Grove Energy Acquires Stake in North Sea Block 42/13

Sterling Resources has signed a letter agreement with Grove Energy (UK) Ltd. under which Grove will acquire a 25% interest in Block 42/13 located in the UK Southern North Sea Gas Basin. Sterling currently holds a 100% working interest in the Block, which will reduce to 75% as a result of the farm out. Sterling will remain operator.

Grove will earn its interest by paying 50% of the dry hole costs of a well to the Carboniferous. Costs in excess of the turnkey cost of drilling the well and any testing costs will be paid by the parties according to their working interests.

Block 42/13 was one of the Blocks awarded to Sterling in the UK 22nd Licensing Round. Since award, Sterling has acquired the 3D seismic over the Block and a full evaluation has been completed by Sterling's consultants, PGL. The study confirms the potential for a large structure within which a 400 foot gas column has been proven by the 42/13-2 well. The study further shows that the 42/13-2 discovery well, drilled by Mobil in 1997, had significant wellbore damage and that an undamaged well should have produced commercial rates of natural gas.

Sterling plans to farm out additional working interest but in the interim will progress final well location and turnkey well proposals. The area is suited to jack up drilling and plans are progressing for a well in 2006.

The agreement is subject to the approval of the UK Department of Trade and Industry and a formal agreement.

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