More Offshore Facilities Needed for Breagh Phase 2 (UK)

Sterling Resources Ltd., announces a revised plan for sanctioning Phase 2 of the Breagh development and an update on Breagh operations.

Previously, operator RWE Dea and Sterling (collectively the “Partnership”) were planning to submit the Phase 2 field development plan (“FDP”) addendum by June 30, 2013 however based upon the results of the recently drilled A03 production well; RWE Dea and Sterling are now re-evaluating development alternatives with a revised FDP to now be submitted by December 31, 2013. Full FDP approval is anticipated by June 2014 and first gas from Phase 2 by the third quarter of 2016. This revised schedule has been approved by the UK Department of Energy and Climate Change (“DECC”).

Since drilling the A03 well, the Partnership has been evaluating the data. The evaluation indicates that the well penetrated a Carboniferous section which has better porosity and higher permeability than previously seen. In addition, once the results of the A05 well, which is currently being drilled, are evaluated the geological model will be further refined for the north and northeastern areas of the field. Consequently, with new information from both wells the Partnership will consider what adjustments need to be made to the currently envisaged Phase 2 development to reflect these results. The Company intends to fund the Phase 2 development from Phase 1 cash flow and potentially from a portion of the escrowed funds from the recent US$225 million bond issue.

“With the large areal extent of the Breagh field of approximately 80 square kilometres, further offshore facilities will be required for the full development of the field,” stated John Rapach, Chief Operating Officer for Sterling Resources. “Both RWE Dea and Sterling are committed to exploiting the eastern side of the Breagh field and will tailor well design and facility requirements for Phase 2 based on well results and production data from Phase 1. The A05 well has encountered a similar geological section to the A03 well (which production tested at 56 million cubic feet of gas per day on an 88/64 inch choke with a flowing-wellhead-pressure of 1344 pounds per square inch) and we are very pleased with the results of the well which provides a good stratigraphic correlation,” noted Rapach.

Following the completion of drilling of the A05 well, a production test will be conducted. This will be followed by perforation of the A04 well and production testing. These operations are expected to be completed by early August. Once these production tests are completed, the rig will be relocated to the A06 well site to resume drilling from the 20 inch casing, which was set prior to drilling the A05 side-track.

“The preliminary results of the A05 well are encouraging for the Breagh development,” commented Mike Azancot, Chief Executive Officer for Sterling Resources. “Operations continue to progress at the gas terminal with the first production expected in August. We look forward to having the full complement of seven Phase 1 wells on production by the end of 2013,” added Azancot.

Press Release, July 2, 2013; Image: RWE Dea

 

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