Sterling Energy Enters Strategic Partnership with Mauritania

Sterling Energy has secured a position as a strategic partner of the Mauritanian government. It has reached a conditional agreement to share in the revenues from the government's 12% interest in the 120 million barrel Chinguetti offshore oil field.

Sterling Chief Executive, Harry Wilson said: "This represents a stunning deal for Sterling, and establishes us as a key player in Mauritania, now recognized as one of the global hotspots for oil exploration and development activity. It cements our close relationship with the Mauritanian Government going forward as we have been confirmed as a strategic partner of the Government to help it develop its additional oil and gas assets."

Chinguetti, due on stream in early 2006, and operated by Woodside, is expected initially to produce 75,000 barrels of oil per day.

Sterling is paying a $15.5 million signature bonus, and providing a letter of credit for $130 million to cover the Government's share of past costs, forward development costs and contingencies. In return, Sterling will receive income from a sliding scale share of the field's production.

Sterling is seeking to raise £97 million (US$ 175 million) to fund the deal and supplement its cash balances, through an institutional placing. A shareholders' meeting has been convened for 18 November.

Sterling is already involved in Mauritania as a result of its successful £40 million take-over last December of Fusion Oil & Gas plc. That gave Sterling production royalty interests in offshore license areas PSC A and PSC B – with no future capital costs paid by Sterling.

A 20-well program is currently under way in PSC A and B, which includes development drilling on Chinguetti, appraisal of the 2003 Tiof discovery, and a five well exploration program, the first well of which resulted in the Tevet discovery last month.