Sterling Issues Activities Update

Calgary-based Sterling Resources, which has interests in the UK and Romania, has issued a status report on its projects. The activities update follows.

UK Offshore
Block operator Oilexco has advised Sterling that the Bredford Dolphin rig should arrive at the Disraeli location on Block 21/23a within the next few days. Oilexco will pay 95 percent of the drilling costs to earn a 65-percent interest to the base of the Eocene section targeting the Tay sands and an 85-percent interest in the deeper section targeting Jurassic sands. Sterling will pay 5 percent of the total well cost to retain a 35-percent interest to the base of the Eocene Tay stratigraphic interval and 15-percent interest in the deeper horizons.

Negotiations are continuing with other potential partners on several of Sterling's other blocks in the North Sea.

UK Onshore
Sterling has concluded a four-well drilling campaign completed within the three onshore UK oil and gas basins in which it holds licenses. All four wells encountered zones with indicated hydrocarbons that will be evaluated by further testing.

In the Cleveland Basin License PEDL 068, the wells at Kirkleatham and Westerdale have been drilled and cased. The Kirkleatham-4 well encountered a 19-meter gas column within the Zechstein Cadeby formation, penetrated at 804 meters. Testing indicated an initial flow rate of 2.8 mmscfd and the rate was increased in steps during the five-day test to a final rate of 5 mmscfd at a wellhead pressure of approximately 1,000 psig on a 18/64-inch choke. The well has been completed for potential future production, and various production options are being reviewed.

The Westerdale-1 well reached total depth of 1,304 meters within the Carboniferous, and potential gas pay was noted in the Carboniferous and the Permian Brotherton Carbonate. A short test on the Carboniferous (1,188 meters) produced small sub-commercial quantities of gas to surface, and pressure data indicate low permeability. The Brotherton interval (905 meters) produced gas to surface on a short unstimulated test at rates up to 130,000 scfd. Due to planning conditions, additional testing will be completed during the next operating period later in the year.

Sterling has retained a 47-percent working interest in PEDL 068 following farmout that covered the majority of the drilling costs on both wells.

In Weald Basin License PEDL070, the Avington-3 appraisal well (Sterling's interest, 8.33 percent) has reached TD and the well has been logged and a liner set. A well test program will be undertaken by the operator's workover rig.

In the Wessex Basin License PL090, the initial phase of testing the Waddock Cross-3 well (Sterling's interest, 18.75 percent) has been completed. Test data are being analysed to enable the design and procurement of pump and process equipment for future extended testing operations.

Onshore Romania
Onshore Romania, planning applications for several potential well locations are underway. Drilling tenders have been issued and the necessary equipment and personnel have been sourced to allow drilling to start in the second quarter. The planned wells are three geographically and stratigraphically distinct targets currently identified by the names Boar, Wolf, and Flounder.

The first well that is expected to be drilled is an oil prospect named Boar. This well is in the southeast part of the Craiova concession and the main target is the Dogger Sandstones with a secondary objective in the Middle Triassic. The main target the Jurassic Dogger is productive in the large Malu Mare field, which lies approximately 40 kilometers north from the planned well.

The first phase of the planned 2006 seismic program has been completed with a total of 165 kilometers acquired mainly in the Boar and Flounder areas of the Craiova block. In addition a new line was shot in the central portion of the block that previously lacked any modern seismic data.

The next phase of seismic is scheduled for June and will focus on a number of other leads identified on older seismic lines that have potential to mature into large-aerial-extent, multiple-stratigraphic targets. Plans are to shoot a minimum of 200 kilometers of new seismic with the possibility that this program could be expanded depending on results.

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