Sterling’s initially focused on the shelf waters of the Gulf of Mexico as its US core area. In the fourth quarter of 2005, Sterling expanded its focus area to include the onshore Texas and Louisiana gulf coast region. Its first venture into the onshore/bay areas was a successful non-operated well in Galveston Bay, south of Houston. In 2006, Sterling participated in five wells, two offshore and three onshore, with three being brought on-stream as producers. The onshore well found productive sand but the development of this reservoir was deemed uneconomic. The offshore well in GA 303 was a discovery and began production in April 2007.
The continued growth of low to moderate risk assets, both offshore and onshore, and the development of new opportunities are aimed to create value and generate cash flow to help support our higher risk, higher reward portfolio in the international arena. Sterling will continue an active drilling and work-over program in 2007. A recent addition to Sterling’s portfolio is an Austin Chalk drilling program in onshore Texas, consisting of up to 25 wells over a three- to four-year period. This is a low-risk horizontal drilling play with the potential to target up to 25 bcf of net reserve additions. Drilling of the first deviated well commenced in early April 2007.
In March 2007, Sterling completed the acquisition of Whittier Energy Corporation for $145 million. Sterling plans to drill 35 wells in the USA in the next 12 months. The acquisition of Whittier increased Sterling’s global 2P reserves from 12.9 Mmboe to 24.5 Mmboe.
Sterling operates 21 offshore platforms as well as 16 onshore fields which represent more than 50% of its US assets. In addition, Sterling operates five oil and gas pipeline systems and an oil and gas gathering system which transports in excess of 35 mmcfge per day for third parties, generating significant income.
Gulf of Mexico
Mustang Island
Location: Texas State Waters
Area: 48.8 km2 (12,064 acres)
Sterling Equity: 12.5% to 100% WI; 9.4% to 82% NRI
Matagorda Island
Location: Texas State Waters
Area: 21 km2 (5,215 acres)
Sterling Equity: 42% to 75% WI; 36.6% to 59.5% NRI
High Island
Location: Texas, Federal Waters
Area: 53.2 km2 (13,140 acres)
Sterling Equity: 7.5% over-riding royalty, 50% to 100% WI; 42.3% to 83.33% NRI
Galveston
Location: Texas, Federal Waters
Area: 23 km2 (5,760 acres)
Sterling Equity: 15.75% WI; 10.7% to 11.3% NRI
Eugene Island
Location: Louisiana, Federal Waters
Area: 20 km2 (5,000 acres)
Sterling Equity: 60% WI; 45% NRI
