United Kingdom

In the UK North Sea, the Sedco 712 drilling unit is currently drilling the last exploration well before it moves to drill the "Constance" prospect on Block 21/23a. The rig operator, Oilexco, estimates a start date of early February.

Sterling will pay 5% of the well cost and retains a 35% working interest in Block 21/23a after farm out to Oilexco. The target is an Eocene Tay sand channel analogous to the neighbouring Pict Field and Saxon Discovery.

Well design and the approval process for the 42/13-3 well continues. The required site survey has been commissioned and is scheduled to be completed during the first quarter. The well will be drilled up dip from a 1997 discovery in the Carboniferous on a significant structure mapped by Sterling's consultants.

Sterling currently retains a 75% working interest in the Block, having farmed out 25% to Grove Energy, and may farm out additional interest prior to drilling. Continued mapping of Sterling's other Southern North Sea Blocks has firmed up a significant Bunter formation prospect in Block 42/19.

The potential for a multiple well programme is being pursued with possible farm in partners and included in the turnkey drilling discussions with the contractor ADTI, a subsidiary of Global Santa Fe.

Technical work on the remaining Blocks acquired in the 22nd Round is virtually complete and all opportunities were exhibited at a recent "Prospect Fair" in London. Interest was high and farm out discussions with multiple parties are being held on each of the remaining 22nd Round assets.

Onshore UK in the Cleveland Basin, a well, Kirkleatham, has been drilled and logged. Sterling retains a 47% interest after farmout. The well reached a total depth of 936 meters and during drilling, gas shows were encountered in the target Zechstein carbonates. Logging confirmed a 19 meter gas column which contained high gas saturation and good porosity within the gas bearing interval. Casing will be set and testing operations undertaken with a work-over rig.

Onshore Romania

Sterling and its partner Grove Energy have entered a new four year exploration period covering the 1.5 million acre Craiova Concession which it operates with a 60% working interest.

Following the recent acquisition of 185 kilometers of 2D seismic within the Dabuleni area in the south east corner of the Craiova Concession, the data was processed during December. The initial maps show two significant regional highs, a Jurassic Dogger fairway play and a semi-regional pinch-out of the Mesozoic section coming north from Bulgaria. These areas were not tested by wells which were drilled pre-seismic and were demonstrably off-structure.

Drill site selection over the two regional highs is being undertaken in the field with a view to commencing the well planning process this month. Final mapping of the Dabuleni area to include volumes and risks of all other potential prospects and leads is to be complete by the end of January.

In parallel with the above Dabuleni programme, planning is ongoing for additional seismic over the remainder of the Craiova Concession to plan the second stage of the multi-well programme scheduled to start in the second quarter.