Sterling (AIM: SEY), the independent oil and gas exploration and production company

with interests in the Middle East and Africa, provides the following update for the Sterling

operated Sangaw North block in Kurdistan (53.33% working interest).

The side-tracked wellbore of Sangaw North #1 well has been drilled to a depth of 3,360

metres, into the top of the Jurassic formations and at a depth above where the influx of

gas was recorded in the previous wellbore.

A liner has been run and cemented across the open hole interval with the liner shoe at

approximately 3,340 metres.

The Company now plans to drill ahead and evaluate the Jurassic formations to a well

depth of 3,660 metres and estimates this will take approximately one month. During this

section, the well is expected to encounter the formations from which gas containing

hydrocarbons and hydrogen sulphide entered the well in the previous wellbore.

Operations are being conducted using drill pipe resistant to the effects of hydrogen

sulphide.

The joint venture partners in the Sangaw North Production Sharing Contract (“PSC”) may

elect, in the event of encouraging results, to drill further to evaluate deeper Jurassic and

Triassic formations.

Petrophysical logs have been acquired across open-hole Cretaceous intervals below

2,400 metres, the base of the intervals logged and flow tested in the previous wellbore.

Preliminary evaluation of the logs acquired in the current wellbore, together with

hydrocarbon shows and other information acquired while drilling, indicate the presence of

hydrocarbons within these deeper Cretaceous intervals. A detailed analysis of all the data

acquired is being undertaken to identify whether flow testing of certain intervals may be

warranted. Flow testing of Cretaceous intervals, if undertaken, will follow any flow testing

that may be undertaken in the Jurassic and Triassic intervals after they have been drilled.

Sterling has received confirmation from the Ministry of Natural Resources of the Kurdistan

Regional Government that the first sub-period of the exploration phase of the PSC has

been extended by one year to allow for the completion of drilling operations in the Sangaw

North #1 well and the evaluation of the results of this well. The first sub-period, including

the one year extension, will now continue until November 2011.

“Operations since the gas influx and parted drill pipe in the previous wellbore have been

challenging, and we are very pleased to have successfully re-drilled and cased the well to

this important point in the upper Jurassic section. From here, we look forward to exploring

the potential of the deeper horizons.”