annual general & special meeting of shareholdersedg1.precisionir.com › companyspotlight ›...

Annual General & Special Meeting of Shareholders

Thursday, May 31, 2012

MANAGEMENT PRESENTATION Mike Azancot – President and CEO

Thursday 31st May 2012

Presentation Themes

• Achievements

• Major Hurdles

• Cash Management

• Portfolio Expectations


Disclaimer

The information in this presentation contains certain forward-looking statements including expectations of future production and capital expenditures. These statements

relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Information concerning

reserves or resources may also be deemed to be forward-looking statements, as such estimates involve the implied assessment that the reserves or resources described

can be profitably produced in the future. These statements reflect current expectations that involve numerous assumptions and which are subject to a number of risks and

uncertainties that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will prove inaccurate and which could cause

actual results to differ from those anticipated by the Company. Although management believes that the expectations reflected in the forward-looking statements are

reasonable, there can be no assurance that such expectations will prove to be correct. The Company cannot guarantee future results, levels of activity, performance, or

achievements. Actual results and future plans could differ materially from those anticipated in forward-looking statements contained in this presentation as a result of the

risks described below.

Certain of the risks and other factors, some of which are beyond the Company’s control, which could cause results to differ materially from those expressed in the

forward-looking statements contained in this presentation include, but are not limited to those as described in the Company’s annual information form for the year ended

December 31, 2011 (the “AIF”) which is available at www.sedar.com. Those factors should not be considered as exhaustive.

In addition, this presentation may contain forward-looking statements attributed to third-party industry sources. These sources are not endorsed or adopted by the

Company explicitly or implicitly. 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.

The forward-looking statements contained in this presentation are expressly qualified by the foregoing cautionary statement. Financial outlook information contained in this

presentation 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 any such financial outlook

information contained in this presentation should not be used for purposes other than for which it is disclosed herein.

Nothing contained herein is intended to constitute an offer to sell or a solicitation of an offer to purchase securities. Any such offer or solicitation may only be made by

prospectus or otherwise pursuant to an exemption from prospectus and registration requirements applicable to the Company.

Information on reserves and resources in this presentation are drawn from the Company’s most recent Statement of Reserves Data and Other Oil and Gas Information on

Form 51-101F1 for the year ended December 31, 2011 appended to the Company’s AIF dated April 12, 2012 and filed on SEDAR at www.sedar.com.


Investment Proposition

• Outstanding track record of finding oil & gas

– Discovered a total of > 200 MMbbls OIIP and > 1.5 Tcf of GIIP

• Breagh gas project in development for first production later this year

• Government support in Romania allows development and exploration to proceed and deliver significant value

• Broad portfolio of high impact exploration prospects

– 460 MMboe(1) of Best Estimate Unrisked Prospective Resources(2) (with additional significant unconventional targets in Romania and France)

• Several near-term catalysts for value creation

– Breagh on production by 4Q 2012

– Commence exploration drilling (2 wells) offshore Romania 3Q 2012

– Cladhan draft FDP submission May 2012

– Seismic programs in Romania, UK & Netherlands

– Portfolio rationalization


(1) RPS year-end report 2011 (2) Prospective Resources are those quantities of petroleum estimated as of a given date to be potentially recoverable from undiscovered accumulations by applications 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 horizon, in which the presence of hydrocarbons require confirmation by drilling.

Asset Working Interest Net Reserves

& Resources Description

NEAR-TERM PRODUCTION

Breagh

UK Southern North Sea

30%

Op: RWE Dea

31.4 MMboe (proved plus

probable) (1)

Phase 1 in development, first gas

expected 4Q 2012

Cladhan

UK Northern North Sea

26.4%, Op 7.3 MMboe

(CR P50)(1)

Northern North Sea oil development

and appraisal activities in 2012 and

2013

Doina & Ana

Offshore Romania

65%, Op 37.3 MMboe

(CR P50)(1)

Offshore gas discoveries, first

production expected in 2015

APPRAISAL P50 CR(1)

Crosgan

UK Southern North Sea

30%

Op: RWE Dea

5.1 MMboe

Appraisal planned for H1 2013;

potential subsea tie-back to Breagh

in 2015

Offshore Netherlands 35%, Op 12.6 MMboe Four oil discoveries, appraisal in

progress

UK North Sea Various 13.5 MMboe 5 Central North Sea discoveries

EXPLORATION P50 PR(1)

Offshore Romania 65%, Op 325 MMboe 9 prospects across 2 blocks

UK North Sea Various 8 MMboe 3 Central North Sea prospects

Onshore Romania 50%, Op 242 MMboe Potential shale gas play

Onshore France 33.4%, Egdon 24 MMboe Seismic over Audignon 2012

CR = Contingent Resources, PR = Prospective Resources The definitions of Contingent and Prospective Resources can be found on Page 28 of the Sterling 2011 Annual Report

