Sterling Energy Touts Increase in Revenues

Sterling Energy, the AIM listed independent oil and gas exploration and production company operating in Africa, the Middle East, the Gulf of Mexico and onshore USA, announces its 2007 Preliminary Results.

Sterling Energy reported that revenues increased by 20% to $97.2 million in 2007 (2006: $81.0 million), with the contribution from the acquired WEC assets and higher oil and gas prices offsetting the impact of disappointing Chinguetti field production.

USA production increased by 109% to an average of 25.8 mmcfge/d (2006: 8.6 mmcfge/d), with 74% being gas (2006: 83%). Revenues from USA operations increased 41% to $67.8 million (2006: $23.4 million) with an average realised price of $7.02/mcfge (2006: $6.73/mcfge). Third party income from Sterling-operated pipelines fell 38% to $1.6 million (2006: $2.5 million), before related costs.

The Group's entitlement to Chinguetti field production in 2007 totaled 0.5 million bbls (2006: 1.0 million bbls). Revenue from the Chinguetti field interests totaled $29.3 million (2006: $57.6 million), net of the cost of related settlements of hedge contracts crystallizing of $5.9million (2006: $3.7 million) and including the royalty income of $4.6 million (2006: $3.8 million). The average cargo sale price was $68.08/bbl (2006: $61.10/bbl), an average discount to Brent of $4.72/bbl (2006: $5.97/bbl).

2007 operating profit amounted to $1.8 million (2006: $13.2 million before impairment charges). Cost of sales increased to $75.2 million (2005: $54.4 million), largely reflecting the additional cost of the acquired WEC business.

USA costs of sales rose to $49.9 million (2006: $14.4 million) averaging $7.59/mcfge (2006: $4.48/mcgfe). Operating expenses increased to $2.75/mcfge (2006:$2.30/mcfge) and depletion charges increased to $4.83/mcfge (2006:$2.18/mcfge) reflecting, in the main, the higher asset valuations resulting from the inclusion of the WEC assets at their fair values.

Chinguetti cost of sales were $25.3 million (2006: $40.0 million) averaging $47.0 /bbl (2006: $40.4 /bbl), of which $7.90 /bbl related to production costs and $32.50 /bbl to depletion charges. The unit production cost increase mainly reflects lower production in 2007.

Pre-license costs of $4.5 million (2006: $1.4 million) were written off as is now required by IFRS.

With the increase in the scale of operations, administrative expenses rose by 31% to $15.7 million (2006: $12.0 million). This is stated after capitalization as fixed assets and recoveries from partners in operated joint ventures.

EBITDA totaled $56.6 million (2006: $59.6 million) which equates to $26.9/boe (2006: $37/boe).

Interest revenue from cash deposits, less finance costs on the bank loans, were a net cost of $9.4 million (2006: income $0.1 million). This reflects the interest and other costs related to the loan financing for and cash investment in WEC. Other finance items include the release of provisions relating to product price hedge contracts settled in 2007 totaling $ 4.6 million gain (2006: $0.3 million gain).

A taxation credit of $0.7 million arose in 2007 (2006: $6.1 million credit).

Net loss after tax totaled $2.3 million (2006: $38.6 million). Fully diluted loss per share was 0.14 USc per share (2006: 2.75 USc loss per share).

Cash inflow from operating activities fell to $47.7 million (2006: $62.3 million) largely reflecting the decline in Chinguetti production. Cash investments in oil and gas assets totalled $233.3 million (2006: $51.1 million), including $145 million invested in the WEC acquisition and $32.6 million in WEC interests post acquisition, $32.1 million was invested in Sterling's pre-existing USA business, $13.4 million was invested in the Chinguetti field (2006: $39 million).

A net amount of $49.2 million was raised in February 2007 from an equity placing to help fund the WEC acquisition. A further $22.3 million was raised in November 2007 to fund the signature bonus and fees relating to the PSC entered into in Kurdistan, which was paid out in February 2008.