CALGARY, March 11, 2016 /CNW/ - Sterling Resources Ltd. (TSX-V: SLG) ("Sterling" or the "Company" and together with its subsidiaries the "Group") announces today that it has entered into a recapitalization agreement (the "Recapitalization Agreement") with its subsidiary, Sterling Resources (UK) Ltd. ("SRUK") and Nordic Trustee ASA (the "Bond Trustee") in relation to the senior secured bond (ticker on Nordic ABM exchange: STRE01 PRO)(the "Bond") issued by SRUK pursuant to a bond agreement originally dated May 2, 2013, as subsequently amended (the "Bond Agreement"), pursuant to which the Company will undertake a number of recapitalization activities described in further detail below (collectively, the "Recapitalization").  A copy of the Recapitalization Agreement and certain related documents have been or will be filed with Canadian securities regulators, under the Company's profile on the SEDAR website at www.sedar.com, on www.newsweb.no (an information platform for the Nordic ABM market, on which the Bonds are listed), on www.stamdata.com (the public website administered by the Bond Trustee), and on the Company's website.

Sterling also announces an update on operational and financial matters principally comprising revised production and capital expenditure profiles for the UK Breagh gas field, and projected group cash balances through to the end of 2019.

The Recapitalization

The Amended and Restated Bond Agreement No. 3 signed on November 30, 2015 pursuant to the Bondholder meeting held on November 6, 2015 imposed a number of refinancing milestones on SRUK and the Company in connection with the intended completion of one or more financing and asset/corporate sale or merger transactions intended to achieve a targeted redemption of the Bonds as soon as practically possible and in any event on or before February 29, 2016 (the "Bond Redemption Deadline") together with a payment of the outstanding amortization instalment (with associated premium and accrued interest) by that same date (the "Outstanding Instalment Deadline").  The Bondholder meeting held on March 7, 2016 approved an extension of this Bond Redemption Deadline to April 1, 2016 and the Outstanding Instalment Deadline to March 15, 2016 or such later date as may be specified by the Bond Trustee (which extensions had been signed and become effective prior to the amounts falling due and payable).

SRUK and the Company have been unable to implement any such financing or asset/corporate sale or merger transactions, and therefore have been unable to comply with the refinancing milestones set forth in the Bond Agreement.  As a result, SRUK and the Company have entered into the Recapitalization Agreement, pursuant to which, among other things the following principal transactions are contemplated to occur in the following order, all on the terms and conditions set forth and contained in the Recapitalization Agreement:

• Rights Offering.  The Company will conduct a rights offering (the "Rights Offering") by way of short form prospectus to the holders of its common shares ("Common Shares") on the record date pursuant to which eligible shareholders will receive rights ("Rights") entitling them to purchase Common Shares at a subscription price per Common Share (the "Subscription Price") to be calculated as at the date of the final prospectus after subtracting US$40 million from the aggregate Bond Liabilities (as defined below) forecasted to the closing date of the Recapitalization (the "Closing Date") and converting to Canadian currency, divided by the maximum of 14,277,525,577 Common Shares issuable pursuant to the Rights Offering.
  
  The gross proceeds of the Rights Offering, less the Foreign Exchange Adjustment as defined below, if any (the "Rights Offering Proceeds") (with the expenses associated with the Rights Offering being paid from the general funds of the Company) will be used solely  to fund the release and cancellation of that portion of the liabilities of the Company and SRUK under or in connection with the Bonds, including the obligation to repay the principal amount thereof, together with any accrued and unpaid redemption premium, amendment fees and interest ("Bond Liabilities") equal to the Rights Offering Proceeds (the "Purchased Liabilities") and for no other purpose.  In the case of an increase in the Rights Offering Proceeds in US dollar terms due to a weakening of the US dollar against the Canadian dollar between launch and the expiry date of the Rights Offering, the amount of such increase (the "Foreign Exchange Adjustment") will be retained by the Company.  The Purchased Liabilities will be selected pro rata from each Bondholder based on the aggregate Bond Liabilities owed to each such Bondholder at the relevant time relative to the entire aggregate Bond Liabilities then outstanding. 
  
