Update

Sterling Energy PLC 18 March 2004 STERLING ENERGY PLC CORPORATE UPDATE 18th March 2004, Sterling Energy plc ('Sterling') is pleased to report the following update. £39.5 MILLION FUSION OFFER Since the offer by Sterling for the whole of Fusion Oil & Gas plc ('Fusion') was declared unconditional in early December 2003, there have been very encouraging developments. In particular, in Mauritania, there has been: - the success of the Tiof #1 discovery well in PSC B and the subsequent Tiof-West #1 discovery well drilled in December 2003. Preliminary estimates indicate oil reserves in excess of 200 million barrels; - the declaration of commerciality on the Chinguetti field in PSC B and the upgrading of its reserves to the proven and probable category by the operator. A development plan is being submitted to the authorities and first production is expected by the end of 2005. Our expectation is for oil reserves of not less than 120 million barrels; - the sale for US$132 million announced in February by Hardman Resources Ltd of interests in two contract areas where Sterling holds interests. The sale price was over 4 times that paid by Hardman when it bought the interests from ENI-Agip in late 2003, and confirms the significant increase in value following the Tiof drilling results. These developments have important implications for the prospectivity of the contract areas and for the expected activity level on the licenses. The acquisition of further 3D seismic is planned, with an extensive two rig drilling programme in the second half of 2004/early 2005. Following the completion of the transactions with Premier Oil plc ('Premier'), Sterling will have no exposure to any of these costs, and will have a production royalty over 3% of reserves in PSC A & 6% in PSC B. At an oil price of US$25 - 28 per barrel, the royalty payment will be US$2.25 per barrel produced. Elsewhere, in the AGC (Agence de Gestion et de Cooperation) area between Senegal and Guinea Bissau, formal confirmation is awaited of a one-year extension to the Croix du Sud permit. This has been sought to allow the completion of the evaluation of the 3D seismic, which was acquired in 2003, and to then consider drilling options. In Guinea Bissau, news is also awaited on the Sinapa #2 well which is currently being drilled by Premier. The Group has an option to take a 5% gross interest (3.50% net after all back-ins) in the block within 60 days of the well being completed. Premier is expected to drill a second well on the adjacent Esperanca block later in the year on the same terms. A new management structure has been put in place in Fusion since the year-end and new recruits have been added as part of the restructuring. Sterling is committed to building its Perth office as the technical and commercial centre for the West African operations. US$39.5 MILLION OSPREY PRODUCTION PURCHASE On 26th February 2004, Sterling completed the purchase of interests in a series of wells in the Gulf of Mexico and their related pipelines and other infrastructure. As a result, for the first time, Sterling has become an operator. Since this purchase was completed, the Group's production has more than doubled to around 12 million cubic feet of gas equivalent per day (mmcfge/ d). These interests have also increased the Group's US proven and probable reserves which Sterling estimates to be over 40 billion cubic feet gas equivalent (bcfge) from their end of 2003 total of over 18 bcfge. Independent engineers are currently reviewing these reserve figures. Sterling is already preparing plans to access the additional potential of the fields; this is expected to include development wells. Early information is encouraging. The Osprey purchase was funded by a new bank loan (now fully drawn at US$27.5million) and from internal cash resources. The loan, which is repayable on 30th June 2006, contains a number of normal conditions such as a twice yearly borrowing base review and limitation on cash usage elsewhere in the Group. Our Houston office is being expanded to take on the new operatorship role. We will also look to take over management of our other fields where prudent and operationally efficient. 2003 RESULTS TIMING AND OTHER FINANCIAL MATTERS Sterling expects to announce its preliminary results for 2003 in the second half of April, with the Annual Report being published in early May. The 2003 results are expected to show a considerable improvement over those for 2002, despite the strength of sterling relative to the US dollar in the second half. Unaudited production revenues for 2003 were approximately US$9.1million on production of some 1.75 bcfge at an average price of some US$5.22/mcfge. Average production increased from 3 mmcfe/d at the start of 2003 to an average of 5.6 mmcfe/d for the final quarter. Through the use of forward contracts, Sterling has sold forward some US$13.4 million of gas into 2004 and early 2005 at an average price of US$5.60/mcf as part of its risk management programme. Current Group cash balances are approximately £5 million, which will be used to meet existing requirements. In order to provide appropriate incentives to staff, approximately 18 million share options have been approved for issue at the mid-market price at the date of allotment. After the further admission of 4,055,032 Sterling ordinary shares in connection with the Fusion offer, the total issued share capital is now 817,419,433. OUTLOOK The Sterling Board is highly encouraged by the Group's significant advances over the last few months. Recent positive operational developments, the Group's growing skill base and profile, together with sustained high energy prices, have important implications for the future level of activity on the assets and for their sustained enhancement. For further information contact: Harry Wilson, Chief Executive, Sterling Energy plc: 01582 462 121 Graeme Thomson, Finance Director, Sterling Energy plc: 01582 462 121 Allan Piper, First City Financial Public Relations: 020 7436 7486 07736 064 982 Chris Callaway, Evolution Beeson Gregory: 020 7071 4300 www.sterlingenergyplc.com Ticker Symbol: SEY This information is provided by RNS The company news service from the London Stock Exchange

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