South East Texas
The Esperson Dome/Ulrich area is a mature producing field that underwent re-development after a 3-D seismic survey of the area was shot in the mid-1990s. A total of 32 wells were drilled as part of the re-development program, 24 of which are productive. Production comes from both the Cook Mountain formation at 7,500 feet and the Yegua formation which is located at 11,000 feet. The typical well in this area produces at an initial rate of 1 to 3 Mmcfe per day and Sterling has approximately 22% average working interest in the field. The Company drilled two 3-D supported probable locations in the fourth quarter of 2005 and an additional probable location in 2006. All three of these wells were successful and were recently connected for production.
In addition to the interest in Esperson Dome/Ulrich, the Company initiated and participated in a 60 square mile 3-D seismic shoot that covered a new region of Southeast Texas in early 2005. After processing and reviewing the data from this shoot, the Company identified 15 Yegua targets at between 12,000 and 14,000 feet and six Nodosaria targets at 8,000 feet. In the first half of 2006, seven wells including all six Nodasaria targets and one Yegua test well were successfully drilled and cased. During the second half of 2006 and through the first quarter of 2007, Sterling have participated in three additional Yegua wells: two of these are successful wells, the third was non-commercial and is being converted to a saltwater disposal well. This field is currently producing in excess of 2 Mmcfe per day net to Sterling.
Sterling is also participating in a 25-well drilling program in the Austin Chalk just northwest of Houston in Burleson, Brazos and Grimes counties. The program consists of three different drilling programs, one in each county. The regional nature and tight characteristics of the Austin Chalk reservoir make it an unconventional resource play and a statistical drilling program that is very attractive due to a high success rate and the predictable nature of the reservoir. In Grimes County, Sterling have a non-operated 25% WI in eleven single-lateral wells, all proven undeveloped locations targeting approximately 10 Bcf net to. In Burleson County, the Company has a 55% non-operated working interest and will be testing both the Austin Chalk and Georgetown formations with 13 dual-lateral wells, targeting approximately 11 bcf of gas and 430,000 barrels of oil net to Sterling. In Brazos County, Sterling has a 55% non-operated working interest in on triple-lateral well, a proven undeveloped location targeting approximately 0.5 Bcf of natural gas and 38,000 barrels of oil net.
