
reservoir performance over the life of the field and assumptions about commercial factors which, in turn, will be
affected by the future oil and gas price. See page 23.
Impairment of Assets
Management is required to assess oil and gas assets for indicators of impairment and has considered the economic
value of both individual E&E assets and the Chinguetti Funding and Royalty Agreements. The carrying value of oil
and gas assets is disclosed in Notes 14, 15 and 16. The carrying value of related investments in the Company
Statement of Financial Position is disclosed in Note 17.
With reference to the Chinguetti Funding Agreement, as part of the assessment, management has carried out an
impairment test whereby the test compares the carrying value at the reporting date with the expected discounted
future cash flows. For the discounted cash flows to be calculated, management has used a production profile
based on its best estimate of proven and probable reserves and a range of assumptions including a 10% pre-tax
discount rate and an internally estimated oil price profile.
With reference to the Chinguetti Royalty Agreement, impairment assessments and any subsequent charges are
calculated on an individual royalty interest basis. Future recoverable amounts are estimated by management
based upon the present value of future cash flows expected to be derived from the production of commercial
reserves in these licences and are compared against the carrying value of these assets.
Exploration and evaluation assets are subject to a separate review for indicators of impairment, by reference to the
impairment indicators set out in IFRS 6, which is inherently judgmental.
Key assumptions used in the value-in-use calculations
The calculation of value-in-use for oil and gas assets under development or in production is most sensitive to the
following assumptions:
• production volumes;
• commodity prices;
• fixed and variable operating costs;
• capital expenditure; and
• discount rates.
Production volumes/recoverable reserves
Annual estimates of oil and gas reserves are generated internally by the Group with external input from operator
profiles. These are reported annually to the Board. The self-certified estimated future production profiles are used
in the life of the fields which in turn are used as a basis in the value-in-use calculation.
Commodity prices
An average of published forward prices and the long term assumption for natural gas and Brent oil are used for
future cash flows in accordance with the Group’s corporate assumptions. Field specific discounts and prices are
used where applicable.
Fixed and variable operating costs
Typical examples of variable operating costs are pipeline tariffs, treatment charges and freight costs. Commercial
agreements are in place for most of these costs and the assumptions used in the value-in-use calculation are
sourced from these where available. Examples of fixed operating costs are platform costs and operator overheads.
Fixed operating costs are based on operator budgets.
74
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS
Capital expenditure
Field development is capital intensive and future capital expenditure has a significant bearing on the value of an
oil and gas development asset. In addition, capital expenditure may be required for producing fields to increase
production and/or extend the life of the field. Cost assumptions are based on operator budgets or specific contracts
where available. The Company and Group are currently not exposed to development capital expenditures.
Discount rates
Discount rates reflect the current market assessment of the risks specific to the oil and gas sector and are based on
the weighted average cost of capital for the Group. Where appropriate, the rates are adjusted to reflect the market
assessment of any risk specific to the field for which future estimated cash flows have not been adjusted. The Group
has applied a discount rate of 10% for the current year (2014: 10%).
Sensitivity to changes in assumptions
A potential change in any of the above assumptions may cause the estimated recoverable value to be lower than
the carrying value, resulting in a further impairment loss. The assumptions which would have the greatest impact
on the recoverable amounts of the fields are production volumes and commodity prices. Having reviewed these
assumptions, impairment has been recognised in the current year for both the Ampasindava and Chinguetti assets.
During the year the Group recognised impairments totalling $8.2 million in accordance with IAS 36 “Impairment of
Assets”. This related to the full impairment of the Ntem block, a decision based on a combination of above ground
risks (the current impasse with the Government over the Company’s claim of force majeure) and a risked assessment
of the remaining prospectivity on block.
During 2014 the Group recognised impairments totalling $7.9 million in accordance with IAS 36 “Impairment of Assets”
on the Chinguetti Funding & Royalty Agreement’s ($6.0 million) and the Ampasindava block ($1.9 million).
Impairments and associated reversals have been determined by comparing the current value in use to carrying values.
Oil & gas expenditure – acquisitions and disposals
Commercial transactions involving the acquisition of a D&P asset in exchange for an E&E or D&P asset are accounted
for at fair value with the difference between the fair value and cost being recognised in the statement of comprehensive
income as a gain or loss. When a commercial transaction involves a D&P asset and takes the form of a farm-in or
farm-out agreement, the premium expected to be paid/received is treated as part of the consideration.
Fair value calculations are not carried out for commercial transactions involving the exchange of E&E assets. The
capitalised costs of the disposed asset are transferred to the acquired asset. Farm-in and farm-out transactions of
E&E assets are accounted for at cost. Costs are capitalised according to the Group’s cost interest (net of premium
received or paid) as costs are incurred.
Proceeds from the disposal of an E&E asset, or part of an E&E asset, are deducted from the capitalised costs and the
difference recognised in the statement of comprehensive income as a gain or loss. Proceeds from the disposal of a
D&P asset, or part of a D&P asset, are recognised in the Income Statement, after deducting the related net book value
of the asset. The Company and Group were not exposed to disposal proceeds in the year.
Decommissioning
The Company has obligations in respect of decommissioning in Mauritania. The extent to which a provision is
recognised depends on the legal requirements at the date of decommissioning, the estimated costs and timing of
the work and the discount rate applied. Decommissioning estimates for the Chinguetti field are based on a range of
operator estimates which are periodically reviewed by the operator and the partnership. Details of these can be found
in Note 21.
