Southern Pacific Resource Corp.

Southern Pacific Resource Corp.

August 28, 2012 07:30 ET

Southern Pacific Provides STP-McKay Operations Update

CALGARY, ALBERTA--(Marketwire - Aug. 28, 2012) - Southern Pacific ("STP" or the "Company") (TSX:STP) is pleased to provide an operational update on its STP-McKay Thermal Project near Fort McMurray, Alberta.

STP-McKay Thermal Project

Operations continue to progress well at the STP-McKay Thermal Project as the steam circulation period advances on all of its first 12 SAGD well pairs. The first pad of six well pairs commenced steaming on July 1, with second pad following on July 13. To date, the plant has been running very well, delivering all steam requirements to the wellbores at a 99% on-time load factor. All start-up issues have been resolved with minimal interruption. The wells are readily accepting steam, and warming up in a manner that ensures good conformance along the horizontal sections. The wells are forecast to need three to four months of steam circulation before being placed into production. Southern Pacific expects bitumen production to begin in the fourth quarter of 2012.

Rail Marketing Arrangement

Southern Pacific's rail marketing arrangements are progressing well in preparation for implementation in January 2013. Southern Pacific announced on June 27 a unique arrangement to transport its bitumen product to the U.S. Gulf Coast using rail. This arrangement includes dedicated loading and offloading capacity at two new rail terminals, located in Lynton, Alberta and Natchez, Mississippi. Both terminals, as well as approximately 500 rail cars, are under construction and on schedule. Southern Pacific has been working with several U.S. Gulf Coast refineries and has received significant interest in its product. The Company has also identified sources in the U.S. Gulf Coast to purchase diluent and transport via backhaul on its rail cars for use at the STP-McKay plant. The economics for shipping bitumen via rail continue to be favourable in the current pricing environment, bolstered by the wide Brent/WTI differential, lower Gulf Coast diluent costs, and the requirement for less diluent versus shipping bitumen by pipeline. Volumes of bitumen produced prior to January 1, 2013 will be delivered to intra-Alberta markets and these arrangements have also been firmed up.

Expansion Update

Southern Pacific continues to work on the regulatory approval process for the Phase 1 Expansion and Phase 2 of the STP-McKay Thermal Project. Throughout the summer, the Company has been preparing its responses to the first round of Supplementary Information Requests (SIRs) submitted by the Alberta regulators. The responses should be completed by mid September, which should keep the approval process on track for approval by the fourth quarter of 2013.

About Southern Pacific

Southern Pacific Resource Corp. is engaged in the exploration, development and production of in-situ thermal heavy oil and bitumen production in the Athabasca oil sands of Alberta and in Senlac, Saskatchewan. Southern Pacific trades on the TSX under the symbol "STP."


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, and 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 the current 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 inherent risks involved in the exploration and development of conventional oil and gas properties and of oil sands properties, difficulties or delays in start-up 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, 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.

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