Oil and gas company Sterling Energy posted an annual loss on Monday following a drop in production and impairment from the termination of its Sangaw North block in Kurdistan.

The group reported a loss of £12.9m for 2012, compared to a profit of $18.4m the previous year.

Sterling Energy was hit by an impairment of $18.4m after relinquishing its five-year agreement on the Sangaw North block following "disappointing results" from the prospect.

"Whilst the outcome is disappointing, we believe the initial resource potential of the Sangaw North block, a view shared by Addax when they farmed-in and paid for our drilling costs, justified our own financial exposure in this project," the firm said in a statement.

A 17% year-on-year decrease in production to 523 barrels of oil per day also pulled down results.

The reduction was mainly due to operational difficulties including a hydrate blockage that halted output for 17 days and a failure of subsea which caused a nine-day stoppage, the company said.

Nevertheless, revenues jumped to $22.5m from $19.1m and the cash balance at year-end rose to $120.3m from $115.m. Revenues were driven by a 28% rise to 2.6m barrels of gross volumes lifted and sold.

During the year the company received $12.7m of net cash flow in Chinguetti field operations and reached an agreement for the prolongation of exploration licences in Madagascar.

Sterling said it would be searching for new ventures to add to its portfolio in 2013.

"We will look both within and beyond our legacy areas for the right opportunity but remain focused on acquiring only those ventures which we believe will deliver real growth and value for our shareholders," the group said.

RD

Related share prices
Sterling Energy (SEY) share price