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STERLING RESOURCES ANNOUNCES OPERATIONAL, FINANCIAL AND STRATEGIC UPDATE

Calgary, Alberta, Canada, January 12, 2015 – Sterling Resources Ltd. (TSX-V: SLG) (“Sterling” or the “Company”) announces an operational, financial and strategic update.  This information is reflected in an updated corporate presentation being presented at the TD Securities London Energy Conference on January 13, 2015.  A copy of the presentation is available on the Company’s website here.  Unless otherwise noted, all figures contained in this news release are denominated in US dollars.

Operational Update
Full field production from Breagh is currently 130 million standard cubic feet per day of sales gas (MMscf/d) and production during 2014 averaged 80 MMscf/d, with a 2014 year-end exit rate of 130 MMscf/d.  Plant uptime was 98 percent during December 2014.  Sales gas production at Breagh during 2015 is expected to be 112 MMscf/d in accordance with previous guidance.  In addition to gas production, condensate is produced at an average condensate-gas ratio of 3.3 barrels per MMscf.

At Cladhan, the second production well (P2) is still being drilled and is not expected to complete until late January or early February.  Other development work is proceeding as planned and first production is still expected in the third quarter of 2015.

UK well 42/15-3, an appraisal of the Crosgan gas discovery, spudded on November 30, 2014 and is expected to reach total depth in late January.  Depending on the results, a production test may be performed.  Sterling has a 30 percent interest in the blocks covering the Crosgan discovery (which is approximately 25 kilometres to the northeast of Breagh) with the operator RWE Dea holding the remaining 70 percent.

Financial Update
At the end of December 2014, the Company had unrestricted cash and cash equivalents of approximately $18 million, following the completion of the amendments to the UK senior secured bond (the “Bond”) announced on December 12, 2014.  As previously noted, the Company needs to fund a combined interest payment and amortization instalment payment to bondholders of $32.7 million on April 30, 2015.  Without completion of any divestments, the expected cash deficit (below the $10 million minimum UK unrestricted cash required under the Bond and after making the $32.7 million payment and satisfying other Bond requirements) is expected to be approximately $20 million at the end of April 2015.  

Discussions are ongoing with a number of potential purchasers of (i) part of the Company’s interest in the UK Breagh gas field, and (ii) a significant proportion of the equity in the Company’s offshore Romania assets.  Completion of either of these sales would be expected to provide all or part of the funds required to make the $32.7 million payment.  The Company is also in discussions with a number of banks regarding a potential reserves based loan facility which, if completed prior to April 30, 2015, would therefore remove the need to make the $32.7 million payment to bondholders.

2015 estimated operating cash flow from Breagh and Cladhan is expected to be approximately $80 million using forward curve prices at December 31, 2014 (an average of 48.6 pence per therm or $7.55 per million British thermal units), net of Sterling’s estimate of operating costs and Flowstream entitlement.  Sterling is planning to put in place gas price hedging through purchase of put options.

With accumulated UK tax losses of approximately £413 million at the end of the third quarter of 2014 and lower UK forward curve gas prices, no UK taxes are now expected to be payable during the life of the Breagh and Cladhan fields.  This scenario assumes (i) forward curve gas prices at year-end 2014, (ii) no Breagh phase 2 or further exploration costs, and (iii) currently forecast general and administrative expenses.

Strategic Update
To address the impacts of the worsening industry environment and ongoing financing challenges, Sterling is shifting its strategy to focus on UK production and tax optimization, and to reduce significantly its exposure to exploration activity in the UK and internationally.  The pursuit of a sale of part of Breagh is intended to improve financial liquidity and to facilitate a debt refinancing, as well as to assist in rebalancing the Company’s asset portfolio which is currently over-dependent on the Breagh asset.  Subject to funding, Sterling would then seek to acquire additional UK production with characteristics that would allow more efficient use of our large UK tax losses.  In principle the Company believes it should be possible to acquire such assets at close to a fully-taxed valuation which, in Sterling’s ownership, will generate cash flows which are largely or completely sheltered from tax.

The ongoing processes to significantly reduce licence equity offshore Romania and to farm-down the UK licences containing the Niadar and Ossian/Darach prospects are intended to reduce future net exploration expenditure as far as possible.  The Company is no longer intending to participate in UK Licensing Rounds (or elsewhere) for the foreseeable future. 

In addition, the Company remains of the view that smaller exploration and production companies will continue to trade at greater discounts to net asset value than their larger peers, and will continue to consider mergers or other corporate transactions (as well as outright sale) that would be to the benefit of shareholders.

Jake Ulrich, Chief Executive Officer of Sterling, commented: “Despite a very challenging macroeconomic environment we continue to have great faith in the long term potential of our assets.  Our portfolio is predominantly gas, which represented 82 percent of our 2P reserves at the end of 2013 and 98 percent of our daily 2014 production.  While the Brent crude spot price roughly halved in the second half of 2014, the UK National Balancing Point (NBP) spot gas price actually rose by about 20 percent.  Our heavily gas-weighted portfolio therefore provides resilience to a sustained low oil price environment.  Over time, we aim to close the value gap between our share price and our fair valuation through a focus on UK production and tax efficiency, backed by rigorous capital allocation.”

Sterling is a Canadian-listed international oil and gas company headquartered in Calgary, Alberta with assets in the United Kingdom, Romania, France and the Netherlands. The common shares are listed and posted for trading on the Toronto Stock Exchange Venture (TSX-V) under the symbol “SLG”.

Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Statements

All statements included in this news release that address activities, events or developments that Sterling expects, believes or anticipates will or may occur in the future are forward-looking statements. In addition, statements relating to expected production, reserves or resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves and resources described can be profitably produced in the future.

These forward-looking statements involve numerous assumptions made by Sterling based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. In addition, these statements involve substantial known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other-forward looking statements will prove inaccurate, certain of which are beyond Sterling's control, including: the impact of general economic conditions in the areas in which Sterling operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with oil and gas operations. Readers should also carefully consider the matters discussed under the heading “Risk Factors” in the Company’s Annual Information Form.

Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Sterling's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. These statements speak only as of the date of the news release. Sterling does not intend and does not assume any obligation to update these forward-looking statements except as required by law.

Financial outlook information contained in this news release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management’s assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this news release should not be used for purposes other than for which it is disclosed herein.

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