Outlook for 2011 and beyond
There remain some further tasks to complete to fully evaluate the results seen at the Sangaw North-1 exploration well and we shall report on these when appropriate. Sterling also has other assets to move forward. Whilst we have little control over the resolution of the border dispute between Cameroon and Equatorial Guinea, the large prospects identified from 3D seismic are ready to drill when force majeure can be lifted; the Ntem block contains significant potential value waiting to be tested with the drill bit.
With the challenges at Sangaw North being overcome we have re-focused some of our skills and resources towards new ventures; the management of operations is now under Angus MacAskill and Andrew Grosse will lead our exploration and new venture activities. During 2011 one of our key objectives is to add to our portfolio of assets; additions will be sought to broaden our exposure to opportunities in Africa and the Middle East; however outstanding opportunities outside of these areas will also be considered.
I would like to thank all Sterling's staff for their diligent efforts during 2010 and hope the rewards for all stakeholders will come in 2011 and beyond.
Alastair Beardsall
Chairman
CHIEF EXECUTIVE'S REVIEW
The Company is focused in Africa and the Middle East and holds high potential interests in three areas, Kurdistan, Cameroon and Madagascar. During 2010, the Company made considerable progress in testing one of the very large exploration projects within its current portfolio, with drilling commencing on the Sangaw North-1 well in Kurdistan on 1 February 2010. Drilling operations have been very challenging but, by the end of the year, the well had been drilled to the base of the Cretaceous aged formations, two flow tests had been completed, and operations were being conducted to allow drilling to the deeper Jurassic targets.
The prospectivity being tested by this well is highly material. Prior to drilling, the gross un-risked prospective resources within the Cretaceous formations were independently estimated to be some 800 million barrels in the case of oil, with gas at least as likely to be discovered. While it is disappointing that the two flow tests within the Cretaceous did not establish commercial amounts of hydrocarbons in the intervals tested, they did establish the presence of gas within the shallower horizons of the Cretaceous formations in the structure.
Following the two flow tests the well was deepened and gas has also been identified during drilling operations in the upper section of the Jurassic formations, but not yet evaluated. We remain encouraged that there may be a very material prospective resource yet to be tested in 2011 by this well. Sterling's in-house estimates are some 3.8 trillion cubic feet of gross un-risked prospective resources in the case of gas and 500 million barrels in the case of oil within the Jurassic and deeper Triassic formations. In addition, we believe, based on gas shows while drilling, that there may be potential for further flow testing in the deeper horizons of the Cretaceous formations.
Sterling's exploration portfolio contains additional potential of a similar material scale. Further technical studies in the Company's deep-water Ntem licence in Cameroon have increased our confidence in the four Cretaceous aged prospects previously mapped, each with gross un-risked prospective resources of several hundred million barrels. These exciting prospects are in similar geological plays to those that have emerged as highly successful discoveries in West Africa over the last few years. We look forward to progressing activity in this licence once the maritime border which forms part of its boundary has been agreed between the neighbouring governments.
In the East African region, the Company has a material interest in the giant Sifaka prospect in the deep-water Ampasindava licence in Madagascar. This prospect has been independently assessed as having 1.2 billion barrels of gross un-risked prospective resources. The drilling of this prospect, operated by ExxonMobil, awaits resolution of the political situation in the country, with elections due to take place in 2011.
The Company has built a portfolio with highly material interests in large scale exploration projects in three emerging exploration areas in Africa and the Middle East. During 2010, focus has been on execution of the Company's first operated well in Kurdistan. In 2011, we look forward to delivery of the results from this well and, through the Company's expertise and experience in these regions, adding to the portfolio of exciting and material exploration opportunities.
Angus MacAskill,
Chief Executive Officer
OPERATIONS REVIEW
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