Share-based payments
Management is required to make assumptions in respect of the inputs used to calculate the fair value of share-based
payment arrangements. Details of these can be found in Note 25.
3.
OPERATING SEGMENTS
The Group’s two operating segments are its Africa and Middle East (discontinued) segments. The UK corporate
office is a technical and administrative cost centre. The operating results of each of these segments are regularly
reviewed by the Group’s executive Directors and senior management in order to make decisions about the
allocation of resources and to assess their performance.
The accounting policies of these segments are in line with those set out in Note 1.
The following tables present revenue, profit and certain asset and liability information regarding the Group’s
operating segments for the year ended 31 December 2015 and for the year ended 31 December 2014.
Africa
Note
2015
$000
2014
$000
Middle East
(Discontinued)
2014
$000
2015
$000
Total
2015
$000
2014
$000
15
14
16
5,031
15,991
(6,028)
(11,873)
(997)
4,118
(8,183)
(1,863)
-
-
-
(2,061)
(3,979)
-
(2,212)
(2,196)
2,159
-
(3,700)
(3,390)
(12,933)
(9,371)
-
-
-
-
-
-
5
-
-
-
5
Statement of comprehensive income
Revenue 1
Cost of sales
Gross (loss)/profit
Impairment of E&E assets
Impairment of royalty assets
Impairment of D&P assets
Accruals release
Pre-licence costs
Chinguetti cessation costs
Onerous contract
Segment result
Unallocated corporate expenses
Loss from operations
Finance income
Finance expense
Loss before tax
Tax
Loss attributable to owners of the
parent
-
-
-
-
-
-
5
-
-
-
5,031
15,991
(6,028)
(11,873)
(997)
4,118
(8,183)
(1,863)
-
-
5
(2,061)
(3,979)
5
(2,212)
(2,196)
2,159
-
(3,700)
(3,390)
5
(12,928)
(9,366)
(2,310)
(2,074)
(15,238)
(11,440)
356
398
(1,068)
(1,276)
(15,950)
(12,318)
-
-
(15,950)
(12,318)
1 Revenue from continuing operations (Mauritania, Africa) includes amounts of $4.7 million (100% external) from one single customer (2014:
$14.9 million).
76
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS
Corporate
Africa
2015
$000
2014
$000
2015
$000
2014
$000
Middle East
(Discontinued)
2014
$000
2015
$000
Total
2015
$000
2014
$000
5.
LOSS FROM OPERATIONS
Loss from operations is stated after charging:
Other segment
information
Capital additions:
Property, plant and
equipment
Exploration and evaluation
Depreciation, depletion &
amortisation
Impairment expense
Segment assets and
liabilities
16
-
(54)
-
32
-
(58)
-
-
4,831
17,102
-
(2,300)
-
(8,183)
(7,903)
Non-current assets 1
34
72
25,074
28,426
Segment assets 2
98,010
107,151
2,503
6,461
Segment liabilities 3
(654)
(815)
(38,173)
(38,877)
16
32
4,831
17,102
(54)
(2,358)
(8,183)
(7,903)
Staff costs
Share-based payments
Impairment
Depreciation of other non-current assets
Onerous contract
An analysis of auditor’s remuneration is as follows:
Fees payable to the Group's auditors for the audit
of the Group's annual accounts
Note
8
8
14,15,16
16
21
25,108
28,498
Audit of the Company's subsidiaries pursuant to legislation
-
-
-
-
-
-
-
-
-
-
10
(8)
53
100,523
113,665
(28)
(38,835)
(39,720)
Audit related assurance services
Total audit fees
1 Segment non-current assets include $nil in Cameroon (2014: $8.0 million), $4.0 million in Mauritania (2014: $nil), $3.6 million in Madagascar
(2014: $3.0 million) and $17.5 million in Somaliland (2014: $17.4 million).
2 Corporate segment assets include $97.6 million cash and cash equivalents (2014: $106.6 million) and $426k other receivables (2014:
$543k). Carrying amounts of segment assets exclude investments in subsidiaries.
3 Carrying amounts of segment liabilities exclude intra-group financing.
See Note 2 for details on the above impairment.
6.
COST OF SALES
4.
REVENUE
Revenue from the sale of oil and gas
Royalty income
Total operating revenue
Total
2015
$000
4,670
361
5,031
2014
$000
14,944
1,047
15,991
Amortisation of intangible royalty asset
Depletion of property, plant & equipment - oil and gas
Operating costs
Over lift of product entitlement
Onerous contract provision
Total
2015
$000
3,623
297
8,183
54
3,700
50
56
-
106
2015
$000
-
-
8,514
904
(3,390)
6,028
2014
$000
3,524
659
7,903
58
3,390
53
59
-
112
2014
$000
733
1,567
9,050
523
-
11,873
78
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS
7.
CHINGUETTI CESSATION COSTS
9.
FINANCE INCOME AND FINANCE EXPENSE
Increase in decommissioning provision
Reassessment of accrued costs
Note
21
2015
$000
(8,762)
10,921
2,159
2014
$000
-
-
-
8.