  The Rights will be offered by way of a short form prospectus to be filed with securities regulatory authorities of each of the provinces of Canada (excluding Quebec) and the Rights Offering is only made to shareholders resident in each such jurisdiction, provided that the Company may elect to distribute the Rights to certain investors in eligible foreign jurisdictions to the extent that the Company has determined it is possible to do so on an exempt basis under or without otherwise breaching the securities laws of any such jurisdiction and to other persons who demonstrate to the Company's satisfaction that the distribution and exercise of the Rights and the issuance of the Common Shares on exercise is not prohibited by any applicable laws and will not require the Company to file any documents, make any application or pay any amount in their jurisdiction of residence unless otherwise agreed.  The Company presently anticipates filing a preliminary prospectus in relation to the Rights Offering on or about March 21, 2016 and as soon as practicable thereafter filing a final prospectus and commencing the Rights Offering.  Assuming an efficient progression of regulatory approvals, the Rights Offering would be expected to close on or about May 16, 2016.  On that date, the Bond Liabilities would amount to approximately US$213.3 million and the Subscription Price would be approximately Can$0.016 per share at the current exchange rate.
  
  The Company will issue a further news release prior to the commencement of the Rights Offering setting forth in greater detail the material terms of the Rights Offering, including the commencement date and expiry date in relation thereto.  The Rights Offering prospectus, when filed on SEDAR, will include a copy of the fairness opinion of FirstEnergy Capital LLP referred to below.
  
  
• Bond Exchange.  Pursuant to a separate shares for debt application to the TSXV, the Bondholders (directly, or indirectly through an affiliate, or through the Bond Trustee) will subscribe for Common Shares (the "Exchange Shares") at the same price per Common Share as the Rights Offering Subscription Price and in such number as is equal to the aggregate Subscription Price of the unsubscribed Common Shares under the Rights Offering at the Closing Date based on the applicable exchange rate on the date of the final prospectus (the "Exchange Amount") in consideration indirectly for the full and final satisfaction of Bond Liabilities equal to the Exchange Amount (the "Exchanged Bond Liabilities").
  
  The only Bond Liabilities thereafter remaining will be the liabilities of SRUK under or in connection with a principal amount of the Bonds anticipated to equal US$40 million (but which may increase to the extent that the Canadian dollar weakens against the US dollar between the date of the final prospectus and the business day immediately following the expiry date of the Rights Offering) (the "Remaining Bonds"), excluding any accrued and unpaid redemption premium, amendment and other fees and interest up to and including the Closing Date (the "Remaining Bond Liabilities").
  
  Immediately after the completion of the Bond Exchange, on the assumption that none of the existing shareholders subscribes for new Common Shares as part of the Rights Offering, the current equity held by the existing holders of Common Shares will be diluted to 3% of the Common Shares.  On the alternative assumption that some of the existing shareholders subscribe for new Common Shares, the equity held by the existing holders of Common Shares will be higher than 3% of the Common Shares. 
  
  
• Transfer of SRUK.  The Company will incorporate a new wholly-owned subsidiary in the United Kingdom ("Newco") and subsequently transfer the entire share capital of SRUK to Newco in order to provide additional security to Bondholders and lenders under the New Loan Agreement (as defined below) and greater flexibility in a future refinancing of the New Loan Agreement and the Bonds post-Recapitalization.
  
