Operating Upate

Sterling Energy PLC
16 November 2006




16 November 2006

                             STERLING ENERGY PLC
                        ('Sterling' or the 'Company')

                                OPERATING UPDATE



Sterling Energy plc, the AIM listed oil & gas exploration & production company
operating in the Gulf of Mexico and Africa, today provides an update on its
activities since the publication on 19 September 2006 of its Interim Results.



Mauritania



Sterling notes the presentation by Woodside, operator of the Chinguetti field,
made today, which gave an interim reserves update for proven, probable and
contingent resources of 77 million bbls. Of this total, 53 million bbls were
proven and probable reserves ('2P'). In addition to an infill well by the end of
2006, a 4D seismic survey is planned for 2007 and a programme of infill wells in
late 2007. It also highlighted the high resolution 3D seismic work planned for
2007 on the Tiof field, in which Sterling has a royalty interest, and the
concept of a tie-back into Chinguetti facilities with a possible capacity of
50,000 bpd. Chinguetti field production since mid-year has been in the range of
27,000-35,000 bopd.

In its 2006 half-year report, Sterling had used a provisional estimate of 2P
field reserves of 80 million barrels ('bbls'), based on a 4 phase development of
the field. These estimates will be formally reviewed again at the time of
publication of the annual results for 2006, in light of further information
gained over the coming months. For the development potential of Phases 2
onwards, key data will be obtained from the drilling of the well planned for
December. The planned 4D seismic will make it possible to have a much better
picture of the ultimate potential recoverable reserves of the Chinguetti field.


Under the provisions of the Funding Agreement, Sterling's cash flow continues to
reflect its priority of recovering development costs paid by it, through cost
oil production.



Gulf of Mexico and Gulf Coast



Production in the third quarter averaged 8.6 mmcfged, compared with 8.5 mmcfged
in the first half of 2006. Shut-ins owing to the pipeline repairs on Gryphon and
the planned upgrade at Mustang Island areas, held back production. Energy prices
have been lower than in the first half. Gas accounts for some 80% of US
production and gas prices to date in the second half have generally ranged
between $5.5 and $7.25 per mcf, recently moving over $8 per mcf with the early
onset of colder conditions.



In line with the strategy of increasing its exposure onshore, Sterling has
executed a letter of intent to participate in a 25 well Austin Chalk horizontal
well programme in the central Gulf coast region of Texas. Sterling will
participate for 25-55% working interest ('WI') in this low risk, infill drilling
in existing fields. Based on an independent consultants report, it exposes
Sterling to 11 bcfge of net proven and 14 bcfge of net possible reserves. At the
end of June 2006, Sterling's 2P USA reserves were over 50 bcfge. With an
expected early December completion, this will immediately add approximately 4+
bcfge to proven reserves. With an initial outlay for the lease purchases and the
first three wells of approximately $9.5 million, this programme is thereafter
expected to be self-funding. Sterling has a 55% WI in the initial test well,
which is expected to spud in mid-December. The programme projects that wells
will be drilled continuously thereafter on a 90 day basis and Sterling can elect
on its participation on a well-by-well basis.



The Matagorda Island 520 SE/4 # 4 ST was successfully re-completed in September,
increasing net production from 1 mcfgd to 500 mcfgd. Sterling has a 59.5% net
revenue interest in the well.



At Mustang Island in the Western Gulf, Sterling has completed early, a $4.8
million upgrade of its pipeline and processing facilities to accommodate
increased third party production, commencing shortly. Sterling paid $0.25
million of the costs of these upgrades, the remainder being paid by a third
party user. This work has resulted in periods of shut-in of the system to
accommodate this work. Sterling's transportation and processing revenues are
expected to double to over $2.6 million per annum and it will enable an
extension of the life of some of its wells.



Sterling recently participated with a 22.25% working interest ('WI') in the
Davis Petroleum Corp. - #1 Trahan.  The well found productive pay but reserves
have now been deemed uneconomic.



Sterling has farmed out its interest in the High Island 52 Field (50% WI),
subject to the drilling of a well in Q1 2007. This farmout excludes Sterling's
royalty interest in the Gryphon wells located in the NE quadrant of High Island
52, which have been generating in excess of $0.5 million net per month. Sterling
will receive cash of $0.3 million if no well is drilled or it is not commercial.
In the event of any development, it will have a 2.75% ORRI and will be relieved
of the field abandonment costs, which exceed $2 million net.



Abandonment operations are underway on High Island A-68/83 where production
ceased in 2003.  Seven wells are being plugged and decommissioning of the
existing platforms will take place in 2007.



The non-operated Galveston 303 #7 well is drilling earlier than expected.
Sterling has a 17.3% WI in this 10,873 foot well to capture 1 bcf of net
reserves. The well is expected to reach total depth in late-November.



The higher potential drilling is expected to start in late November, on the
North Theall Heirs #1 exploratory well located onshore south Louisiana. Sterling
has a 34% WI in this high risk 15,000 foot well, targeting a net 10-30 bcfge.



Preparation also continues on the Thunder Stud prospect in south Louisiana (15%
WI). This is Sterling's first onshore operated well, targeting deep reserves
(18,000 feet) in excess of 20 bcfge net. Drilling is expected to start in late
December.





Active programme and seeking acquisitions



Chief Executive, Harry Wilson, said:



'Our cash balance, currently over $50 million, continues to increase, supported
by liftings from Chinguetti and production in the Gulf of Mexico.  Activity over
the next year remains at a high level.  We have joined an onshore US infill well
programme, which will commence in December, adding to our reserves and
production.  We keenly await the results of the next Chinguetti well due to spud
shortly and of the 3 largely carried exploration wells in West Africa and 3 in
the USA due by the end of the first half of 2007.  We continue to seek further
profitable and value adding assets'.



Enquiries

Sterling Energy ([phone])          Web site: www.sterlingenergyplc.com
Harry Wilson
Graeme Thomson

Citigate Dewe Rogerson ([phone])
Media enquiries: Martin Jackson
Analyst enquiries: Nina Soon




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