EMPLOYEE INFORMATION
The average monthly number of employees of the Group (including executive Directors) was:
Africa
Corporate support staff
Group employee costs during the year (including executive Directors) amounted to:
Wages and salaries
Social security costs
Other pension costs
Share-based payments
2015
2014
7
10
17
2015
$000
3,023
372
228
297
4
10
14
2014
$000
2,955
367
202
659
3,920
4,183
Key management personnel include directors who have been paid $919k (2014: $1.0 million), see Remuneration
Committee Report (pages 40 - 49) for additional detail.
A portion of the Group’s staff costs and associated overheads are recharged to the joint venture partners, expensed
as pre-licence expenditure or capitalised where they are directly attributable to ongoing capital projects. In 2015
this portion amounted to $3.5 million (2014: $4.1 million).
Finance income:
Interest revenue on short-term deposits
Finance expense:
Bank charges
Unwinding of discount on decommissioning provision
Unwinding of discount on production royalty bonus provision
Exchange differences
2015
$000
356
356
13
966
-
89
2014
$000
398
398
11
1,079
5
181
1,068
1,276
10. TAXATION
The tax charge for the year is calculated by applying the applicable standard rate of tax as follows:
Loss before tax
Tax on loss on ordinary activities at standard
UK corporation tax rate of 20.25% (2014: 21.50%)
Effects of:
Expenses not deductible for tax purposes
Capital allowances in excess of depreciation
Adjustment for tax losses
Tax charge for the year
Total
2015
$000
(15,950)
(3,230)
1,572
(785)
2,443
-
2014
$000
(12,318)
(2,648)
2,101
102
445
-
Deferred Tax
At the reporting date the Group had an unrecognised deferred tax asset of $19.0 million (2014: $17.1 million)
relating primarily to unused tax losses and unutilised capital allowances. No deferred tax asset has been recognised
due to the uncertainty of future profit streams against which these losses could be utilised. At the reporting date
the Company had an unrecognised deferred tax asset of $15.4 million (2014: $13.4 million) relating primarily to
unused losses and unutilised capital allowances.
80
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS 11. DISCONTINUED OPERATIONS
14.
INTANGIBLE ROYALTY ASSETS
On 29 January 2013, the Company formally announced the Group’s withdrawal from the Sangaw North licence
in Kurdistan. The decision to relinquish was made in December 2012 and all amounts were fully impaired at
this date. At the date of the final dissolution, the Group had fully satisfied the work commitment required by the
Sangaw North PSC and all other commitments in country.
During 2015 the Group released accruals totalling $5k.
The financial impact of the Group’s discontinued operations is provided below:
Net decrease in cash and cash equivalents
12. LOSS ATTRIBUTABLE TO THE COMPANY
2015
$000
(43)
2014
$000
(460)
The loss for the financial year within the Company accounts of Sterling Energy plc was $4.3 million (2014: $84.3
million) which includes the investment impairment as detailed in Note 17. As provided by s408 of the Companies
Act 2006, no individual statement of comprehensive income and expense is provided in respect of the Company.
13. EARNINGS PER SHARE
Basic
Diluted
2015
$000
2014
$000
2015
$000
2014
$000
Loss for the year (continuing operations)
(15,950)
(12,318)
(15,950)
(12,318)
Loss for the year (discontinuing operations)
-
-
-
-
Weighted average number of ordinary shares in
issue during the year
220,053,520
220,053,520
220,053,520
220,053,520
Dilutive effect of share options outstanding
-
-
-
-
Fully diluted average number of ordinary shares
during the year
220,053,520
220,053,520
220,053,520
220,053,520
EPS (continuing operations) (US cents)
EPS (discontinuing operations) (US cents)
(7.25)
-
(5.60)
-
(7.25)
-
(5.60)
-
In the current year, the number of potentially dilutive ordinary shares in respect of All staff and NED LTIPs outstanding
as at the year-end is 7,578,783 (2014: 13,185,433) (see Note 25 on pages 94 - 96).
Net book value at 1 January 2014
Amortisation charge for the year
Impairment for the year
Net book value at 31 December 2014
Net book value at 31 December 2015
15.
INTANGIBLE EXPLORATION AND EVALUATION (‘E&E’) ASSETS
Net book value at 1 January 2014
Additions during the year
Impairment for the year
Net book value at 31 December 2014
Additions during the year
Impairment for the year
Net book value at 31 December 2015
Impairment for the 2015 refers to the full impairment of the Ntem asset (2014: Ampasindava).
Group
$000
2,794
(733)
(2,061)
-
-
Group
$000
13,187
17,102
(1,863)
28,426
4,831
(8,183)
25,074
82
83
Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS 16. PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 1 January 2014
Additions during the year
At 31 December 2014
Additions during the year
At 31 December 2015
Accumulated depreciation and impairment
At 1 January 2014
Charge for the year
Impairment reversal for the year
At 31 December 2014
Charge for the year
Impairment for the year
At 31 December 2015
Net book value at 31 December 2015
Net book value at 31 December 2014
Net book value at 31 December 2013
Oil and Gas
assets
$000
Computer
and office
equipment
$000
185,802
-
185,802
-
185,802
(180,256)
(1,567)
(3,979)
(185,802)
-
-
143
32
175
16
191
(45)
(58)
-
(103)
(54)
-
Total
$000
185,945
32
185,977
16
185,993
(180,301)
(1,625)
(3,979)
(185,905)
(54)
-
(185,802)
(157)
(185,959)
-
-
5,546
34
72
98
34
72
5,644
Company
Cost
At 1 January 2014
At 31 December 2014
At 31 December 2015
Accumulated depreciation and impairment
At 1 January 2014
Charge for the year
Impairment for the year
At 31 December 2014
At 31 December 2015
Net book value at 31 December 2015
Net book value at 31 December 2014
Net book value at 31 December 2013
Oil and Gas
assets
$000
Computer
and office
equipment
$000
185,802
185,802
185,802
(180,256)
(1,567)
(3,979)
(185,802)
(185,802)
-
-
5,546
-
-
-
-
-
-
-
-
-
-
-
Total
$000
185,802
185,802
185,802
(180,256)
(1,567)
(3,979)
(185,802)
(185,802)
-
-
5,546
84
85
Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS 17.