  
• Remaining Bonds.  Immediately following the foregoing transactions, SRUK and the Company shall enter into a further amended and restated bond agreement with the Bond Trustee (the "Amended and Restated Bond Agreement No. 4") for the purpose of setting out the revised terms and conditions governing the Remaining Bonds that remain outstanding following the Rights Offering and Bond Exchange (the "Remaining Bonds"), the key terms of which are as follows (further details are set out in Schedule A to the Recapitalization Agreement):
  • US$40 million principal amount unless increased as a result of an exchange rate movement as described under "Bond Exchange" (with no associated accrued and unpaid redemption premium, amendment fees and interest); no redemption premium or make-whole provision;
  • Maturity 30 April 2020;
  • 9% per annum interest coupon, semi-annual interest payment dates on 30 April and 30 October, paid in kind until repayment of the SSCF (as defined below);
  • Repayment out of cash sweep (subject to various tests) after full repayment of SSCF and final bullet repayment;
  • Financial covenants comprise, on a simplified basis: (i) a minimum field life cover ratio of 1.5x dropping to 1.0x after the date the SSCF is discharged, (ii) cumulative production for the previous 12 months to be not less than 90% of budgeted amount, (iii) a minimum Group cash requirement of US$5 million at all times, (iv) a minimum Group cash requirement of US$5 million on a projected basis after the date the SSCF is discharged through to the bond maturity date, and (v) a backward-looking minimum debt service cover ratio of 1.0x; ; and
  • Guarantees from each Group company and a security package based on existing security documents extended to cover Newco.
    
    
• Super senior credit facility.  At the same time as the entry into the Amended and Restated Bond Agreement No. 4, the Company and SRUK shall enter into a super senior credit facility (the "SSCF") with certain of the Bondholders or their affiliates, the key terms of which are as follows (the "New Loan Agreement"; further details are set out in Schedule A to the Recapitalization Agreement):
  • Two tranches each of US$20 million; Tranche A used first and Tranche B if required; both on a revolving, multi-currency basis;
  • Certain restrictions apply to usage of Tranche A and Tranche B as set out in Schedule A to the Recapitalization Agreement;
  • Final maturity date 24 months after Closing Date, optional extension to April 30, 2019 subject to satisfying certain conditions; bullet repayment;
  • 7% arrangement fee on each Tranche, for Tranche A paid in cash on the Closing Date, for Tranche B paid in cash upon the earlier of (i) the date of first utilisation of Tranche B and (ii) the date falling 24 months after the Closing Date (provided that no fee shall be payable if the SSCF is cancelled in full before that date);
  • Interest rate for each tranche is aggregate of the margin and LIBOR (subject to a LIBOR floor of 1 percent). Tranche A margin is 13 percent per annum; Tranche B margin is 13 percent per annum increasing 100 basis points each quarter from drawdown of Tranche B (subject to an overall cap of 15.0 percent per annum);
  • Semi-annual interest payment dates on 30 April and 30 October, Tranche A interest paid cash and Tranche B paid in kind;
  • Commitment fee on unused facility equal to half of applicable margin paid on each interest payment date: for Tranche A paid in cash, for Tranche B only applicable if tranche is used and paid in kind;
  • Cancellation premium on Tranche A and (if used) Tranche B, equal to relevant commitment fee on cancelled amount from date of cancellation to the applicable final maturity date;
  • Financial covenants are essentially the same as those applying for the Remaining Bonds and in addition there are utilisation conditions which comprise, on a simplified basis: (i) a minimum interest cover ratio (EBITDA to SSCF cash charges) of 1.0x, (ii) a minimum 4-year Rolling NPV cover ratio of 1.3x, (iii) a minimum Group cash requirement of US$5 million on a projected basis until the SSCF discharged date, (iv) a minimum field life cover ratio of 1.5x; and
  • Senior ranking in relation to guarantees and security package as described under Remaining Bonds, as set out in the Intercreditor Agreement (as defined below).

• Ancillary Agreements.  At the same time as the entry into the Fourth Amended and Restated Bond Agreement No. 4 and the New Loan Agreement, the Company and SRUK shall also enter into an intercreditor agreement (the "Intercreditor Agreement"), the principal terms of which are set out in Schedule A to the Recapitalization Agreement) and each of the Company and its affiliates (including Newco) shall execute the guarantees and security documents contemplated in the Amended and Restated Bond Agreement No. 4 and the New Loan Agreement.
  
