Business Weekly - Cambridge, UK

Sterling finance director, Graeme Thomson, said: “We are delighted with the results from these two wells, which represent a significant step towards our target of doubling production from the Gulf of Mexico by the year end. With forward gas prices averaging over $7.50 /mmbtu for the next year we are looking forward to strong cash flow from these assets.”

The AIM-listed firm successfully entered and recompleted the A-1 well at Eugene Island 268 in which it has a 60 per cent working interest and 45 per cent net revenue interest.

Located off the coast of Louisiana, the well tested gross gas flows of 3.9 million cubic feet per day (mmcfd) from the deeper EO Sand.

The rig is in the process of moving off location following which the well will be hooked up to the sales line. The upper recompletion in the shallower EK Sand will be opened for production upon depletion of the EO Sand.

Sterling also successfully drilled and completed the MU 749 GU No. 2 well adjacent to existing Sterling production at Mustang Island off the Texan coast.

The well encountered 30 feet of net pay sand, approximately 30 feet high structurally to the other productive wells which have been drilled in this Cib Haz Sand reservoir.

Although Sterling encountered operational problems and delays in drilling the No. 2 well, it has now been completed and shut in following positive pressure tests on the reservoir.

Fabrication of the production facilities has now commenced following which the No. 2 well will be connected to Sterling’s Mustang Island 747 Platform for production. The rig has now moved off location to Matagorda Island.

After completing a farmout during drilling, Sterling owns a 75 per cent working interest and 56.4 per cent net revenue interest in the No. 2 well.

Work-over operations have now commenced on the No. 16 well in the El Gordo field – Matagorda Island 520 – where Sterling has a 57.3 per cent working interest and 45.8 per cent net revenue interest.

Chief executive Harry Wilson, says: “Our US programme aims to double production in the Gulf of Mexico by the year end.

“Eugene Island will shortly be on production and is expected to lift our Gulf of Mexico production by over 15 per cent.

“2004 was a successful and eventful year for Sterling and 2005 has begun in the same fashion.

A strong performance in 2004 on a broad range of financial and operational fronts has transformed the company and its prospects.

“Notable achievements during the year were a 144 per cent increase in operating cashflow to £8.1 million, a doubling of production to 10.2 million cubic feet gas per day (mmcfgpd) and a 450 per cent increase in net 2P reserves to 21.6 million barrels oil equivalent.

“The successful £97 million fundraising and acquisition of an equivalent c.8 per cent economic interest in the Chinguetti development, offshore Maur-itania, presages a step change for Sterling when the field comes on production in Q1 2006.

“This deal also positions Sterling as an innovative participant within one of the world’s most prospective hydrocarbon regions and cements a strong relationship with the Mauri-tanian Government.

“In recent months we have brought more focus to our African operations through the disposal of non-core assets such as those in the Philippines and the farmout of assets such as Dome Flore in the AGC to accelerate development and reduce risk.

“The substantial boost in our cash flow from our share of the expected 75,000 boepd of production from the Chinguetti development in 2006 and the continued strong commodity prices, will allow the company to access many new opportunities for growth.

“I do not expect any let up in the pace of our activities over the next 12 months.”