INVESTMENT IN SUBSIDIARIES
18. TRADE AND OTHER RECEIVABLES
Cost
At 1 January 2014
Impairment of investment in subsidiary
Additions during the year
At 31 December 2014
Additions during the year
At 31 December 2015
Company
$000
107,834
(79,604)
660
28,890
223
29,113
Trade receivables
Amounts owed by subsidiary undertakings
Other receivables
Amounts due from joint venture partners
Prepayments and accrued income
Group
Company
2015
$000
80
-
130
-
340
550
2014
$000
2,699
-
162
-
433
2015
$000
42
20,366
8
-
62
2014
$000
2,518
17,130
55
-
70
3,294
20,478
19,773
The subsidiary undertakings at 31 December 2015 are as follows (these undertakings are included on consolidation):
The Directors consider that the carrying amount of trade and other receivables is a reliable estimate of their fair
value.
Country of
incorporation
Class of
shares held
Proportion of
voting rights
held 2015
Proportion of
voting rights
held 2014
Nature of
business
19. SHARE CAPITAL
Ordinary
100%
100%
Ordinary
100%
100%
Exploration for oil
and gas
Exploration for oil
and gas
Ordinary
100%
100% Investment holding
company
Authorised, called up, allotted and fully paid
220,053,520 (2014: 220,053,520) ordinary shares of 40p
149,014
149,014
2015
$000
2014
$000
Ordinary
100%
100%
Jersey, CI
Ordinary
100%
100%
Exploration for oil
and gas
Exploration for oil
and gas
20. RESERVES
Reserves within equity are as follows:
Jersey, CI
Ordinary
100%
100% Investment holding
company
Share Capital
Amounts subscribed for share capital at nominal value.
United
Kingdom
United
Kingdom
United
Kingdom
United
Kingdom
Sterling Energy (UK) Limited 1
Sterling Energy (International)
Limited 2
Sterling Energy Overseas
Limited 1
Sterling Energy Mauritania
Limited 3
Sterling Northwest Africa
Holdings Limited 1
Sterling Energy Holdings
Limited 4
Sterling Cameroon Limited 4
Jersey, CI
Ordinary
100%
100%
Sterling Energy (East Africa)
Limited 4
Sterling Kenya Limited
(Dormant) 4
Jersey, CI
Ordinary
100%
100%
Jersey, CI
Ordinary
100%
100%
Exploration for oil
and gas
Exploration for oil
and gas
Exploration for oil
and gas
1 Held directly by the Company, Sterling Energy Plc
2 Held directly by Sterling Energy (UK) Limited
3 Held directly by Sterling Energy Overseas Limited
4 Held directly or indirectly through Sterling Northwest Africa Limited
Share Premium Account
The share premium account represents the amounts received by the Company on the issue of its shares which
were in excess of the nominal value of the shares.
Currency Translation Reserve
The foreign currency translation reserve includes movements that relate to the retranslation of the subsidiaries
whose functional currencies are not the US dollar.
Retained Deficit
Cumulative net gains and losses recognised in the Statement of Comprehensive Income less any amounts
reflected directly in other reserves. The share option reserve has been included within the retained deficit and is a
non-distributable reserve.
86
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS 21. SHORT AND LONG-TERM PROVISIONS
22. TRADE AND OTHER PAYABLES
At 31 December 2015, a provision of $3.7 million (2014: $3.4 million) has been made in recognition of all expected
future net onerous commitments under the Chinguetti Funding Agreement – see also Note 2.
Long term provisions are detailed in the table below:
Group
Decommissioning provision (a)
2003 Production Royalty Bonus Scheme (b)
a) Decommissioning Provisions
Group/Company
At 1 January
Increase in decommissioning provision
Unwinding of discount
2015
$000
2014
$000
32,395
22,667
-
-
32,395
22,667
2015
$000
2014
$000
22,667
21,588
8,762
966
32,395
-
1,079
22,667
The amounts shown above represent the estimated costs for decommissioning the Group’s producing interests
in respect of its economic interest in the Chinguetti field in Mauritania.
The Company amount of $32.4 million (2014: $22.7 million) represents the amount provided within the Company
for future decommissioning expenditure.
b) 2003 Production Royalty Bonus Scheme
Group
At 1 January
Unwinding of discount
Transferred to current liabilities
Foreign exchange movements
2015
$000
2014
$000
-
-
-
-
-
63
5
(68)
-
-
This scheme was intended to reward key persons for the successful performance of certain assets after financial
thresholds had been reached for the period since listing in 2002. The scheme was terminated in 2007 and
replaced by the LTIP scheme (‘2007 LTIP’, and the ‘All Staff LTIP’, see Note 25) and no further sums were
accrued. The scheme concluded in 2015.
