Sterling Energy (AIM: SEY), an independent oil & gas exploration and production company with interests in North America, Africa and the Middle East, today announces that it has retained BMO Capital Markets to manage a sales process for its U.S. oil &  gas exploration and production business (the “U.S. business”).   

The Board of Sterling has recently undertaken a comprehensive strategic review of the Company's assets and prospects and has concluded that it would be in shareholders’ best interests to sell the U.S. business.  The Board believes that the U.S. business has grown to a size that makes it attractive to prospective buyers.  The Board has therefore mandated BMO Capital Markets to manage the sales process.

The Board expects that the proceeds of any sale will enable it to repay the Company's borrowings and leave it with significant net cash. This, together with cash revenues from its Mauritanian producing interests, will provide funding to increase the Company’s investment in the very considerable upside potential of its key assets in Africa and the Middle East. 

Sterling will focus on an increasing number of higher impact exploration prospects, which currently include Madagascar, Kurdistan, Gabon, AGC (a joint exploration zone between Senegal and Guinea Bissau) and Cameroon. It will also pursue new opportunities including potential acquisitions.
 
Studies by an independent consultancy, RISC, covering two of the Company’s prospects in Kurdistan and offshore Madagascar, were recently completed. These indicated unrisked best estimate net prospective resources of over 500 million barrels of oil with a high net estimate of over 1,900 million barrels of oil for Sterling’s current interests on those two prospects.

Sterling will update shareholders further in due course.

 
Background to U.S. Business

Sterling’s U.S. operations include a substantial inventory of low-risk development and exploration projects, primarily in the onshore Gulf Coast and shallow water Gulf of Mexico.

On 14 March 2008, Sterling announced a gas discovery from its Marlin #1 well.  The well has since come on stream at initial rates of over 4.5 mmcfged (750 boed) net to Sterling, some 25% higher than the initial announced test rate.  An offset to this well is scheduled to be drilled in May. Other projects in South Texas, Southeast Texas and state waters offshore Texas, some of which have recently been farmed out, will be drilled in the near-term.

At the end of March 2008, Sterling’s U.S. net production was a record 32 mmcfged (5,333 boed). 

Based on independent petroleum consultants reports, year-end 2007 U.S. 2P reserves were 111 bcfge (18.5 million boe), of which proved reserves constitute approximately 65%. Possible reserves add a further 70 bcfge (11.6 million boe). 

Graeme Thomson, CEO of Sterling, commented:

"We believe that this is a very opportune time to sell our U.S. business, against a background of growing production and rising gas prices.  The sale will leave Sterling financially well positioned, adequately resourced and more sharply focused on high impact 'company making' exploration prospects. In particular, I am very excited about Kurdistan and Madagascar where independent studies have indicated a combined unrisked net economic value at potentially over $2 billion if both prospects are successful at the best estimate level.  It therefore makes sense for Sterling to position itself such that our shareholders have the appropriate level of participation in the exploration and exploitation of these and other major prospects."

Enquiries

Sterling Energy Plc (+44 20 7405 4133)    

Graeme Thomson, CEO
Harry Wilson, Deputy Chairman
Jon Cooper, CFO

Evolution Securities (+44 20 7071 4300)
Rob Collins, Director

BMO Capital Markets (+1 713 546 9704)
Stewart Frankel, Director

Citigate Dewe Rogerson (+44 20 7638 9571)
Media enquiries: Martin Jackson
Analyst enquiries: Kate Delahunty

In accordance with the guidelines of the AIM Market of the London Stock Exchange, Harry Wilson, BSc (Hons) Physics (1973), Executive Deputy Chairman of Sterling Energy Plc, who has been involved in the oil industry for over 33 years, is the qualified person that has reviewed the technical information contained in this press release.

Definitions

2P   - proven and probable
bcfge - billions of cubic feet gas equivalent
boe - barrels of oil equivalent
boed - barrels of oil equivalent per day
mmcfged - millions of cubic feet of gas equivalent per day