The Matagorda Island 520 SE/4 # 4 ST was successfully re-completed in September, increasing net production from 1 mcfgd to 500 mcfgd. Sterling has a 59.5% net revenue interest in the well.
At Mustang Island in the Western Gulf of Mexico, Sterling has completed early, a $4.8 million upgrade of its pipeline and processing facilities to accommodate increased third party production, commencing shortly. Sterling paid $0.25 million of the costs of these upgrades, the remainder being paid by a third party user. This work has resulted in periods of shut-in of the system to accommodate this work. Sterling's transportation and processing revenues are expected to double to over $2.6 million per annum and it will enable an extension of the life of some of its wells.
Sterling has farmed out its interest in the High Island 52 Field (50% WI), subject to the drilling of a well in Q1 2007. This farmout excludes Sterling's royalty interest in the Gryphon wells located in the NE quadrant of High Island 52, which have been generating in excess of $0.5 million net per month. Sterling will receive cash of $0.3 million if no well is drilled or it is not commercial. In the event of any development, it will have a 2.75% ORRI and will be relieved of the field abandonment costs, which exceed $2 million net.
Abandonment operations are underway on High Island A-68/83 where production ceased in 2003. Seven wells are being plugged and decommissioning of the existing platforms will take place in 2007.
The non-operated Galveston 303 #7 well is drilling earlier than expected. Sterling has a 17.3% WI in this 10,873 foot well to capture 1 bcf of net reserves. The well is expected to reach total depth in late-November.
The higher potential drilling is expected to start in late November, on the North Theall Heirs #1 exploratory well located onshore south Louisiana. Sterling has a 34% WI in this high risk 15,000 foot well, targeting a net 10-30 bcfge.
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