Trade payables
Amounts owed to subsidiary undertakings
Amounts advanced from joint venture partners
Accruals
Group
Company
2015
$000
264
-
1,043
1,433
2,740
2014
$000
356
-
850
12,457
13,663
2015
$000
13
2014
$000
10
35,523
39,120
-
771
36,307
-
12,134
51,264
The Directors consider that the carrying amount of trade and other payables is a reliable estimate of their fair value.
23. OPERATING LEASES AND CAPITAL COMMITMENTS
Group
Company
2015
$000
2014
$000
2015
$000
2014
$000
Minimum lease payments under operating
leases recognised as an expense in the year
6,124
5,220
5,702
4,763
At the reporting date outstanding commitments for minimum operating leases payments fall due as follows:
Within one year
In the second to fifth year inclusive
Group
Company
2015
$000
4,774
422
5,196
2014
$000
5,203
1,554
6,757
2015
$000
4,315
-
4,315
2014
$000
4,809
1,554
6,363
Operating lease payments represent the Group’s share of rentals for the Berge Helene vessel in Mauritania, a BWO
operated Floating Production, Storage and Offtake (‘FPSO’) and rentals payable for its office properties. The current
FPSO commitment is through the Chinguetti Funding Agreement and has a break clause in 2016; accordingly,
included within the $5.1 million is $4.3 million payable on the FPSO within one year.
88
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS
Financial Risk Management Objectives
The Group’s and Company’s objective and policy is to use financial instruments to manage the risk profile of its
underlying operations. The Group continually monitors financial risk including oil and gas price risk, interest rate
risk, equity price risk, currency translation risk and liquidity risk and takes appropriate measures to ensure such
risks are managed in a controlled manner including, where appropriate, through the use of financial derivatives. The
Group and Company does not enter into or trade financial instruments, including derivative financial instruments,
for speculative purposes.
Interest Rate Risk Management
The Group and Company does not have any outstanding borrowings and thus, the Group and Company is only
exposed to interest rate risk on its short-term cash deposits.
Interest Rate Sensitivity Analysis
The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date
and assumes the amount of the balances at the reporting date were outstanding for the whole year.
A 100 basis point change represents management’s estimate of a possible change in interest rates at the reporting
date. If interest rates had been 100 basis points higher and all other variables were held constant the Group’s
profits and equity would be impacted as follows:
Cash and cash equivalents
Group Increase
Company Increase
2015
$000
987
2014
$000
1,081
2015
$000
975
2014
$000
1,065
24. FINANCIAL INSTRUMENTS
Capital risk management and liquidity risk
The Group and Company is not subject to externally imposed capital requirements. The capital structure of
the Group and Company consists of cash and cash equivalents held for working capital purposes and equity
attributable to the equity holders of the parent, comprising issued capital, reserves and retained deficit as disclosed
in the statement of changes in equity. The Group and Company uses cash flow models and budgets, which are
regularly updated, to monitor liquidity risk.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis
of measurement and the basis on which income and expenses are recognised, in respect of each material class
of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.
Due to the short-term nature of these assets and liabilities such values approximate their fair values at 31 December
2015 and 31 December 2014.
Group
Financial assets (classified as loans and receivables)
Cash and cash equivalents
Cash and cash equivalents held on behalf of partners
Trade and other receivables
Total
Financial liabilities at amortised cost
Trade and other payables
Total
Company
Financial assets (classified as loans and receivables)
Cash and cash equivalents
Trade and other receivables
Total
Financial liabilities at amortised cost
Trade and other payables
Total
Carrying amount/Fair value
2015
$000
2014
$000
97,553
107,034
1,100
209
1,114
2,861
98,862
111,009
2,740
2,740
13,663
13,663
Carrying amount/Fair value
2015
$000
2014
$000
97,483
20,416
106,473
19,703
117,899
126,176
36,307
36,307
51,264
51,264
90
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS Foreign Currency Risk
The Group’s and Company’s functional currency is the US dollar, being the currency in which the majority of the
Group’s revenue and expenditure is transacted. Small elements of its management, services and treasury functions
are held and transacted in pounds sterling. The Group does not enter into derivative transactions to manage its
foreign currency. Foreign currency risk is immaterial to the Group and Company – see the following table:
Financial Assets
Cash and cash equivalents
Cash and cash equivalents held in US$
Cash and cash equivalents held in GBP
Trade and other receivables
Trade and other receivables held in US$
Trade and other receivables held in GBP
Financial Liabilities
Trade and other payables
Trade and other payables held in US$
Trade and other payables held in GBP
Group
Company
2015
$000
97,380
1,273
98,653
2014
$000
106,791
1,357
108,148
2015
$000
96,203
1,280
97,483
2014
$000
105,180
1,293
106,473
Group
Company
2015
$000
157
53
210
2014
$000
2,779
82
2,861
2015
$000
2014
$000
20,408
19,699
8
4
20,416
19,703
Group
Company
2015
$000
2,202
538
2,740
2014
$000
12,972
691
13,663
2015
$000
30,042
6,265
36,307
2014
$000
45,196
6,068
51,264
Credit Risk Management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group or Company. The Group and Company reviews the credit risk of the entities that it sells its products to
or that it enters into contractual arrangements with and will obtain guarantees and commercial letters of credit as
may be considered necessary where risks are significant to the Group or Company. The Group’s and Company’s
business is diversified in terms of both region and the number of counter-parties, and the Group and Company
does not have significant exposure to any single counter-party, group or company of counter-parties with similar
characteristics.
