Operational Update

Sterling Energy PLC
04 February 2008




04 February 2008

                              STERLING ENERGY PLC

                         ('Sterling' or the 'Company')


                                BOARD CHANGES


                             OPERATIONAL UPDATE


Sterling (symbol: SEY), an AIM listed independent oil & gas exploration and
production company with interests in the Gulf of Mexico, Africa and the Middle
East, today announces changes to strengthen its Board and provides an update on
2007 production and drilling and on its 2008 programme. It anticipates
announcing its preliminary results in late April.


Board Changes


The Board has been considering how best to enhance the performance of the
Company's asset base, to carry out its growth strategy and to maximize value for
its stakeholders. As a result it has agreed that, with immediate effect:


•    Harry Wilson, currently Chief Executive Officer ('CEO'), will become
     Executive Deputy Chairman and will focus primarily on business development
     opportunities which will assist Sterling to implement its growth strategy 
     more effectively. A founder of Sterling, he has been its CEO since its 
     listing on AIM over 5 years ago.


•    Graeme Thomson, currently Finance Director, Company Secretary and
     responsible for Sterling's USA business, will become CEO. Also a founder of
     Sterling, he has been an Executive Director for over 5 years and has worked
     in a variety of roles in the oil industry for over 25 years.


•    Jonathan Cooper will become Finance Director and Company Secretary. For the
     last 2 years he has been finance director at Gulf Keystone Petroleum and
     previously spent 9 years at Dresdner Kleinwort Wasserstein, where he worked
     as a Director in the Oil & Gas Corporate Finance Team.


Sterling also announces that Paul Griggs, its Commercial Director, will be
leaving the Company and stepping down as a Director on or around 30 April 2008.
Paul has played an important part in the development of Sterling over the last 3
years including the successful completion of the US $145 million Whittier
transaction and signing of a Production Sharing Contract in Kurdistan in 2007.
He feels it is a good time to move on to new challenges and the Company wishes
him every success in the future.


Dr Richard Stabbins, Chairman, said:


'These changes will enable Sterling to focus on working its asset base more
effectively and to fulfill its development potential. Having been Chairman now
for six months, I can see great promise in the Company that needs to be
unlocked. With our bank debt now refinanced, we expect that 2008 will be an
exciting year as a result of our investments in production and exploration.'


Graeme Thomson, CEO, said:


'We expect to drill prospects in the coming year that could significantly alter
the reserves base of Sterling. In both Gabon and Madagascar there is major
upside potential. Kurdistan is on track for drilling in 2009, whilst our USA
programme is intended to strengthen a core producing area.  Whilst we have a
number of challenges to deal with, I believe our experienced and dedicated team
can ensure success.'


Operational Update


Group production for the second half of 2007 is estimated at over 5,500 boepd
compared with 4,900 boepd in the first half.


United States


Net production for the USA operations at the end of 2007 was approximately 4,800
boepd, of which about 80% was gas and the remainder was liquids. Recently, gas
prices have been increasing having been relatively unchanged during a long
period of rising oil prices. Production for Q4 2007 is estimated to have
averaged 4,200 boepd. It was affected by natural production declines and by
equipment and weather delays in hooking-up discoveries.


In 2007, the USA operations drilled 35 wells with an 80% success rate. The third
Austin Chalk well, Jet-3, has recently come on-stream and is producing at a net
rate of 1.8 mmcfd (300 boepd). The fourth well in this programme is now drilling
at about 15,000 feet.


On the Thunder Stud prospect (Brown-1, NRI 10.7%) both oil & gas were
encountered and testing was carried out in two intervals of the Yegua formation.
The deeper sand was non-commercial, whilst the upper sand flowed oil and gas
at a gross rate of c.475 boepd. The shallower Hackberry sands will be completed
as a small producer. Partners are expected to agree to drill a second well in
2008, which will target sizable and better quality reservoir potential up-dip.


Year-end USA reserves are currently being evaluated, with present indications
that 2P reserves will be approximately 110 bcfge, of which proved are
approximately 65%. Possible reserves will add a further approximately 70 bcfge.


Gas prices have recovered in early 2008 and Sterling has entered into further
hedges on its US production for 2008-9 at prices of approximately $8/mcf for gas
and $84-89 /bbl for oil. The cost of US rigs and services remains high.


The USA capital expenditure programme for 2008 is expected to be $45-50 million
and the major focus will be on appraisal and development drilling. Where
appropriate, a portion of internally generated exploration prospects will be
farmed out.


Africa and Middle East


Gabon


The offshore ICM-1 well is scheduled to spud in May on the Iris Marin licence
(Sterling 50% interest*). This well is targeting gross reserves of 15-40 million
bbls.


Mauritania


An appraisal well will be drilled on the Banda discovery at the end of Q1 by the
Attwood Hunter at no cost to Sterling as it holds a royalty interest. It will
then drill two development wells and carry out three workovers on the 50 million
bbl Chinguetti field during Q2 2008.


The objective is to more than double field production, which in Q4 2007 averaged
12,300 bpd. Sterling's share of the proceeds of the one cargo lifted in Q4 was
$6.6 million.


The hook-up of these wells is expected to generate additional net revenues in
the second half of 2008 and the results of these operations could have a
material impact on the value of these interests. Petronas has now completed the
acquisition of Woodside's interests in Mauritania, including Chinguetti, and has
taken over as field operator.


AGC joint development area


In AGC, the operator is in negotiations to secure a rig to drill an exploration/
appraisal well targeting the exploration potential of light oil reservoirs on
the flanks of the offshore Dome Flore heavy oil discovery, plus also appraising
the heavy oil accumulation. These negotiations are subject to regulatory
approvals. Sterling has a carried 30% interest in the well.


Madagascar


Negotiations are in progress regarding possible early drilling on a significant
prospect offshore Madagascar. Sterling currently has a partly-carried 30%
interest in an area of approximately 25,000 sq km, with ExxonMobil as operator.
Sterling will seek to farmout a further portion of its costs in the proposed
well.


Kurdistan


Planning for the 2D seismic programme on the recently acquired Sangaw North
permit is making good progress.  Recent field work has significantly improved
the understanding of the block and has also identified a number of oil seeps on
the main structure which are extremely encouraging. Sterling is seeking to
fast-track work on this highly prospective area.


Financial Update


Recent falls in interest rates are estimated to have reduced Sterling's
annualized financing costs by approximately $3 million. Current Group cash
balances are estimated at $14 million. Working capital management remains a high
priority.


The borrowing base review of Sterling's USA and Mauritanian producing interests,
effective from mid-February 2008, has been agreed. This follows completion of
the refinancing of all its bank debt in mid December 2007. Sterling will
maintain its $154 million borrowings and will have undrawn facilities of $4
million. The next review is effective from mid-July 2008




Enquiries


Sterling Energy Plc                    ([phone])          
Web site: www.sterlingenergyplc.com
Harry Wilson
Graeme Thomson

Evolution Securities                   ([phone])
Rob Collins
Chris Sim

Citigate Dewe Rogerson                 ([phone])
Media enquiries: Martin Jackson
Analyst enquiries: Kate Delahunty



In accordance with the guidelines of the AIM Market of the London Stock
Exchange, Harry Wilson, BSc (Hons) Physics (1973), Executive Deputy Chairman of
Sterling Energy Plc, who has been involved in the oil industry for over 33
years, is the qualified person that has reviewed the technical information
contained in this press release.


*subject to completion of pre-emption over a further 11.43%



                      This information is provided by RNS
            The company news service from the London Stock Exchange