• Shareholder Approval.  The Company will, following the Bond Exchange, call and conduct a special meeting of shareholders as soon as practicable following the Closing Date (ideally and if feasible in conjunction with the Corporation's annual meeting of shareholders) (the "Company Meeting") to consider, among other things, the following resolutions (collectively, the "Recapitalization Resolutions")
  • A resolution approving the creation of one or more new "Control Persons" (as defined in TSX Venture Exchange ("TSXV") Policy 1.1 – Interpretation) pursuant to the Recapitalization (the "Control Person Resolution"), to be approved by a simple majority of shareholders (excluding from such vote the Common Shares held by Control Persons and any interested parties of any Control Person) ("disinterested approval"); and
  • A resolution (the "Consolidation Resolution") approving the consolidation of the Common Shares on a basis to be determined by the Board of Directors following the completion of the Bond Exchange (the "Consolidation"), to be approved by a special resolution majority of shareholders.
    
• 
  As indicated above, assuming that no Rights are exercised pursuant to the Rights Offering, the Supporting Bondholders would hold in aggregate 14,277,525,577 Common Shares (97%) following completion of the Bond Exchange.  Based upon information provided to the Company by the Bond Trustee, it is anticipated that one Bondholder, being Meridian Capital International Fund ("Meridian"), together with an existing shareholder of the Company, YF Finance Limited (together with Meridian, the "Meridian Concert Parties") will hold in aggregate 4,515,983,637 Common Shares (30.7%) following completion of the Bond Exchange, which may render the Meridian Concert Parties together a new control person for purposes of applicable TSXV policy.  In addition, an indirect shareholder of Meridian is a Bondholder and it is anticipated will hold 1,967,125,746 Common Shares (13.4%) following completion of the Bond Exchange.  As such, disinterested approval of the Control Person Resolution will be required, after excluding the votes attributable to the Common Shares held by the Meridian Concert Parties and such indirect shareholder of Meridian.
  
  As a result of the foregoing, and after excluding Meridian's and such indirect shareholder's votes from the Control Person Resolution, the Company anticipates the passage of both of the Recapitalization Resolutions at the Company Meeting.
  
  The Company anticipates holding the Company Meeting as soon as practicable following the Closing Date.  Further details in respect of the Recapitalization will be provided in an information circular anticipated to be delivered to shareholders of the Company in relation to the Company Meeting.
  
  
• Consolidation.  The Company would then consolidate its Common Shares on a basis to be determined by the Board of Directors following the completion of the Bond Exchange. 
  
  The Company proposes to effect the Consolidation in view of over 14 billion Common Shares anticipated to be issued and outstanding following the Recapitalization and the resultant dilutive effect on the Common Share price and in light of the anticipated conditions to be imposed upon the Company by the TSXV in connection with any approval of the Recapitalization.  Following the proposed Consolidation the number of Common Shares then issued and outstanding would be reduced significantly, and the Common Share price will accordingly be significantly higher assuming the equity market capitalization stays the same.

As a separate provision of the Recapitalization Agreement, the Exit Fee Letter entered into between Sterling and the Bond Trustee pursuant to the Amendment and Restatement Agreement No. 3 (as described in the Company's news release of October 22, 2015) will be terminated on the Closing Date. 

Two Bondholders (or their affiliates) have entered into commitment letters in aggregate for the full size of the SSCF, with credit approval, on the basis of the term sheet set out in Schedule A to the Recapitalization Agreement.  Full facility documentation will be agreed prior to the Closing Date.

Additional details regarding the Recapitalization, including the terms of the Amended and Restated Bond Agreement No. 4, the New Loan Agreement and the Intercreditor Agreement, are contained in the term sheets attached as Schedule A to the Recapitalization Agreement.  A corporate presentation summarizing the recapitalization and providing an operational update will be made available in the next couple of days on the Company's website and on Stamdata.

