Offshore staff

CALGARY, Canada – Sterling Resources expects to start drilling the Ioana gas prospect in the Romanian sector of the Black Sea in September.

The well on the Midia block will be followed immediately by drilling of the Eugenia oil prospect in the Pelican block to the north.

Sterling’s local subsidiary Midia Resources has approval from Romania’s National Agency for Mineral Resources to take a 50% interest in another Black Sea concession, the 1,000-sq km (386-sq mi) block 25 (Luceafarul). Current concession holder Petro Ventures Europe will retain the remaining 50%.

This was one of numerous 10th round offshore concessions awarded in June 2010, and ratified by the government in October 2011. It is a shallow-water block, west of Sterling’s Midia block, and contains a gas discovery and multiple exploration plays.

Independent reserves evaluator RPS Energy estimates potential resources at 104 bcf (2.9 bcm) of gas. The concession has an initial three-year exploration period with a commitment to acquire seismic and drill one well. Exploration can then be extended by a further three years.

Sterling also notes the Romanian government’s commitment to liberalizing the country’s gas sector in a recent letter to the International Monetary Fund. The letter states that gas prices will be liberalized from the end of this year to converge with average European prices by the end of 2014 or end-2015 for the non-household sector (industrial), and by end-2018 for the household sector.

As the non-household sector has accounted for 70-75% of Romania’s total market in recent years, Sterling sees this schedule as positive for its offshore Ana and Doina gas field developments, which it expects to come onstream in 2015/2016.

Concurrently, the company has engaged financial advisers and launched processes for the sale of a significant part of its 65% interest in the Midia and Pelican blocks and most of or all its remaining 26.4% stake in the Cladhan field discovery in the UK northern North Sea.

Sterling hopes to sign definitive sale agreements around the end of September, adding that the two high-impact wells and seismic activities offshore Romania can go ahead without the need to wait for proceeds from the divestments.

7/18/2012