Sterling Updates Ops at Sangaw North Block

Sterling provided the following update on operations in the Sterling operated Sangaw North block (53.33% working interest) in Kurdistan.

Since the last update on November 23, 2010, operations have been conducted to remove the hydrocarbon gas, containing approximately 0.5% hydrogen sulfide, that had entered the well bore and to retrieve the drill pipe that had parted at a depth of approximately 850 meters.

The gas influx has been contained, removed from the wellbore, and flared. The drilling fluid in the well bore has been replaced with heavier fluid to control the higher formation pressure encountered at the base of the well.

The drill pipe in the well bore has been adversely affected by the hydrogen sulphide within the gas, with the steel becoming brittle and prone to fracturing. Consequently, operations to retrieve the drill pipe have been challenging with drill pipe being recovered in lengths of between 1 meter and 120 meters, and operations being required to clean smaller pieces from the well bore.

The top of the drill pipe remaining in the well is at approximately 1,670 meters, some 220 meters below the bottom of the existing casing.

Recent operations indicate that the structural integrity of the drill pipe is improving with depth. The Company plans, based on the increasing rate of recovery, to continue retrieving drill pipe to reach the bottom hole assembly. However, if the rate of drill pipe recovery does not remain sufficiently high, the Company may proceed to abandon the existing wellbore at a depth in the open hole above the remaining drill pipe, sidetrack at this depth to a new well bore and re-drill the remaining section to the planned casing point.

These operations are challenging and the Company is unable to provide an estimate of the length of time that will be required to successfully complete them. Once they have been completed, the Company plans to run casing in the well.

Angus MacAskill, Sterling's Chief Executive said, "The Company has made significant progress in removing gas from the well, managing the formation pressures, and retrieving damaged drill pipe. With the remaining drill pipe now in the open hole below the casing shoe, we plan to proceed using the two operational options available to reach the planned casing point."