(1) RPS, Year-end Report 2011 , adjusted for WI% changes

Finding and Developing Oil & Gas in Europe Three field developments, all discovered or appraised by Sterling, and material exploration upside in asset portfolio


A sustainable business model focused on shareholder value


The Sterling Business Model: Consistent, Repeatable

Balance high impact exploration with major projects and funding


Licence Awards, High Working Interest

• Portfolio includes licences in:

– UK

– Netherlands

– France

– Romania

• Awarded UKNS licences since 2003

• Extensive geophysical capabilities

Drill, Discover and Appraise, Reduce Working Interest

• High calibre exploration team

• Discoveries include

– Cladhan

– Breagh

– Doina

– Ana

– Sheryl

– Blakeney

Monetise, Reduce Working Interest

• Sold 15% working interest in Breagh + surrounding exploration to RWE Dea

• Sold 13.5% working interest of North Cladhan & 12.5% of South Cladhan to TAQA

Develop and Produce

• Breagh Phase I first gas expected Q4 2012

– Sterling’s first development

• Cash flow will partially fund ongoing high impact drilling programme and future development capex

Consider Farm Down

Breagh 2004 2007 / 2008 2009 2012

Cladhan 2003 2008 / 2010 2012 2014 / 2015

Doina/Ana 1997 2007 / 2008 2H 2012 2015

Reinvest Cashflow and Cash Proceeds

Health Safety & Environment

Performance from 2006 to 2011

• 1.99 million man-hours

• 1 environmental incident

• 1 lost time incident

Achieved by

• Commitment to HSE standards throughout the organization (company

and contractors)

• Open and continuous dialogue with operations contractors

• Hands-on approach with adherence to policies and procedures


Reserves and Resources Portfolio

Sterling’s reserves and resources portfolio now offers a balanced spread of developed,

undeveloped and extensive exploration upside in both oil and gas


33MMboe

Proved plus Probable Reserves

94MMboe

Company Interest P50

Contingent Resources Unrisked

460MMboe

Company Interest Best Estimate

Prospective Resources Conventional, unrisked (excludes unconventional gas resources in Romania).

Source RPS, Year-end Report 2011

Near-Term Production Expectations

Sterling expects to achieve first gas from Breagh by Q4 2012 with Cladhan & Doina/Ana to follow in 2015


(1) Sterling’s evaluation of profiles based

on RPS, year-end 2011. Unrisked P50

Contingent Resources plus Best Estimate

Prospective Resources

Breagh; RWE FDP Phase 1

adjusted for 2012 delay

Cladhan; FDP

4 Producers, 3 Injectors

Cladhan Core Area; draft FDP

2 Producers, 1 Injector

Ana & Doina (1)

(1)

(1)

mb

oe

pd

Breagh: Near-term gas production


Crosgan

Breagh

97% of 2P

Reserves

2P Reserves(1) 184 Bcf, 0.8 MMbbls condensate

31.4 MMboe (Net Sterling)

Working Interest 30%

Operator RWE Dea (70%)

First Production 4Q 2012

Breagh Phase 1 (Alpha Platform)

• 2P Reserves (1): 28.7 MMboe

• FDP approval from DECC in July 2011

• Development activities: Offshore pipelines and cabling laid, jacket and topsides installed.

Onshore operations ongoing. Well hook up and rig operation started in May 2012.

3-4 wells expected online by year end.

Breagh Phase 2 (Bravo Platform or Subsea )

• Incremental 2P Reserves (1) : 2.7 MMboe

• Project sanction: 2012

• First production target : 2014

Crosgan

• P50 Contingent Resources(1): (30.3 Bcf) 5.1 MMboe

• Potential subsea tie-back to Breagh in 2014/15

(1) RPS, Year-end Report 2011

Breagh: Field Development


• £95 million main tranche, £10 million cost-overrun tranche with 4 banks. Use of cost-overrun facility requires matching amount of additional equity

funding.

• After discussions with banks, reduced minimum group cash requirement for each forward-looking cash flow statement (CFS) from £35 million to £20

million, with effect from April 1, 2012.

• After clarification of cost overrun and production delay, Sterling will work with the banks to recalculate availability under both tranches. May need to

use a material part or all of the cost-overrun tranche.

• 90 day period to remedy any shortfall in minimum group cash level in CFS.

