Cameroon: Ntem

Location	Southern Douala Basin (Kribi-Campo sub-basin)
Area	2,319 km²
Sterling Equity	50%
Partner	Murphy Oil Corporation 50% (Operator)

The Ntem concession area is a deep water block situated in the southern Douala / Rio Muni Basin and lies adjacent to the northern maritime border of the Rio Muni province of Equatorial Guinea. Water depths range from 400m to 2,000m across the block. During the first term of the concession over 2,100km of 2D and 1,500km2 of 3D seismic data were acquired. Additional seismic and gravity data were purchased.

This large block is undrilled and is well placed with respect to both Tertiary and Upper Cretaceous plays, which have both proved successful in West Africa. To the north of the block, Tertiary oil, gas and condensate discoveries made by Noble Energy commenced production in 2011, and further nearby discoveries are being appraised by Euroil (Bowleven).

During 2011, Sterling re-processed the 3D seismic data and interpretation of the improved data increased Sterling’s confidence in the material exploration prospects previously identified in the block. The Company considers that four of these prospects are ready to drill and estimates that each has gross un-risked prospective recoverable resources of several hundred million barrels.

In November 2011 Sterling completed a farm-out agreement with Murphy Cameroon Ntem Oil Co. Ltd (Murphy), a wholly owned subsidiary of Murphy Oil Corporation under which Murphy was assigned a 50% working interest in, and operatorship of, the Ntem concession. Sterling retains a 50% non-operated working interest. As consideration, Murphy paid to Sterling a contribution towards past costs and is committed to fully fund joint operations in relation to the current phase of exploration.

Operations within the Ntem concession area are currently suspended under the force majeure provisions of the licence owing to an overlapping maritime border claim between Cameroon and Equatorial Guinea. The Company believes that both countries are actively working to resolve this issue and that the impact of the outcome will be either neutral or positive to the Company’s position however, the possibility exists that the resolution could take longer than expected and that the outcome could have a negative effect on the Company’s position.

When force majeure is lifted, there will be 15 months remaining in the current exploration period which includes the drilling of one exploration well. Having introduced an experienced deep water operator, the Company is now well placed for this operation when it occurs.