Management and the board of directors of the Company and Sterling UK believe that the Recapitalization is in the best interest of all stakeholders, for the following reasons:

• No alternative refinancing opportunities or corporate sale or merger opportunities (whether for the Company or SRUK) or asset sale opportunities are available and capable of completing in time to achieve the extended Bond Redemption Deadline and the Outstanding Instalment Deadline, despite considerable effort by the Company over the past two years.
  
  
• In the absence of a recapitalization, in the Company's view further extensions of the Bond Redemption Deadline and the Outstanding Instalment Deadline are unlikely.  In this situation, the Company's view is that there would be a very significant risk that the Bond Trustee (acting on behalf of the Bondholders) would then accelerate the Bond, exercise its share pledge over the shares of SRUK.  Losing SRUK would leave the Company without any ongoing source of funds or material realizable assets and would place the Company at a very high risk of insolvency, which would represent a materially worse outcome for shareholders, creditors and other stakeholders;
  
  
• The provision of up to US$40 million of additional standby financing by way of the SSCF could assist in funding Breagh development or other corporate costs, and would make the Group more robust to a continuing very low gas price environment and better able to withstand  any operational disruptions;
  
  
• The reduction in the Company's total indebtedness and annual interest burden by approximately US$173 million and US$22 million respectively (excluding any new financing pursuant to the proposed New Loan Agreement) will create a viable long term financial base; and
  
  
• Existing shareholders will be able to maintain their relative pro rata position in the Company by subscribing for new Common Shares through the Rights Offering on the same financial terms as the Bondholders.

The determination to proceed with the Recapitalization was made based on a variety of factors, including without limitation, an opinion from FirstEnergy Capital LLP, the Company's financial advisor with respect to the Recapitalization, addressed to the board of directors of the Company that the Recapitalization is fair, from a financial point of view, to the Shareholders.

The Recapitalization remains subject to the approval in its entirety by the TSXV.

The Bondholder Meeting

SRUK has today summoned a meeting of Bondholders scheduled to be held on March 18, 2016 (the "Bondholder Meeting") for the purpose of approving the Recapitalization.  In addition, and in consideration of the time needed to implement the Recapitalization and to facilitate the Recapitalization, SRUK has also sought a waiver with respect to the right of the Bondholders to declare the Bonds to be in default and due for payment as a consequence of certain provisions of the Bond Agreement until the termination date of the Recapitalization Agreement (the "Termination Date").  A copy of the summons letter is being filed on SEDAR, on the Company's website and on Stamdata.

Upon approval, the Bond Trustee will be further authorized and directed to complete the negotiation of form, terms, conditions and timing in relation to the Recapitalization, without requiring further authorization, with such form, terms, conditions and timing to be substantively and substantially consistent with the terms of the Recapitalization. In addition, the Bond Trustee will be given power of attorney to prepare, finalize and enter into the necessary agreements in connection with documenting the decisions made by the Bondholder Meeting as well as to carry out the necessary completion work, including but not limited to negotiating and entering into the Amended and Restated Bond Agreement No. 4 (making appropriate amendments to the Bond Agreement) and any ancillary and related documents thereto.

To approve the above resolution, Bondholders representing at least 2/3 of the Bonds represented in person or by proxy at the Bondholder Meeting must vote in favour of the resolution. In order to have a quorum, at least 1/2 of the Bonds must be represented at the Bondholder Meeting.

The Company and SRUK have received voting support agreements from certain Bondholders holding in aggregate in excess of 76 percent (by value) of the Bonds and, on that basis the Company expects the matters proposed to be approved at the Bondholder Meeting to be passed.  The Bond Trustee has entered into the Recapitalization Agreement on this basis. 

This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction. All sales will be made through registered securities dealers in jurisdictions where the Rights Offering has been qualified for distribution. The Rights and the Exchange Shares offered are not, and will not be, registered under the securities laws of the United States of America, nor any State thereof, and may not be sold in the United States of America absent registration in the United States or the availability of an exemption from such registration.

