Southern Pacific Resource Corp.
TSX VENTURE : STP

Southern Pacific Resource Corp.

October 13, 2009 09:00 ET

Southern Pacific Provides Additional Information On Producing SAGD Oil Asset Acquisition

CALGARY, ALBERTA--(Marketwire - Oct. 13, 2009) - Southern Pacific Resource Corp. ("Southern Pacific" or the "Corporation") (TSX VENTURE:STP) is pleased to provide additional information on the recently announced (October 9th,2009) acquisition of steam assisted gravity drainage ("SAGD") producing heavy oil interests ("the Senlac Acquisition"). These assets have averaged a daily oil production rate of 5,000 barrels per day ("bbl/d") since June 1, 2009, which is the effective date of the acquisition. The acquisition is expected to close on or about November 2nd, 2009 with a net acquisition price of about $90 million.

The Senlac Acquisition will dramatically alter Southern Pacific by adding facilities, operations, relevant experience and significant cash flow, all of which will directly complement the existing oil sands assets of the Corporation. The Senlac Acquisition has produced more than 13 million barrels of heavy oil using SAGD technology over the past 12 years and the Corporation expects a remaining projected life of approximately 15 years. The assets are currently producing more than 6,000 bbl/d. Southern Pacific expects to continue the development of the Senlac Acquisition by drilling additional SAGD well pairs throughout the remaining project life.

The netbacks for the SAGD heavy oil produced at Senlac are typically better than netbacks from SAGD projects in the Athabasca oil sands. The oil is lighter, and requires less steam to mobilize the oil; the current steam/oil ratio for the project is currently below2.0 bbl/bbl. The 12-13 degree API oil also requires less diluent for blending.

The estimated cashflow over the twelve months following the close of the Senlac Acquisition is expected to be in excess of $51 million, which post financing equates to approximately $0.23 per share. With this level of cashflow, based upon the forward strip price for WTI, the payback on the acquisition is expected to take less than two years.

This cashflow will be utilized to:

  • advance the Corporation's STP-McKay project, which has been designed to recover 12,000 bbl/d (9,600 bbl/d net to the Corporation at an 80% working interest)
  • fund the upcoming winter's exploration core hole programs at Hangingstone and McKay South
  • fund the next phase of development at Senlac

Southern Pacific has posted a new presentation on its website that fully describes the Senlac Acquisition and the impact it will have on the Corporation. Visit the website at www.shpacific.com to view this presentation.

Readers' Advisory

Barrel of Oil Equivalent: Where amounts are expressed on a barrel of oil equivalent ("boe") basis, natural gas volumes have been converted to boe at a ratio of 6,000 cubic feet of natural gas to one barrel of oil equivalent. This conversion ratio is based upon an energy equivalent conversion method primarily applicable at the burner tip and does not represent value equivalence at the wellhead. Boe figures may be misleading, particularly if used in isolation.

Safe Harbour

This news release contains certain "forward-looking information" within the meaning of such statements under applicable securities law including estimates as to: future production, operations, operating costs, commodity prices, administrative costs, commodity price risk management activity, acquisitions and dispositions, capital spending, access to credit facilities, income and oil taxes, regulatory changes, other components of cash flow and earnings, anticipated discovery of commercial volumes of bitumen, the timeline for the achievement of anticipated exploration, anticipated results from any current or projected drilling program and, subject to regulatory approval and commercial factors, the commencement or approval of any SAGD project. 

Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include, but are not limited to, the completion of the transactions contemplated by the Acquisition, the equity financing and the credit facility, the inherent risks involved in the exploration and development of conventional oil and gas properties, of oil sands properties and the assets to be acquired pursuant to the Acquisition, difficulties or delays in start-up and continuing operations, the uncertainties involved in interpreting drilling results and other geological data, fluctuating oil prices, the possibility of unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future and other factors including unforeseen delays. As an oil sands enterprise in the development stage, with some conventional production Southern Pacific faces risks including those associated with exploration, development, start-up, approvals and the continuing ability to access sufficient capital from external sources if required. Actual timelines associated may vary from those anticipated in this news release and such variations may be material. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans, risks associated to the uncertainty of reserve estimates including those relating to the Acquisition, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. For a description of the risks and uncertainties facing Southern Pacific and its business and affairs, readers should refer to Southern Pacific's most recent Annual Information Form. Southern Pacific undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, unless required by law. 

The reader is cautioned not to place undue reliance on this forward-looking information.

aNeither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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