Sterling Disappointed with Sangaw North Results

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

A flow test has been completed across the open hole section of the Sangaw North-1 well between 3,338 meters and 4,190 meters. This interval contains target horizons in the Jurassic Mus and Butmah formations and the Triassic Kurra Chine formation.

The well flowed at a stabilized rate of approximately 4.6 million standard cubic feet of gas and 7,280 barrels of formation water per day during a 12 hour flow period through a 1.5 inch choke with a wellhead pressure of 470 pounds per square inch.

Approximately 74 percent of the produced gas was hydrocarbon gas with the remainder comprising 24 percent hydrogen sulphide and 2 percent carbon dioxide.

A wireline logging operation was attempted to identify the contribution from individual zones within the open hole section but was unsuccessful due to mechanical restrictions within the flow testing equipment.

No further flow testing is planned in the open hole section of the well and this section is being isolated with cement plugs.

The joint venture partnership has elected, based on gas shows while drilling, to conduct two cased hole flow tests; the first across a 100 meter interval within the Jurassic aged Sargelu formation and the second across a 100 meter interval within the Cretaceous aged Kometan formation. Each flow test, including preparatory operations, is expected to take approximately three weeks to complete.

Angus MacAskill, Sterling's Chief Executive said, "We are disappointed that the open hole flow test has not demonstrated commercial hydrocarbon flow rates within the deeper horizons of the Sangaw North-1 well. The data acquired during this test will be integrated with all the other data acquired in well operations to determine the potential of these horizons. We look forward to the outcome of the two cased hole flow tests to be conducted in shallower formations."