The Company and/or SRUK have been advised by FirstEnergy Capital, PwC, Stikeman Elliott, Bracewell, Burness Paull and Schjødt. The Bond Trustee has been advised by FTI Consulting, Freshfields Bruckhaus Deringer, Osler and Wikborg Rein.

Operational Update

Production at the UK Breagh gas field (Sterling 30 percent) in the first two months of 2016 averaged 25.8 million standard feet of sales gas per day net to Sterling. The field continues to achieve a high level of operational facilities uptime, being 99 percent over that same period.  Production at the UK Cladhan field (Sterling 2 percent) in the first two months of 2016 averaged 210 barrels of oil per day net to Sterling.

Further to the news release of January 18, 2016, Sterling now expects construction work on the onshore compression project to commence in 2017 along with the re-commencement of drilling rig activity on the Breagh field.  Onshore compression is expected to come online at the start of the fourth quarter of 2018, one year later than previously expected. Drilling activity is expected by Sterling to recommence in April 2017 and would include the drilling of wells A09 and A10 and the hydraulic stimulation of one existing well over a nine month period. Sterling expects the drilling of the last two wells (A11 and A12) and the hydraulic stimulation of a further existing well will be evaluated over the next year, following final interpretation of 3D seismic acquired in 2014 and associated reservoir studies.  If economically justified, this further drilling activity could proceed immediately after the drilling of A09 and A10 and the hydraulic stimulation of the first existing well.  No onshore compression construction costs or drilling activity is budgeted by Sterling for 2016.

Sterling has prepared a production and capital expenditure profile to reflect its current view of the base case Phase 1 development, assuming a total of 10 wells including the hydraulic stimulation of one existing well as outlined above.  This profile has been prepared using Sterling's reservoir simulation model and it has not been reviewed by the Company's independent reserves evaluator.

The following table shows the Company's expectation of Breagh sales gas production and capital expenditure ("capex") on a cash basis, all net to Sterling's 30 percent interest, for the next ten years.  Cumulative remaining net capex from the start of 2016 through to the first quarter of 2019 is US$51.5 million.  Net pre-sanction costs for Phase 2 through to the first quarter of 2017 are expected by Sterling to amount to US$3.1 million.  Decommissioning costs of the offshore facilities and wells are not included in the table below but are expected by Sterling to be approximately US$38 million net to Sterling, in 2015 real terms.  This is approximately 17 percent less than assumed in the update of Breagh reserves and net present value as at June 30, 2015 as evaluated by RPS Energy, the Company's independent reserves evaluator, of which an executive summary is filed on SEDAR (www.sedar.com) and on the company's website.  Operating costs are expected to average US$8.8 per barrel of oil equivalent over the period 2016 to 2020 (1 barrel of oil equivalent = 6 thousand cubic feet of sales gas).

Financial Update

At the end of February 2016, the Company had total Group cash resources of US$11.7 million. Advisory fees associated with the negotiation and implementation of the Recapitalization Agreement are expected to amount to US$3.5 million on a cash basis from March 2016 through to June 2016.  In the next few months, the Company expects to receive a net refund of Romanian taxes of approximately US$3 million.  Pursuant to the Recapitalization Agreement, no additional amendment fees will now become payable in cash as a result of not achieving full redemption by the Bond Redemption Deadline (as referred to in the Company's news release of November 6, 2015).

At forward curve UK gas pricing as at February 29, 2016, closing group total cash (total and unrestricted) at the end of each quarter through to the end of 2019, after FlowStream entitlement payments but before debt financing costs, is set out below.  This assumes a continuation of gross general and administrative ("G&A") costs (i.e. before any licence allocations or partner recoveries) of approximately US$8 million per annum (real terms 2016) and exploration and appraisal costs of approximately US$2 million in 2016 and negligible costs thereafter.  Opportunities to make material cuts in G&A costs later in 2016, reflective of an ongoing low gas price environment, are under review.

