March 7 (Bloomberg) -- Sterling Resources Ltd., a Calgary-based oil-and-gas explorer, fell the most in seven months after disclosing a rise in costs expected to develop a North Sea gas platform, as well as a drop in reserves at the field.
Sterling declined 11 percent to close at C$1.91 in Toronto, the biggest retreat since Aug. 4. The shares have lost 57 percent in the past 12 months.
A forecast for costs to develop the first phase of the Breagh project in the southern North Sea rose to 566 million pounds ($891 million), 17 percent higher than an estimate in July, mostly because of expenses of installing an offshore pipeline, the company said today in a statement.
Reserves for the Breagh project fell 11 percent after “revised understanding and mapping of reservoir sands over the eastern side of the field,” the company said.
The reduction in reserves “is a slight negative, but should not cause undue concern,” James Hosie, an analyst at RBC Capital Markets, said today in a note to clients. He rates Sterling shares “outperform.”
Sterling also said it has used 59 million pounds of a 105 million pound credit facility to pay for development of the first phase of the Breagh project.
“We continue to believe Sterling can deliver the Breagh development without the need to raise additional funds, but would note that the tight funding position may limit its ability to pursue other opportunities in its portfolio,” Hosie said.
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