SEY.L Regulatory News (SEY)

Sterling Energy Plc

22 October 2012

INTERIM MANAGEMENT STATEMENT

Sterling Energy Plc ("Sterling" or the "Company") is today issuing its Interim Management Statement for the period beginning 1 July 2012.

HIGHLIGHTS

·; Production, net to Sterling from the Chinguetti field, averaged 569 bopd for the third quarter 2012 (Q3 2011: 622 bopd).

·; Adjusted EBITDA in third quarter of $0.6 million (Q3 2011: $1.7 million) (unaudited).

·; Loss after tax in third quarter of $0.7 million (Q3 2011: profit $0.05 million) (unaudited).

·; Cash as at 30 September 2012 of $116.5 million (unaudited), including partner funds of $1.6 million.

Angus MacAskill, Sterling's Chief Executive, said:

"The Company continues to make progress towards testing the exploration potential of the existing portfolio and enlarging that portfolio with the addition of new ventures. The completion of acquisition of 2D seismic data in Kurdistan will allow the joint venture to make an informed decision by early next year on whether to drill an exploration well in 2013, and continued progress in Madagascar supports a resumption of exploration activity in early 2013. In new ventures, our team continues to identify and evaluate potential opportunities to enhance our portfolio."

Cameroon

The Ntem concession area is a highly prospective deep water block, offshore Cameroon, in water depths ranging from 400 metres to 2,000 metres. The block lies within a very material proven exploration play fairway extending from Equatorial Guinea in the south to Liberia in the west, with several exploration wells planned by various operators in this play fairway in the coming year.

The Company holds a 50% non-operated working interest in the Ntem licence, following the introduction in 2011 of Murphy Cameroon Oil Co. Ltd as a 50% working interest partner and operator.

The Ntem block remains in force majeure and the Company believes progress continues towards a resolution of the border dispute between the governments of Cameroon and Equatorial Guinea, but no specific timetable can be forecast. When force majeure is lifted, there will be 15 months remaining of the current exploration period during which time an exploration well must be drilled.

Madagascar

The Ampasindava and Ambilobe blocks are highly prospective blocks located in the deep water basin to the northwest of Madagascar. The Company holds a 30% working interest in the Ampasindava licence, containing the Sifaka prospect, and 100% working interest in the contiguous Ambilobe licence.

The Ampasindava and Ambilobe licences are both currently in suspension. The incumbent government, formed by non-democratic means in March 2009, is engaged in a "roadmap", developed in co-operation with their African neighbours, towards the holding of democratic elections which are now scheduled to occur in mid-2013.

The current exploration periods for both the Ambilobe and Ampasindava licences were due to come to an end in November 2010. Progress has continued in discussions with OMNIS, the state agency managing the petroleum resources of Madagascar, and Sterling expects that exploration activities will resume in both licences by early 2013, 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.

In Ampasindava, the Sifaka prospect is expected to commence drilling in 2014. The estimated cost to drill this well will exceed the value of the remaining carry of approximately $37 million of gross costs, and Sterling may seek to farm down its working interest, prior to drilling, to reduce its share of the cost for this well.

In Ambilobe, the work commitments for the current exploration period have been fulfilled. A number of large Cretaceous and Tertiary leads have been identified, located in both shallow and deep waters, which will require additional seismic data to develop into potential drillable prospects

Kurdistan

The Company completed the acquisition of 117 km of 2D seismic data in the Sangaw North block in south east Kurdistan. This data, which supplements the 2D seismic data previously acquired in the contract area, is expectedto better define the potential of atarget along the flank of the main structure, analogous to the recent discoveries made in adjacent acreageto the south east of the Sangaw North PSC area. Following the interpretation of the new 2D seismic data, the joint venture partnership may elect to drill an exploration well in 2013.

The Korean National Oil Corporation (KNOC) assigned its 20% working interest in the Sangaw North PSC to the Kurdistan Regional Government of Iraq (KRG) effective 5 August 2012. Under the terms of the assignment, from the effective date the future exploration costs associated with this 20% interest will be carried by the remaining contractor entities in proportion to their equity interests; consequently, Sterling's paying interest in the PSC has increased from 53.33% to 66.67% and Addax's has increased from 26.67% to 33.33%, while their equity interests remain unchanged at 53.33% and 26.67% respectively.

The KRG has the option to assign the 20% interest to a third party before 31 March 2013, in which case the carried costs will be reimbursed to Sterling and Addax and their paying interests will revert to their equity share of 53.33% and 26.67% respectively. If an assignment is not completed, the KRG may retain the 20% interest and pay its share of the costs from the effective date, 5 August 2012.

Sterling and Addax agreed to notify the KRG before 31 January 2013 whether the partnership intends to drill a further exploration well on the Sangaw North block before the end of the current exploration phase which runs to November 2013, with the option for a further one year extension in the event that further exploration and/or appraisal work is warranted. Under this agreement, if Sterling and Addax elect not to drill, then the PSC will terminate on 1 February 2013.

Mauritania

Third quarter 2012 production from the Chinguetti field net to Sterling totalled 52,312 barrels, an average of 569 barrels of oil per day, compared to 622 barrels of oil per day for the same period in 2011. Production in the period was reduced due to a planned maintenance programme for subsea equipment in the field which concluded successfully with production restored to normal levels at the end of the period.

Production is stored on location in the floating production storage and offloading vessel (FPSO) until a suitable volume is accumulated which is then sold and transported away by sea tanker. There were no cargossold in the period.

There are no approved plans for further development of the Chinguetti field. 

New Ventures

The Company's technical and commercial team has completed a preliminary screening of many exploration opportunities in sub-Saharan Africa and evaluated a number in more detail. Through this process, the Company identified several attractive opportunities to complement its existing portfolio. However, a combination of more detailed due diligence that identified unacceptable commercial/legal risks and more aggressive bidding terms by our peers resulted in no new ventures being secured during the period. The Company continues to identify and evaluate a number of other interesting opportunities.

Financial Position

In the third quarter of this financial year, Sterling reports the following unaudited results:

(1) Revenue for Q3 is derived from royalty incomes relating to interests in the Chinguetti field.

(2) EBITDA is earnings before interest (and other finance income and costs), tax, depreciation, depletion, amortisation and write-offs of oil & gas assets. Adjusted EBITDA is calculated before share based payments, charged to the income statement under IFRS 2 and pre-licence costs.

(3) Cash balances at the end of Q3 2012 totalled $116.5 million, including $1.6 million of partner funds, (Q2 2012: $114.4 million, including $1.5 million partner funds). The Group continues to remain debt free.

For further information contact:

Sterling Energy Plc +44 (0)20 7405 4133

Alastair Beardsall, Chairman

Angus MacAskill, Chief Executive

www.sterlingenergyplc.com

Liberum Capital +44 (0)20 3100 2222

Simon Atkinson

Tim Graham

Peel Hunt LLP +44 (0)20 7418 8900

Andy Crossley

Richard Crichton