SEY.L Regulatory News (SEY)

29 Mar 2007 07:04

Sterling Energy PLC29 March 2007 COMPLETION OF THE $145 MILLION ACQUISITION OF WHITTIER ENERGY CORPORATION ("WHITTIER") AND UPDATE Sterling, the AIM listed (symbol: SEY) independent oil & gas exploration andproduction company operating in the Gulf of Mexico and Africa, today announcesthat it has completed its $145 million cash acquisition of all of the issued andto be issued share capital of Whittier, an onshore US Gulf Coast exploration andproduction company, which was conditionally announced on 19 January 2007. Based on end 2006 reserve estimates, this acquisition is expected to: • double Sterling's proven and probable ("2P") reserves to nearly 25million barrels of oil equivalent ("boe") and add materially to its contingentresources; • contribute to an increase in entitlement production to a current levelof approximately 6,500 boe/day, compared with an average of 3,100 boe/day inthe first quarter of 2007; • significantly increase cash flow from operations, thereby permitting alarge increase in exploration and production expenditures. This enlarged USA portfolio will comprise the majority of Sterling's productionand reserves, will extend its operations in an area contiguous with itsshallow-water Gulf of Mexico interests and strengthen the management andtechnical team. With a programme of over 40 low-risk wells already planned forthe next twelve months on the Whittier assets, together with Sterling's currentdrilling schedule, further significant USA exploration and developmentopportunities will be pursued. Following the closing and payment of related costs, Sterling expects to havecurrent cash balances of approximately $30 million, undrawn bank facilities of$13 million and bank debt of approximately $141 million. Harry Wilson, Chief Executive of Sterling Energy Plc, said: "The acquisition of Whittier materially strengthens Sterling's position in thesector and creates new opportunities for us to grow. Adding significant, lowerrisk, onshore US production and development assets to our existing offshore Gulfof Mexico assets, Whittier both de-risks and significantly increases the scaleof our cash generation. This will allow us to build on our existing portfolioof exploration projects and provide us with greater flexibility to pursue newopportunities on a bigger scale." Sterling is currently operating the high risk/high potential onshore ThunderStud well and expects to reach target depth in early May. It also expects tocommence drilling on the 25 well Austin Chalk infill programme next week. Thishad been delayed due to lack of rig availability but one has now been secured ona one year contract with an option for a further year. Average Chinguetti field production to date in 2007 is approximately 18,600barrels of oil/day ("bopd") and is currently around 24,000 bopd, with the C-18well having very recently been completed and brought on production. This well ispart of the Phase 2 field development, with detailed seismic expected to be shotby mid-year and a further four wells are then expected, to be drilled,commencing in the latter part of 2007. As previously reported by Sterling in January 2007, independent consultingengineers estimated ultimate Chinguetti field 2P recoverable reserves at the endof 2006 at 51 million barrels ("bbls") and valued Sterling's Mauritanian assets,including risked gross field contingent resources of up to 18 million bbls, at$87-121 million. This compared to relevant mid-2006 net book values of $170million. Since then, the operator has issued a revised field 2P recoverableestimate of 62 million bbls plus contingent field resources of 48 million bbls. An offshore well in Guinea Bissau, drilled at no cost to Sterling, has beenplugged this week. Sterling has an option to participate for 5% in the secondhigher potential well due to spud shortly. A largely carried well (20.5%interest, paying 2.5%) is also due to spud in Gabon around mid-year. Sterling intends to issue its annual results for the year ended 31 December 2006towards the end of April/early May, adopting International Financial Reportingand reporting in its functional currency, US dollars. Enquiries Sterling Energy Plc (01582 462 121) Web site: www.sterlingenergyplc.com Harry WilsonGraeme Thomson Citigate Dewe Rogerson (020 7638 9571) Media enquiries: Martin Jackson / George CazenoveAnalyst enquiries: Nina Soon An investor presentation regarding the Acquisition is available on Sterling'swebsite: www.sterlingenergyplc.com . This information is provided by RNS The company news service from the London Stock Exchange