Sanction of Phase 2 of the Breagh development will be made later in 2012. A decision as to the appropriate form of incremental development will be made following completion of a sub-surface study being conducted jointly by Sterling and RWE Dea UK, reflecting the results of reprocessed 3D seismic and better than expected results from the first two development wells.
In April an agreement was executed with TAQA for the sale of a 13.5 percent interest in the North Cladhan area (Blocks 210/29a and 210/30a) for an initial consideration of US$47 million. This initial consideration will be received in three installments: US$22.3 million upon completion of assignment, now expected around the end of this month; US$4.3 million to be paid upon the achievement of certain milestones likely to be attained by October 2012; and the balance as a carry of a portion of Sterling's Cladhan development expenditures up to US$53.6 million or a cash payment of up to US$20.4 million, or a combination of the two. A further payment of up to US$10 million could be received if, after first production, proven plus probable reserves are certified to be in the range of 30 to 45 million barrels for 100 percent of the field. A final field development program is expected to be submitted around the beginning of the fourth quarter of 2012 with approval expected early in 2013. It is planned that TAQA will assume operatorship later in 2012.
During April, the Company announced that the South Cladhan exploration well, 210-29c-5 did not encounter hydrocarbons and was subsequently plugged and abandoned. Pursuant to farm-out agreements the well was drilled at no cost to Sterling.
The Company has engaged a financial advisor to sell up to all of its remaining 26.4 percent interest in the Cladhan field in the UK North Sea. Subject to the receipt of suitable offers, it is the Company's intention to sign a definitive sale agreement and complete during the fourth quarter.