In relation to its cash and cash equivalents, the Group has to manage its currency exposures and the credit risk
associated with the credit quality of the financial institutions in which the Group maintains its cash resources. At
the year end the Group held approximately 99% (2014: 99%) of its cash in US dollars. At the year end the Group
held the majority of its balances with AA- and A+ Standard & Poors rated institutions. The Group continues to
monitor its treasury management to ensure an appropriate balance of the safety of funds and maximisation of
yield.
During the year the Company reversed previously impaired loans to Sterling Energy (International) Limited totalling
$18k (2014: $533k) following the relinquishment of its Sangaw North licence in Kurdistan. Trade and other
receivables are non-interest bearing. The Group does not hold any collateral as security and the Group does not
hold any significant provision in the impairment account for trade and other receivables as they relate to customers
with no default history. There are no financial instruments held at fair value under the level 1, 2 and 3 hierarchy.
Liquidity and Interest Rate Tables
The following tables detail the remaining contractual maturity for the non-derivative financial assets and liabilities
of the Group and Company. The tables have been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest
and principal cash flows including rates for loan liabilities and cash deposits on actual contractual arrangements.
The weighted average interest rate used in 2015 is nil % (2014: nil %).
Less than
six months
$000
Six months
to one year
$000
One to
six years
$000
Total
$000
Interest
$000
Principal
$000
Group
Trade payables (2015)
Trade payables (2014)
1,197
1,111
Company
Trade and other
payables (2015)
Trade and other
payables (2014)
8
4
-
-
-
-
-
-
1,197
1,111
35,523
35,531
39,120
39,124
-
-
-
-
-
-
-
-
92
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS
25. SHARE-BASED PAYMENTS
The Group recognised a total expense, within administration costs, in respect of share-based payments under
equity-settled share option plans of $297k (2014: $659k). The Company recognised a total expense, within
administration costs, in respect of share-based payments under equity-settled share option plans of $22k
(2014: $30k).
In 2009 the Company reviewed the existing share-based incentive schemes currently in place to motivate and
incentivise Group employees. The Company also took independent advice to support its review. Based on this,
the Company proposed a new All Staff Long Term Incentive Plan as being the most effective way to deliver
the incentives that the Board believes will continue to align the interests of the employees and shareholders.
Shareholders approved this plan at the December EGM held on 22 December 2009.
With effect from 2009, all further awards are made under the All Staff Long Term Incentive Plan. Awards are
made on similar terms to non-executive Directors of the Company, under a separate plan the NED LTIP.
All Staff Long Term Incentive Plan (‘All Staff LTIP’)
In accordance with the approved All Staff LTIP, the Group has granted options to its staff and executive Directors
to acquire shares in the Company.
The movement during the year, on the share options, was as follows:
2015
Number of
share options
2015
Exercise
price (pence)
2014
Number of
share options
2014
Exercise price
(pence)
Outstanding at the beginning of the year
11,556,950
Granted during the period
Lapsed during the period
Outstanding at the end of the year
Exercisable at the end of the year
-
(5,440,450)
6,116,500
-
40
40
40
40
-
12,114,800
4,396,300
(4,954,150)
11,556,950
-
40
40
40
40
-
All options are equity settled. The vesting period is three years. If the options remain unexercised after a period of
five years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before
the options vest or are exercised.
The options outstanding at 31 December 2015 have a contractual life of 3.35 years (2014: 3.81 years). The cost
of the options is spread over the vesting period of three years. There were no options granted during the year. The
fair value of the options granted in 2014 was 5.7 pence.
If the Company share price (‘SESP’) under-performs the Index performance by 10% or more, then no share
options will be earned and the share options will lapse.
If the SESP performance is between matching the Index and under-performing by 10%, the amount of the share
options that will be earned will be determined by extrapolating on a 2.5:1 straight line basis.
If the SESP performance matches the Index performance, then 25% of the share options will be earned.
If the SESP performance is between matching the Index and out-performing by 50%, the amount of the share
options that will be earned will be determined by extrapolating on a 1.5:1 straight line basis.
If the SESP out performs the Index performance by 50% or more, then 100% of the share options will be earned.
All performance measures are defined as being the absolute share price performance or absolute index
performance, and not the performance relative to each other.
Fair values were measured by use of a modified binomial model. The inputs to the basic binomial model were as
follows:
Share price (pence)
Exercise price (pence)
Expected volatility at time of grant
Expected life (years)
Risk free rate (%)
Expected dividends
2015
n/a
n/a
n/a
n/a
n/a
n/a
2014
24
40
61.25%
3
0.66%
Nil
All Staff LTIP Sub-Plan
In 2013 the Company introduced a HMRC approved sub-plan to the All Staff Long Term Incentive Plan (‘HMRC
Sub-Plan’).
