Acquisition

Sterling Energy PLC 27 February 2004 Sterling Energy plc closes $39.5 million production deal in Gulf of Mexico Further to the announcement made by the Company on 30th January 2004, Sterling Energy plc ('Sterling' or 'the Company') is pleased to announce that it has concluded the acquisition of five producing gas fields from Osprey Petroleum Partners, LP for $39.5 million in cash. The fields are located in shallow water, offshore Texas, in the Gulf of Mexico, and include the associated gas gathering system and onshore facilities. Harry Wilson, Chief Executive of Sterling Energy plc, said 'This acquisition, following our successful £38 million bid for Fusion Oil & Gas Plc completed in December 2003, marks another key step in our development as an independent oil & gas company.' The acquisition increases Sterling's gas production to around 12 million cubic feet of gas equivalent per day and is expected to add operating cash flow after direct costs, of about $1 million per month at recent gas prices. Based on an independent engineering report, the transaction will more than double Sterling's proven plus probable reserves in the Gulf of Mexico. Proven producing reserves in the fields acquired are assessed to be 21.6 billion cubic feet equivalent (bcfe) at 1st November 2003. In addition there are substantial undeveloped reserves. As a result of this transaction, Sterling becomes an operator for the first time in the Gulf of Mexico. Sterling expects to be able to add considerably to the existing production levels through a drilling and work-over programme of the undeveloped reserves acquired. The consideration for the acquisition was $39.5 million paid in cash with an effective date of 1st November 2003. The consideration was funded from a further $25 million loan facility from Hibernia Bank and existing cash resources. The bank loan is repayable on 30th June 2006. It is subject to twice yearly borrowing base reviews and other covenants which limit the use of the production cash flow. Sterling believes that the facility will give it flexibility to develop its US assets without the pressure of near-term loan repayments. Sterling will provide an update on operations, and in particular the integration of Fusion, early indications of which are encouraging, in early March. For further information contact: Harry Wilson, Chief Executive, Sterling Energy plc: 01582 462 121 Nigel Quinton, Operations & Technical Director, Sterling Energy plc: 01582 462 121 Graeme Thomson, Finance Director, Sterling Energy plc: 01582 462 121 Allan Piper, First City Financial Public Relations: 020 7436 7486 07736 064 982 Rob Collins, Evolution Beeson Gregory: 020 7071 4311 This information is provided by RNS The company news service from the London Stock Exchange