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Sterling Resources to sell its entire Romanian business

Staff writer |
Sterling Resources has entered into an agreement to sell its entire Romanian business to Carlyle International Energy Partners, an affiliate of The Carlyle Group.

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The sale includes licence blocks 13 Pelican, 15 Midia, 25 Luceafarul and 27 Muridava, structured as a corporate sale of the Company's wholly-owned subsidiary Midia Resources SRL, and is expected to complete around the end of the second quarter of 2015 subject to satisfaction of certain conditions typical for a transaction of this nature, including statutory Romanian approvals and the consent of certain participants in the Romanian concessions.

CIEP will pay a cash consideration of $42.5 million to Sterling at completion (prior to any Romanian tax liabilities). Concurrent with the above sale Sterling has entered into an agreement with Gemini Oil & Gas Fund II, L.P. to terminate an investment agreement signed with Gemini in 2007.

Under the investment agreement, Gemini provided funding to Sterling towards its drilling costs of the successful Ana discovery well on the Midia block in return for an entitlement for Gemini to receive payments equivalent to a share of Sterling's gross revenue from any future production from a designated area within the block.

Upon completion of the Romanian sale, Sterling will make a termination payment to Gemini comprising a cash consideration of $10 million out of the proceeds received from CIEP and issuance to Gemini of 60,372,876 common shares of Sterling having a market value of $7.5 million (based on the ten day volume-weighted average price of the common shares on the TSX-V for the period ending March 24, 2015, being CAD $0.157 per share at an average exchange rate of $1 = CAD$1.2664.)

Following the issuance of the Gemini Shares, Sterling's issued capital will total 441,572,956 shares, an increase of approximately 15.8 percent, of which Gemini's shareholding will be 13.7 percent.

Net of the Gemini cash payment, Sterling will receive cash proceeds of $32.5 million from the Romanian sale (prior to any Romanian tax liabilities).

The next amortization and interest payment is due on April 30, 2015, but as previously reported the Company does not expect to have sufficient funds to make the payment in full on that date. As completion of the Romanian sale is likely to be after this date, the Company is considering options to improve our short term liquidity position.

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