The movement during the year, on the share options, was as follows:
2015
Number of
share options
2015
Exercise
price (pence)
2014
Number of
share options
2014
Exercise price
(pence)
Outstanding at the beginning of the year
1,235,700
Granted during the period
Lapsed during the period
Outstanding at the end of the year
Exercisable at the end of the year
-
(166,200)
1,069,500
-
42
-
42
42
-
949,900
563,800
(278,000)
1,235,700
-
43
40
43
42
-
The options outstanding at 31 December 2015 have a contractual life of 3.33 years (2014: 4.31 years). The cost
of the options is spread over the vesting period of three years. There were no options granted during the year. The
fair value of the options granted during 2014 was 5.7 pence.
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Fair values were measured by use of a modified binomial model. The inputs to the basic binomial model were as
follows:
26. RELATED PARTY TRANSACTIONS
Details of Directors’ remuneration, which comprise key management personnel, are provided below:
Share price (pence)
Exercise price (pence)
Expected volatility at time of grant
Expected life (years)
Risk free rate (%)
Expected dividends
2015
n/a
n/a
n/a
n/a
n/a
n/a
2014
24
40
61.25%
3
0.66%
Nil
Non-executive Directors Long Term Incentive Plan (‘NED LTIP’)
In accordance with the approved NED LTIP, the Group has granted options to its non-executive Directors to
acquire shares in the Company.
Short-term employee benefits
Payments on loss of office
Defined contribution pension
Share-based payments
Group
Company
2015
$000
876
-
43
(84)
835
2014
$000
960
123
41
416
1,540
2015
$000
163
-
-
22
185
2014
$000
173
-
-
30
203
Further information on Directors’ remuneration is detailed in the Remuneration Committee Report, on pages 40 - 49.
The movement during the year, on the share options, was as follows:
The Group and Company has no other disclosed related party transactions.
2015
Number of
share options
2015
Exercise
price (pence)
2014
Number of
share options
2014
Exercise price
(pence)
Outstanding at the beginning of the year
392,783
Granted during the period
Lapsed during the period
Outstanding at the end of the year
Exercisable at the end of the year
-
(83,333)
309,450
309,450
40
-
40
40
40
642,783
-
(250,000)
392,783
83,333
40
40
40
40
40
All options are equity settled. The vesting period is three years. If the options remain unexercised after a period of
five years from the date of grant, the options expire.
Furthermore, options are forfeited if the non-executive Director leaves the Group before the options vest or are
exercised. The options outstanding at 31 December 2015 have a contractual life of 1.75 years (2014: 2.33 years).
The cost of the options is spread over the vesting period of three years.
No performance criteria are attached to the outstanding options, other than the requirement that the holders must
remained employed by the Group when the options are exercised, unless employment is terminated on death, or
as a good leaver.
27. SUBSEQUENT EVENTS
Mauritania – Withdrawal from block C-3
On 29 January 2016 it was announced that it’s wholly owned subsidiary SEML had submitted a notice of withdrawal
to its joint venture partners in relation to block C-3, offshore Mauritania. As part of the withdrawal, SEML will assign
its entire 40.5% participating interest in the production sharing contract for block C-3, located offshore in the
Islamic Republic of Mauritania to Tullow Oil at no cost to Tullow Oil. The minimum work obligations for block C-3
have been completed. As a result, SEML will have no additional costs associated with the withdrawal.
28. CONTINGENT LIABILITIES
The Group has received a claim for VAT from the Madagascan tax authority totalling $946k in respect of its
Ampasindava and Ambilobe licences. Having taken professional advice the Group considers the claim to be
wholly without foundation and continues to defend its position through the appropriate dispute resolution and
legal processes.
Following the farm-in to the Odewayne licence in Somaliland, there is a remaining contingent consideration of
$8.0 million payable to Petrosoma Limited based upon various operational milestones being met. At 31 December
2015, these milestones had not been met.
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015Year ended 31 December 2015Notes to the Financial StatementsGROUP ACCOUNTS Definitions and Glossary of Terms
$
2006 Act
2007 LTIP
1P
2D
2P
3D
3P
AIM
All Staff LTIP
AGM
Articles
bbl
bopd
boe
Board
US dollars
the Companies Act 2006, as amended
the 2007 Long Term Incentive Plan
proven reserves (both proved developed reserves + proved undeveloped
reserves)
two dimensional
1P (proven reserves) + probable reserves, hence “proved AND probable”
three dimensional
the sum of 2P (proven reserves + probable reserves) + possible reserves, all
3Ps “proven AND probable AND possible”
AIM, a market of the London Stock Exchange
the All Staff Long-Term Incentive Plan adopted in 2009
Annual General Meeting
the Articles of Association of the Company
barrel, equivalent to 42 US gallons of fluid
barrel of oil per day
barrel of oil equivalent, a measure of the gas component converted into its
equivalence in barrels of oil
the Board of Directors of the Company
Combined Code or Code
UK Corporate Governance Code
Companies Act
the Companies Act (as amended 2006)
Company
CSOP
Directors
E&P
Adjusted EBITDAX
EITI
EUR
Farm-in & Farm-out
Sterling Energy plc
Company Share Option Plan (HMRC approved share option scheme)
the Directors of the Company
exploration and production
earnings before interest, taxation, depreciation, depletion and amortisation,
impairment, share-based payments, provisions, and pre-licence expenditure
Extractive Industries Transparency Initiative
the total amount of hydrocarbons expected to be produced from the
hydrocarbon accumulation over the life of the project. Estimated ultimate
recovery is synonymous with recoverable resource and the terms are used
interchangeably.
a transaction under which one party (farm-out party) transfers part of its
interest to a contract to another party (farm-in party) in exchange for a
consideration which may comprise the obligation to pay for some of the
farm-out party costs relating to the contract and a cash sum for past costs
incurred by the farm-out party.
