Sterling's European Drilling Program On Track in 2010

Sterling Resources has provided the following update regarding recent events in the United Kingdom, Romania, France and the Netherlands.

Apart from weather delays to the Craiova onshore drilling program in Romania, all other projects are progressing well, in line with previously released time lines. Sterling remains on track to complete its eight well drilling program during 2010, while work on its two major development projects continues, and the addition of two new areas to the asset portfolio await final approvals.


On the South Craiova concession, onshore Romania (Sterling 50% interest) the program has been delayed by extreme winter weather impacting rig mobility. To date two of the three wells have been drilled and the third location, NG-01, the best defined structure of the three locations, was spudded on February 12. The first location drilled (NG-04) has been plugged and abandoned after encountering gas shows in a number of intervals that failed to flow at commercial rates. The second well (location NG-02) has been completed and preparation is ongoing to test two intervals that had gas shows while drilling. These wells are being drilled at no cost to Sterling.

In offshore Romania, we remain cautiously optimistic that the transfer of the Black Sea license interests to our partners will be approved early in 2010. On that basis, Midia Resources, Sterling's Romanian subsidiary and operator of the offshore Pelican and Midia blocks has initiated the planning, permitting and environmental approval for an exploration well to test the Eugenia South prospect, located in the northern Pelican block. The well, planned for Q3, will drill to the Cretaceous horizon and test the potential for oil and gas in the same reservoirs that produce in the nearby Lebada fields. Sterling is also carried on this well.

"Since becoming operator in 2007, we have believed in the significant potential of Eugenia (formerly known as Gasca South) and consider the prospect as medium to low risk given the hydrocarbon presence in offset wells," noted Stephen Birrell, Sterling's Vice President of Romanian Operations.

United Kingdom

Offshore UK the rig has been contracted to drill the Cladhan appraisal well in the Northern North Sea (Sterling 39.9%) and subject only to the timing of the rig's existing commitments, this well is expected to spud in May. In the Southern North Sea the operator has tendered for the drilling of the two "Greater Breagh Area" exploration wells (Macanta and Airidh, Sterling 30%), the site surveys have been completed and drilling is anticipated to commence during the second quarter. Finally, planning for the Grian well in Quad 48 (Sterling 57%) has commenced, with drilling planned for the third quarter.

Consistent with our news release of November 17th, 2009, this active drilling program includes several high impact wells and we are pleased that progress continues according to original plans.

The Breagh development program is also on track with UK government project sanction targeted for early in the second quarter of 2010 and first gas production anticipated in April of 2012. The field will be developed using a phased approach, with phase one being a single platform with up to nine wells, a new 100km 20 inch diameter pipeline to shore and processing at the existing Teesside Gas Processing Plant (TGPP) facility. This will achieve first gas for a gross capital cost of approximately (pnds stlg)300 to (pnds stlg)350 million depending on final well count and rig rate achieved. Phase one will have the capacity for a gross plateau production rate of 225 MMscfd. Phase two will incorporate an additional platform and the capacity for 18 wells, and depending on future exploration success and potential for attracting third party gas, will have the capacity for a maximum gross plateau production rate of 400 MMscfd. The necessary detailed engineering studies for the longer lead items are underway and bids for the pipeline installation are being evaluated with the start of major offshore activity planned for late 2011. The operator supplied project phasing and costing has been integrated into our discussions with the Royal Bank of Scotland for procurement of a senior debt facility, which is also progressing.

Onshore UK, the development plan has been approved and related gas sales documents are in final form for the small Kirkleatham gas discovery (Sterling 47%). First gas production is anticipated to begin in October 2010 and initial gross rates of 5 MMscfd are planned from the currently completed well. Gas will be sold to the nearby chemical plant and the results from early production may lead to additional drilling or conversion to a gas storage facility.


Onshore France, the operator's discussions regarding a farm out related to the large gas prospect on the St Laurent permit (Sterling 33.42%) are progressing well. In the Paris basin Sterling, as operator, has recently applied for a total of 9.5 blocks with a working interest ranging from 25% to 50%. The applications have passed the period of gazetting and are currently awaiting final approvals by the General Industry and Environment Council. With a gross area of some 150,000 acres, the blocks have the potential for conventional traps in the Jurassic and Triassic formations which are productive in nearby fields. In addition the area has been selected for the potential of an "unconventional" oil play. Analogous to the Bakken shale oil play in the US Williston Basin, this is predicated on a very thick Liassic section (up to 600 metres) which sits in the oil window. Within the shales, there are several distinct carbonate, silt and sand units that are known to be
oil bearing from old well results. The source potential oil volumes of the Liassic section are believed to be very significant and analogue well types have good potential initial production rates. Timing of first drilling will not be before 2011, although a multi well pilot scheme targeting the same play is scheduled to start this year in the neighbouring license.


Sterling has signed a letter of intent to acquire an operated interest in the F Quad blocks offshore the Netherlands. On completion of the full
agreement and subject to Ministry approval, Sterling will hold a significant working interest in five blocks of over 400,000 acres which contain several oil discoveries.

"The potential addition of the French and Dutch acreage is in line with our strategy of adding prospectivity to our portfolio for possible future drilling with lower cost technical definition being the first step," stated Pat Whitley, Sterling's Vice President Exploration (International).