Cash balances below US$5 million indicate a need for additional financing, in view of the minimum liquidity requirement which will drop to US$5 million from March 17, 2016 assuming approval of the resolutions in the summons at the Bondholder Meeting, before taking into account an appropriate cash buffer for operational or financial purposes.  The intention is that such additional financing would be provided by the SSCF.

CEO Commentary

Commenting on the recapitalization process, Jake Ulrich, Sterling's Chief Executive Officer, said: "The recapitalization is clearly the best alternative for Sterling's stakeholders.  Despite our best efforts, in a falling gas price and weakening wider economic environment we were not able to refinance with third party capital or to conduct an M&A transaction to redeem our bonds. Without the recapitalization, there would be a high risk that bondholders would enforce their rights leading to no real prospect of any return for shareholders.  The recapitalization will reduce our remaining liability to bondholders from over US$210 million down to approximately US$40 million, transforming the balance sheet of the Group.  Together with the availability of up to US$40 million of additional funding, this will give us the financial strength we need to maximise the economic potential of Breagh and to weather the low gas price environment for several years ahead.  We will continue to pursue M&A opportunities and will be better equipped to do this with a much stronger balance sheet.  A further refinancing involving a bank market reserves-based loan may be attractive in the future.  While we recognise the high level of dilution being faced by existing shareholders, they will benefit from the substantial debt reduction and removal of the financing overhang which has affected us significantly for several years.  Finally, the share consolidation will restore our share price to a more appropriate level.  We look forward to welcoming our bondholders as new shareholders and to exploiting whatever value-adding opportunities lie ahead."

Sterling Resources Ltd. is a Canadian-listed international oil and gas company headquartered in Calgary, Alberta with assets in the United Kingdom, France and the Netherlands.  The shares are listed and posted for trading on the TSX Venture Exchange under the symbol "SLG".

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Filer Profile No. 00002072

Forward-Looking Statements

All statements included in this news release that address activities, events or developments that Sterling expects, believes or anticipates will or may occur in the future are forward-looking statements.  In addition, statements relating to expected production are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the relevant reserves and resources can be profitably produced in the future. In particular, this news release contains forward-looking statements with respect to the Recapitalization, including the anticipated timing of filing the Rights Offering prospectus, the timing of the Company Meeting, the passage of the Recapitalization Resolutions, the consolidation of the Common Shares, the timing of closing the Rights Offering and the anticipated Bond Liabilities as at such date, the role of the SSCF in funding Breagh development and other corporate costs, the anticipated remaining Bonds following the Recapitalization, the anticipated control person(s) following the Recapitalization and the size of their holdings and the expected costs of the Recapitalization, future holdings of Common Shares, expectations for a Romanian tax refund, expectations for the timing of onshore compression work and drilling activity, including the drilling of A11 and A12 and hydraulic stimulation, expectations for Breagh sales gas production, decommissioning and operating costs for Breagh and expected costs for net pre-sanction in relation to Breagh Phase 2, future production and capital expenditures, exploration and appraisal costs, corporate costs and cash balances.

These forward-looking statements involve numerous assumptions made by Sterling based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.  In addition, these statements involve substantial known and unknown risks and uncertainties that contribute to the possibility that the predictions, forecasts, projections and other-forward looking statements will prove inaccurate, certain of which are beyond Sterling's control, including: the impact of general economic conditions in the areas in which Sterling operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with oil and gas operations.  Readers should also carefully consider the matters discussed under the heading "Risk Factors" in the Company's Annual Information Form.

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.  Sterling's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements.  These statements speak only as of the date of the news release. Sterling does not intend and does not assume any obligation to update these forward-looking statements except as required by law.

Financial outlook information contained in this news release about prospective results of operations, cash balances or asset valuations 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 such financial outlook information contained in this news release should not be used for purposes other than for which it is disclosed herein.

SOURCE Sterling Resources Ltd.