FA
FCA
FPSO
Funding Agreement
Financial Conduct Authority
Floating, Production, Storage and Offloading vessel
G&G
GBP
geological and geophysical
pounds sterling
Genel Energy
Genel Energy Somaliland Limited
Group
HMRC
HMRC Approved Sub-Plan or
HMRC Sub-Plan
HSSE
hydrocarbons
IFRS
Index
JV
K
km
km2
lead
the Company and its subsidiary undertakings
Her Majesty’s Revenue and Customs
The HMRC approved sub-plan of the All Staff LTIP
Health, Safety, Security and Environment
organic compounds of carbon and hydrogen
International Financial Reporting Standards
FTSE 350 Index
joint venture
thousands
kilometre(s)
square kilometre(s)
indication of a potential exploration prospect
London Stock Exchange or LSE
London Stock Exchange Plc
m
mcf
Murphy
NED LTIP
OECD
OPU
metre(s)
thousand cubic feet
Murphy Cameroon Ntem Oil Co. Ltd
non-executive Director Long Term Incentive Plan adopted in 2009
Organisation for Economic Cooperation and Development
Oil Protection Unit
Ordinary Shares
ordinary shares of 40 pence each
P90
P50
P10
Pmean
the value on a probabilistic distribution which is exceeded by 90% of the
outcomes.
the value on a probabilistic distribution which is exceeded by 50% of the
outcomes. The P50 is also the median value of the distribution.
the value on a probabilistic distribution which is exceeded by 10% of the
outcomes.
the average of the values in the probabilistic distribution between defined
‘boundary conditions’. Universally regarded as the best single value to
quote or communicate for any uncertain distribution of outcomes involved in
repeated trial investigations.
Panel or Takeover Panel
the Panel on Takeovers and Mergers
Petroleum
Petroleum system
oil, gas, condensate and natural gas liquids
geologic components and processes necessary to generate and store
hydrocarbons, including a mature source rock, migration pathway, reservoir
rock, trap and seal.
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Sterling Energy plc Report and Financial Statements 2014
Sterling Energy plc Report and Financial Statements 2014
99
Definitions and Glossary of Terms (cont.)
Professional Advisers
Petronas
Petrosoma
Premier
Pre Stack Depth Migration
Prospect
PSA
PSC
Pura Vida
RA
Reserves
Reservoir
Seismic
SESP
Shares
Shareholders
SMHPM
Subsidiary
Tcf
TSR
PC Mauritania 1 PTY LTD
Petrosoma Limited (joint venture partner in Somaliland)
Premier Oil
process by which seismic events are geometrically re-located in space and
depth to the location the event occurred in the subsurface
an area of exploration in which hydrocarbons have been predicted to exist
in economic quantity. A group of prospects of a similar nature constitutes a
play.
production sharing agreement
production sharing contract
Pura Vida Mauritius
Royalty Agreement
reserves are those quantities of petroleum anticipated to be commercially
recoverable by application of development projects to known accumulations
from a given date forward under defined conditions. Reserves must satisfy
four criteria; they must be discovered, recoverable, commercial and
remaining based on the development projects applied. Reserves are further
categorised in accordance with the level of certainty associated with the
estimates and may be sub-classified based on project maturity and/or
characterised by development and production status.
a porous and permeable rock capable of containing fluids
data, obtained using a sound source and receiver, that is processed to
provide a representation of a vertical cross-section through the subsurface
layers.
Sterling Energy plc share price
40p ordinary shares
ordinary shareholders of 40p each in the Company
Société Mauritanienne Des Hydrocarbures et de Patrimoine Minier
a subsidiary undertaking as defined in the 2006 Act
Trillion cubic feet
total shareholder return (End Share Price – Opening Share Price/Opening
Share Price) plus (Sum of Dividends per Share/Opening Share Price)
United Kingdom or UK
the United Kingdom of Great Britain and Northern Ireland
UK Corporate Governance Code
United States or US
Working Interest or WI
Formerly the Combined Code, sets out standards of good practice in
relation to Board leadership and effectiveness, remuneration, accountability
and relations with shareholders
the United States of America
a Company’s equity interest in a project before reduction for royalties or
production share owed to others under the applicable fiscal terms
Nominated Adviser and Corporate Broker
Peel Hunt
Moor House
120 London Wall
London
EC2Y 5ET
Corporate Bankers
HSBC
165 Fleet Street
London
EC4A 2DY
Barclays Commercial Bank
1 Churchill Place
London
E14 5HP
The Royal Bank of Scotland plc
1 Albyn Place
Aberdeen
AB10 1BR
Legal
Memery Crystal LLP
44 Southampton Buildings
London
WC2A 1AP
Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Registered Office
85 Fleet Street
London
EC4Y 1AE
100
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015 Notes
102
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Sterling Energy plc Report and Financial Statements 2015Sterling Energy plc Report and Financial Statements 2015 Sterling Energy plc
85 Fleet Street
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EC4Y 1AE
Tel:
+44 (0)20 7405 4133
Fax: +44 (0)20 7440 9059
Email: info@sterlingenergyuk.com
www.sterlingenergyplc.com