Project Financing

Breagh Cost Overruns

£ million net % of overrun

FDP 145

Drilling 9 28

Offshore Pipeline 11 33

Onshore Terminal 7 22

Onshore Pipeline 4 12

Other 2 5

Cost update May 21, 2012 (mid case) 178 100

C$ million

RPS 10% NPV Sterling total 2P Reserves as at December 31, 2011 (per AIF) 393

Breagh Phases 1&2 value included in total above 374

Breagh Phase 1 value included in total above 369

Adjustment for reference date of Mar 31, 2012 +30

Adjustment for UK b/f tax loss at Mar 31, 2012 +93

Adjustment for 3 month production delay (to October 2012) -6

Adjustment for capex increase (to £592.5 million mid case, 100%) -11

Adjustment for change in capex phasing +3

Adjusted 10% NPV as at Mar 31, 2012 478

Equivalent value C$ per share (222.7 million shares in issue) 2.15

Adjustment to Breagh Phase 1 value

Note: this is an estimated management proforma adjustment, not independently verified, and

does not represent fair market value

Cladhan: Achieved Commerciality, Further Upside


• Discovered in 2008

• Initial appraisal in August 2010

• Five fields within tie-back distance to Cladhan discovery

• Completed four-well appraisal programme H1 2011

• Successful in delineating the northern core area with a new effective oil column of over 1,200 feet

• Better understanding of the field’s limits – enabling Sterling to proceed with development planning

• Field development submission in mid 2012

• Subsea development options being considered are to own FPSO or via host platform

• Acquired Geostreamer data Sept 2011

• Acquired a 25% interest in Cladhan South in March 2011 through an asset swap with Valiant Petroleum,

provides further potential upside.

• Divested 13.5% of North Cladhan & 12.5% of South Cladhan to TAQA

• Drilled Cladhan South Exploration well

P50 Contingent Resources(1) 7.2 MMbbls

P50 Prospective Resources(1) 9.0 MMbbls

Working Interest 26.4%

Operator Sterling (TAQA Designate)

Field Partners Wintershall (33.5%)

TAQA (40.1%)

First Production 2014 / 2015

(1) RPS, Year-end Report 2011, adjusted to 26.4% WI

26.4% WI

12.5% WI

Cladhan Summary

Cladhan sand fairways & recent wells


Development well locations

Detailed

Development Plan

Cladhan: Development Schedule


Offshore Romania: Summary


Country Highlights XV Midia (Gas Prone Block) – 65% WI XIII Pelican (Oil Prone Block) – 65% WI

Discoveries P50 CR (1) Prospects P50 PR(1)

Doina and Ana 37.4 MMboe Eugenia 78 MMboe

Prospects P50 PR(1) Eugenia South 12 MMboe

Ioana 71 MMboe Mihaela 59 MMboe

Clara 6 MMboe Cati 4 MMboe

Florina 8 MMboe Irina (2) 44 MMboe

Gina 12 MMboe

Bianca 12 MMboe

Anca (2) 56 MMboe

Nadia (2) 33 MMboe

Maria (2) 13 MMboe

Paula (2) 6 MMboe

Updip Voinicul (2) 3 Mmboe

(1) RPS, Year-end Report 2011 (2) RPS, May 2012 review

Addition of Block 27

• 40% Working Interest, adjacent to Pelican block

• 3D seismic to be acquired 2H 2012

Other Participants now in Region

• 345 Bcf discovered on Doina and Ana (XV Midia block)

• 1st gas 2015

• 224 Bcf (37.4 MMboe) net to Sterling (1)

• 10 further prospects on XV Midia block

• 6 oil prospects identified on XIII Pelican block

• Favourable fiscal regime

• Strong local demand for gas

• Gas price liberalization plans

• ExxonMobil

• Melrose Resources

• LUKOIL

• PETROM / OMV

• Petro Ventures

• Gas Plus

• Petromar

• Vanco

Romania Offshore: Significant Opportunities

Progressing development of material gas discoveries and new regional infrastructure


Romanian Gas Price Liberalization

According to quoted government sources there will be a new Gas law

to be provided mid June 2012 as an Emergency Ordinance that has

the following main issues that are pertinent to us:

• The status of transit pipelines will be changed by end June, by

renegotiating the intergovernmental agreements with the

Russian Federation to provide for access.

