Sterling has concluded the previously announced farm-out agreement with RegEnersys under which RegEnersys will acquire a 15-percent working interest in UK offshore Blocks 42/13 and 42/12 which contain the Breagh gas discovery. Completion is subject to normal UK Government and partner approvals. Post completion, Sterling will retain a 50-percent working interest in the blocks and will essentially be carried for the dry-hole costs of the Breagh appraisal well. RegEnersys is a substantial natural resources investment fund, established to invest in opportunities within the energy sector. The Breagh interest is the first for RegEnersys in the North Sea and reflects the potential for significant infrastructure development assuming success of the forthcoming appraisal well. Sterling and RegEnersys have also agreed to terms that enable RegEnersys to acquire working interests in Sterling's significant acreage position which has been built up around the Breagh discovery. RegEnersys has preferred access to the Heerema Group of Companies who are international players in the oil and gas industry and the construction and infrastructure markets.
Sterling has secured a drilling slot for the Breagh appraisal well using the ENSCO 100 jackup rig and currently estimates a spud date in the third quarter of the year. There is potential for additional slots utilizing this rig to enable 2008 follow-up drilling depending on the success of Breagh.
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