Sterling Group Production for Second half of 2007 by Nearly 1,000bbl/d

Sterling Energy reported that group production for the second half of 2007 is estimated at over 5,500 bbl/d compared with 4,900 bbl/d in the first half.

Net production for the USA operations at the end of 2007 was approximately 4,800 bbl/d, of which about 80% was gas and the remainder was liquids. Recently, gas prices have been increasing having been relatively unchanged during a long period of rising oil prices. Production for Q4 2007 is estimated to have averaged 4,200 bbl/d. It was affected by natural production declines and by equipment and weather delays in hooking-up discoveries.

In 2007, the USA operations drilled 35 wells with an 80% success rate. The third Austin Chalk well, Jet-3, has recently come on-stream and is producing at a net rate of 1.8 mmcfd (300 bbl/d). The fourth well in this program is now drilling at about 15,000 feet.

On the Thunder Stud prospect (Brown-1, NRI 10.7%) both oil & gas were encountered and testing was carried out in two intervals of the Yegua formation. The deeper sand was non-commercial, whilst the upper sand flowed oil and gas at a gross rate of c.475 bbl/d. The shallower Hackberry sands will be completed as a small producer. Partners are expected to agree to drill a second well in 2008, which will target sizable and better quality reservoir potential up-dip.

Year-end USA reserves are currently being evaluated, with present indications that 2P reserves will be approximately 110 bcfge, of which proved are approximately 65%. Possible reserves will add a further approximately 70 bcfge.

Gas prices have recovered in early 2008 and Sterling has entered into further hedges on its US production for 2008-9 at prices of approximately $8/mcf for gas and $84-89 /bbl for oil. The cost of US rigs and services remains high.

The USA capital expenditure programme for 2008 is expected to be $45-50 million and the major focus will be on appraisal and development drilling. Where appropriate, a portion of internally generated exploration prospects will be farmed out.

The offshore ICM-1 well in Gabon is scheduled to spud in May on the Iris Marin license (Sterling 50% interest*). This well is targeting gross reserves of 15-40 million bbls.

An appraisal well will be drilled on the Banda discovery in Mauritania at the end of Q1 by the Attwood Hunter at no cost to Sterling as it holds a royalty interest. It will then drill two development wells and carry out three workovers on the 50 million bbl Chinguetti field during Q2 2008.

The objective is to more than double field production, which in Q4 2007 averaged 12,300 bpd. Sterling’s share of the proceeds of the one cargo lifted in Q4 was $6.6 million.

The hook-up of these wells is expected to generate additional net revenues in the second half of 2008 and the results of these operations could have a material impact on the value of these interests. Petronas has now completed the acquisition of Woodside’s interests in Mauritania, including Chinguetti, and has taken over as field operator.

In AGC, the operator is in negotiations to secure a rig to drill an exploration/appraisal well targeting the exploration potential of light oil reservoirs on the flanks of the offshore Dome Flore heavy oil discovery, plus also appraising the heavy oil accumulation. These negotiations are subject to regulatory approvals. Sterling has a carried 30% interest in the well.

Negotiations are in progress in Madagascar regarding possible early drilling on a significant prospect offshore Madagascar. Sterling currently has a partly-carried 30% interest in an area of approximately 25,000 sq km, with ExxonMobil as operator. Sterling will seek to farmout a further portion of its costs in the proposed well.

Planning for the 2D seismic program in Kurdistan on the recently acquired Sangaw North permit is making good progress. Recent field work has significantly improved the understanding of the block and has also identified a number of oil seeps on the main structure which are extremely

encouraging. Sterling is seeking to fast-track work on this highly prospective area.

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