Sterling Energy Provides Annual Results for 2011

Source: www.gulfoilandgas.com 3/20/2012, Location: Africa

Sterling Energy Plc is an upstream oil and gas Company listed on AIM in London. Sterling is an experienced operator of international licences with a current focus on projects in Africa and the Middle East. Sterling has high potential projects in Cameroon, Madagascar and Kurdistan. The Company also has an economic interest, approximately equivalent to 8 per cent, in production from the Chinguetti field in Mauritania and a minor royalty interest in the surrounding exploration acreage.

Chinguetti is mature with no further development planned in the field. Gross oil production during 2011 averaged approximately 7,250 barrels per day. The rate of production decline has been reduced over the last 2 years, due to reservoir management and production optimisation activities. As a result of this improved production performance and outlook compared to previous predictions, the Company has in 2011 partially reversed a prior impairment of the asset by $8.3 million and increased the net proved and probable reserves by 0.472 million barrels. Cash flow from our interests in Chinguetti currently covers the Company’s administrative overhead costs and makes a contribution to the cost of operations. Whilst the cash flow from this project is significant, this asset is not material in comparison to the future potential of our other projects.

Gross production continued to decline at the lower rate observed in 2010, reducing from 7,800 bopd in January to 6,800 bopd in December. The average production net to Sterling during 2011 was 629 bopd. Sterling estimates that at the end of 2011, as a result of the lower observed decline rate, Chinguetti held a remaining 9.2 million barrels of gross proved and probable reserves (2P) that could be accessed with the existing wells. This is reflected in the upwards revision of Sterling’s net 2P reserves to 0.664 million barrels. No in-fill drilling or work-over activity took place on the Chinguetti field during 2011. A planned shutdown for maintenance of the floating production and storage facility was conducted over a 5 day period in November 2011.

In October 2011, the joint venture partners in PSC A and PSC B concluded agreements with the Mauritanian Government for the replacement of the offshore exploration areas within these PSC’s with a new, single exploration PSC called C-10, operated by Tullow Oil Plc. The exploration programme in PSC C-10 is expected to include a minimum of 2 wells over the first 3 years. The existing Banda, Tevet and Tiof discoveries have been ring-fenced under their original PSC terms and extensions of up to 18 months were granted to allow appraisal and development activities to be completed. Petronas will continue to operate Chinguetti field. In the event of any commercial development of existing or future discoveries within these contract areas, Sterling will be entitled to revenue, but will not have any cost obligations, under its royalty interest agreements with Premier Oil.


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