• Gas will be liberalized gradually from Dec 1 2012 to Oct 1 2014

for industrial customers and from July 1 2013 to October 1st

2018 for domestic customers


Gas Price Liberalization Infrastructure Map

PRODUCER GAS PRICE FORECAST

Purvin & Gertz, September 2011

Central North Sea: Beverley Play Type & Regional Setting


Top Row - Beverley (Left to Right):

• Regional Setting

• Schematic showing potential for multiple targets

Bottom Row - Beverley (Left to Right):

• Regional setting & line of section

• Seismic detail showing Beverley together with

analogue significant producing fields Gannet B &

Gannet C

• Beverley – the last undrilled salt

diapir in the Central North Sea

• A number of analogous diapirs

have been drilled resulting in

discoveries (e.g. Gannet B,

Gannet C, Kyle and Banff)

• Success would add to the

existing Evelyn and Belinda

discoveries to create producing

hub

Offshore Netherlands


1) Appraising oil discoveries

2) Exploration

• Additional prospectivity identified in the F Quad area by recent 3D analysis

• Recently awarded 50% working interest in the Wintershall operated E3/F1 blocks

(1) RPS, Year-end Report 2011, adjusted for WI%

Prospects SLG WI Drill Date Development Scenario

F17 35% 1H 2012 Host Facility

F17-4 35% 1H 2013* Subsea tie-back to F17

F14 35% TBD Subsea tie-back to F17

F18 35% 2H 2013* Subsea tie-back to F17

L01-FB 35% TBD Subsea tie-back to F17

* - Potential Drill date

• Owner and operator of shallow horizons in licences F14, F16 (excluding the F16-E and

F16-P production units), F17a, F18 and L01b

• Four oil discoveries in five blocks, previous wells have tested at flow rates between

2,000 bbls/d and 4,000 bbls/d

• Gross acreage position of 479,000 acres

• Appraisal well in Block F17a completed, F17-9 well encountered 10m gross oil section

and OWC – remapping in progress

• P50 Contingent Resources 12.6 MMbbl and Prospective Resources of 19.6 MMbbl (1)

• Lack of existing oil infrastructure in region but development solutions available

• Acquired additional 10% interest from Enquest 2Q 2012

Offshore Netherlands: Discoveries and Exploration Potential


F17 F18

Korvet Brigantijn

Barkentijn

Fregat

F17-4 Amplitude

Brigantijn

“New Play” - Barkentijn

Seismic Section across F17-4 “New Play”

KEY

ODT WUT

Fregat

APPRAISAL / DEVELOPMENT

EXPLORATION

• Continued 3D analysis presents

additional prospectivity associated with

amplitude and salt ridges – as per

Barkentijn example given

• Exploration portfolio recently

supplemented by addition of E3/F1

blocks awarded early 2012

LKO

Korvet (F17-A)

Brigantijn (F17-4 )

New Well

Onshore France


Paris Basin:

• 9.5 blocks of gross 150,000 acres

• Jurassic & Triassic aged targets

• Potential drilling in 2013

Aquitaine Basin: • Sterling to be operator with 40% interest of St

Laurent & Donzacq licences. • 3D seismic reprocessing and acquisition. • Potential well in 2013 on Audignon gas prospect. • 144 Bcf Best Estimate Unrisked Prospective

Resources(1)

(1) RPS, Year-end Report 2011

2011 Actual & 2012 Planned Activity


Financial Management in a Challenging Period

• Bought deal July 2011 for $42.5 million to secure Breagh debt financing (RBL) to receive

government approval of Breagh Phase 1 programme

• RBL terms amended in April 2012 releasing $24 million from liquidity buffer

• Cladhan divestment in April 2012 to raise $26 million mid 2012, further cash or carry

payment later

• Probable Breagh cost over-runs and 1st gas delay along with a proactive 2013 work

campaign in Romania will require additional funding later in 2012 from sources such as:

– Divestment of a portion of our 65% equity position of offshore Romanian assets

– UK divestments

– Breagh RBL refinancing


Presentation Themes

• Achievements

• Major Hurdles

• Cash Management

• Portfolio Expectations


Moving through our first

development project whilst

maintaining significant E & A

portfolio upside potential.

Management Team


Mike Azancot – President and Chief Executive Officer

A Petroleum Engineer (Master of Engineering) specialising in

Upstream business optimisation. 30 years of broad experience in the

E&P sector holding senior management positions in International

businesses with Occidental, LASMO and Petrokazakhstan in the North

Sea, China, Indonesia and Kazakhstan.

David Blewden – Chief Financial Officer

A senior financial executive with over twenty five years of international

experience in oil and gas financial management, corporate finance and

energy investment banking. He has held senior financial positions at

PetroSaudi International, African Arabian Petroleum, Yukos Oil

Company and energy investment banking roles at Citigroup, UBS,

Chase Manhattan and Schroders. Mr Blewden holds a BA (Honours)

and MA in Natural Sciences from Cambridge University, England.

John Rapach – Chief Operating Officer

Over twenty-five years of operations experience in both offshore and

onshore environments. He is an industry renowned specialist in the

preparation of reserve assessments, well testing, field development

and performance enhancement.

Annual General & Special Meeting of Shareholders

Thursday, May 31, 2012

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