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Sterling Energy’s Iraqi Kurdistan update

Exploration & Production

Sterling Energy PLC has provided an update on its activities in the Kurdistan region of Iraq.

The Sangaw North number one exploration well has been drilled to an intermediate depth of 2,395 m and open-hole wire-line log data acquired from 1,450 m to 2,395 m. Analysis of the wire-line log data indicated potential hydrocarbon bearing zones, and Sterling has completed open-hole drill stem tests (DST) over two prospective zones identified from the well data.

The first DST was performed using inflatable straddle packers to selectively test an open-hole interval within the cretaceous age kometan formation. During the six hour flow period, an initial recovery of gas was followed by flowing water with minor gas content.

The second DST was performed with a casing packer set near the shoe of the 9 7/8" casing and an inflatable open-hole bridge plug set within the cretaceous age shiranish formation in order to test an open-hole interval of the shiranish. Coiled tubing and nitrogen were used during the initial flow period to assist in driving back the fluid column in the tubing and the heavy drilling mud in the open-hole section; the coiled tubing was removed when the well started to flow naturally.

Following an initial clean up period, the well produced gas at an estimated flow rate of four mmscfd along with some drilling fluids, however the gas flow decreased and was replaced with water, believed to be formation water, flowing at an estimated rate of 4,300 bbl per day. The well was then shut-in and then re-opened for a second flow period.

The well initially flowed water and then produced gas at an estimated flow rate of 1 mmscfd, however again the gas flow decreased and was replaced with water at an estimated rate of 750 bpd. The forward plan is to drill ahead through the remaining cretaceous section to evaluate the Qamchuqa reservoir and then to the deeper reservoirs in the Jurassic. The well is expected to reach a depth of 3,660 m during the fourth quarter of 2010.