Sterling Resources Ltd.

Sterling Resources Ltd.

July 26, 2011 16:00 ET

Sterling Resources Ltd. Announces $45 Million Bought Deal Financing

CALGARY, ALBERTA--(Marketwire - July 26, 2011) -


Sterling Resources Ltd. (TSX VENTURE:SLG) ("Sterling" or the "Company") is pleased to announce that it has entered into a bought deal financing agreement with a syndicate of underwriters (the "Underwriters") led by RBC Capital Markets to issue 32,143,000 common shares (the "Common Shares") at a price of $1.40 per Common Share (the "Offering Price") for gross proceeds of $45,000,200 (the "Offering").

Sterling has also granted the Underwriters an over-allotment option (the "Over-allotment Option") to purchase up to a further 4,821,450 Common Shares at the Offering Price, solely to cover their over-allocation position, if any. The Over-allotment Option will be exercisable in whole or in part, at the sole discretion of the Underwriters, until 30 days following the closing of the Offering. If the Over-allotment Option is exercised in full, the gross proceeds raised pursuant to the Offering will be $51,750,230.

The net proceeds of this Offering are intended to fund certain incremental appraisal and development activities which the Company considers accretive while allowing the Company to maintain sufficient cash to meet the liquidity threshold set under the recently signed £105 million senior secured loan facility agreement to assist Sterling's wholly-owned subsidiary Sterling Resources (UK) Ltd. in financing Phase 1 of the development of the Breagh gas field (and the facilities and infrastructure associated therewith) (the "Loan").

The incremental appraisal and development activities consist of an accelerated appraisal/development well on the UK Crosgan discovery and a potential production-test on the Netherlands F17 well. The Crosgan gas discovery, located mostly in Southern North Sea blocks 42/10 and 42/15 (Sterling 30%, RWE Dea SNS UK Limited 70% and operator), contains P50 Contingent Resources of 32.1 Bcf (Sterling interest) and unrisked Best Estimate Prospective Resources of 14 Bcf (Sterling interest), as estimated by the Company's independent reserves evaluator, RPS Energy, as at December 31, 2010 and disclosed in the Company's annual information form for the year ended December 31, 2010 dated April 19, 2011 and filed under the Company's SEDAR profile at This well was originally scheduled for 2012 or 2013 but is planned to be accelerated so that a tie-back can be integrated into the Phase 2 development of Breagh as early as possible. A drill stem test is now planned offshore Netherlands, subject to satisfactory results from an appraisal well on the existing F17 oil discovery, currently scheduled for the fourth quarter of 2011. Sterling owns 50% interest in block F17 and is the operator thereof.

Contingent Resources are those quantities of petroleum estimated as of a given date to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. The Resource volumes shown represent probabilistic totals of several entities within each license or block area. There is no certainty that it will be commercially viable to produce any portion of the Contingent Resources. The P(50) or 2C is considered to be the best estimate of the quantity that will actually be recovered. If probabilistic methods are used there should be at least a 50 percent probability P(50) that the quantities actually recovered will equal or exceed the estimate. Similarly, the 1C or P(90) and 3C or P(10) represent the low and high estimates respectively.

Prospective Resources are those quantities of petroleum estimated as of a given date to be potentially recoverable from undiscovered accumulations by application of future development projects. There is no certainty that any portion of the Prospective Resources will be discovered or, if discovered, that it will be commercially viable to produce any portion of the Resources. These Prospective Resources are in areas of the field or geological horizons, in which the presence of hydrocarbons require confirmation by drilling. The Best Estimate case is considered to be the best estimate of the quantity that will actually be recovered. If probabilistic methods are used there should be at least a 50 percent probability P(50) that the quantities actually recovered will equal or exceed the estimate. Similarly, the Low case and High case represent the P(90) and P(10) estimates respectively.

Under the terms of the Loan, the Sterling group (consisting of the Company and its subsidiaries from time to time) must maintain a certain minimum aggregate cash balance over the next 12 months on a rolling basis, subject to revision when the Phase 2 development is approved and a step-up to the existing loan agreed. Approximately $30 million is being raised to ensure Sterling can satisfy this liquidity test through to end 2012 while carrying out its previously planned activities. Although the Breagh development project is on schedule for first gas in mid 2012, overall cost variations may occur. Therefore, as a precautionary measure, a portion of the funds raised will be designated towards potential project cost overruns to ensure satisfactory liquidity under the Loan. To the extent that a lower minimum cash balance is required under the Loan in the future, excess cash is intended to be used towards funding the equity portion of development costs on the Company's other projects in the UK and internationally.

The Offering is subject to certain customary conditions including the receipt of all regulatory approvals, including approval of the TSX Venture Exchange (the "TSX-V"). The Common Shares will be offered by way of a short form prospectus in all of the provinces of Canada (excluding Quebec) and on a private placement basis elsewhere; including to Qualified Institutional Buyers in the United States pursuant to Rule 144A of the Securities Act of 1933, as amended, and in the United Kingdom and European Union. Closing is anticipated to occur on or about August 16, 2011.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction. The Common Shares have not been and will not be registered under the United States Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements being available.

Sterling Resources Ltd. is a Canadian-listed international oil and gas company headquartered in Calgary, Alberta with assets in the United Kingdom, Romania, France and the Netherlands. The shares are listed and posted for trading on the TSX-V under the symbol "SLG".

Filer Profile No. 00002072

Forward-Looking Statements

All statements included in this press release that address activities, events or developments that Sterling expects, believes or anticipates will or may occur in the future are forward-looking statements. Specific forward-looking statements in this press release include statements regarding the expected closing date of the Offering and the anticipated amount and use of proceeds. In addition, statements relating to reserves or resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves and resources described can be profitably produced in the future.

These forward-looking statements involve numerous assumptions made by Sterling based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. In addition, these statements involve substantial known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other-forward looking statements will prove inaccurate, certain of which are beyond Sterling's control, including: the impact of general economic conditions in the areas in which Sterling operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with oil and gas operations. Readers should also carefully consider the matters discussed under the heading "Risk Factors" in the Company's Annual Information Form.

The closing of the Offering could be delayed if the Company is not able to obtain the necessary regulatory approvals on the timelines planned. The Offering will not be completed at all if these approvals are not obtained or some other condition to the closing is not satisfied. Accordingly there is a risk that the Offering will not be completed within the anticipated time, or at all. Further, the intended use of the net proceeds of the Offering might change if the board of directors determines that it would be in the best interests of the Company to deploy the proceeds for some other purpose.

Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Sterling's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. These statements speak only as of the date of the press release. Sterling does not intend and does not assume any obligation to update these forward-looking statements except as required by law.

Financial outlook information contained in this press release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this press release should not be used for purpose other than for which it is disclosed herein.

Neither the TSX-V nor its Regulation Services Provider (as that term is defined in policies of the TSX-V) accepts responsibility for the adequacy or accuracy of this release.

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