ONSHORE FRANCE

Sterling was part of a group that applied for a license in the Adour-Arzacq sub-basin of the prolific Aquitaine Basin of southern France. Formal award of the St Laurent license was made in 2002 for an initial three year term. The license has since been extended to 2015. Sterling has a 33.423% interest in this block and the operator’s discussions regarding a potential farm out are progressing well.

In the Paris basin Sterling, as operator, has recently applied for a total of 9.5 blocks with a working interest ranging from 25% to 50%. The applications have passed the period of gazetting and are currently awaiting final approvals by the General Industry and Environment Council. With a gross area of some 150,000 acres, the blocks have the potential for conventional traps in the Jurassic and Triassic formations which are productive in nearby fields. In addition the area has been selected for the potential of an “unconventional” oil play. Analogous to the Bakken shale oil play in the US Williston Basin, this is predicated on a very thick Liassic section (up to 600 metres) which sits in the oil window. Within the shales, there are several distinct carbonate, silt and sand units that are known to be oil bearing from old well results. The source potential oil volumes of the Liassic section are believed to be very significant and analogue well types have good potential initial production rates. Timing of first drilling will not be before 2011, although a multi well pilot scheme targeting the same play is scheduled to start this year in the neighbouring license.

LOCATION OF STERLING'S FRENCH ASSETS

ST LAURENT LICENSE

The St Laurent license covers some 125,280 acres and is located 20 km northwest of the giant Lacq field. There are numerous occurrences of hydrocarbons on the St Laurent license including an undeveloped accumulation of heavy oil discovered by the Grenade Sur Adour-1 well in 1975.

The Grenade Sur Adour-1 well encountered a 97 metre column of heavy oil (13° API) in a Cretaceous reef carbonate within a stratigraphic trap. The joint venture obtained an independent determination of the significant oil in place associated with the Grenade heavy oil discovery.

The original well produced 70 barrels of oil equivalent (BOE) per day compared to the 200 to 300 BOE per day now anticipated. During early 2008 the Grenade-3 well located on the St Laurent permit was completed and the reservoir section encountered lacked adequate porosity and permeability and thus the well was suspended. The geological model has been reevaluated to determine an alternate drilling location back towards the original Grenade -1 discovery well.

In addition to the Grenade discovery, significant exploration potential exists on the block. The operator has mapped a very significant undrilled Triassic known as Audignon. The license has been renewed for a further 5 year term and future activity will focus on a sidetrack of the Grenade-3 well and the farm out of the large Audignon prospect for drilling during 2011.