Off Madagascar, Sterling Energy farming out DW blocks

Sterling Energy has annnounced in its Interim Management Statement for the period beginning 1 January 2013 that it has started a farmout process for the Ampasindava and Ambilobe deepwater blocks offshore Madagascar.

The Ampasindava and Ambilobe blocks are highly prospective blocks located, respectively, in the Majunga and Ambilobe deepwater basins offshore northwest Madagascar. The Company holds a 30% working interest in the Ampasindava license, containing the Sifaka prospect which is independently estimated to have gross un-risked, best-estimate, prospective recoverable resources of 1.2 billion bbl, and 100% working interest in the Ambilobe license.

The transitional government has made considerable progress along the 'roadmap,' developed in cooperation with their African neighbors and signed in September 2011, towards the holding of democratic elections, now due to take place in mid-2013.

Formal agreement has been reached with OMNIS, the state regulator, to prolong the current exploration period of both the Ambilobe and Ampasindava production sharing contracts with each licence having the same remaining duration and obligations in the current exploration periods as existed in March 2009; in effect, the exploration periods will have been suspended from March 2009 to when they resume. These agreements now await formal ratification by the Government.

Following the farm-in to the Ampasindava block by ExxonMobil in 2005, Sterling's costs in this block are carried up to a fixed amount. The cost to drill the Sifaka prospect is estimated to exceed the remaining carry and the Company has started a farm-out process to introduce an additional partner, and reduce its current working interest, to cover these costs. It is currently unlikely that an exploration well will commence drilling before mid-2014

In the Ambilobe block, the Company has started a farm-out process to introduce a partner to carry the costs of the next stage of exploration which is likely to include the acquisition of additional seismic data to define the leads that have been identified.