Southern Pacific Resource Corp.

Southern Pacific Resource Corp.

December 10, 2010 10:26 ET

Southern Pacific Resource Corp. Announces Increase to Previously Announced Offering of Convertible Unsecured Subordinated Debenture to $150 Million

CALGARY, ALBERTA--(Marketwire - Dec. 10, 2010) - 


Southern Pacific Resource Corp. (TSX:STP) ("Southern Pacific" or the "Company") is pleased to announce that it has increased the size of its previously announced public offering, on a "bought deal" basis, to $150 million principal amount of convertible unsecured subordinated debentures with an interest rate of 6.00% per annum, payable semi-annually on the last day of June and December. The transaction was upsized from the original amount of $125 million.

The offering is being made through a syndicate of underwriters co-led by BMO Capital Markets, RBC Capital Markets and Credit Suisse Securities (Canada), Inc. and includes TD Securities Inc. and Raymond James Ltd.

The Company has also granted the underwriters the option to purchase up to $22.5 million principal amount of additional Debentures at a price of $1,000 per Debenture to cover over-allotments, exercisable in whole or in part anytime up to 30 days following closing of the offering. If the over-allotment option is fully exercised, the total gross proceeds to Southern Pacific from the sale of Debentures will be approximately $172.5 million.

The Debentures have a face value of $1,000 per debenture, a coupon of 6.0%, a maturity date of June 30, 2016, and will be convertible into Common Shares at the option of the holder at a conversion price of $2.15 per Common Share.

The Debentures will be issued by way of a short form prospectus to be filed in all provinces, except Quebec (collectively, the "Selling Jurisdictions") and by way of private placement in the United States to Qualified Institutional Buyers pursuant to Rule 144A or in such other manner as to not require registration under the United States Securities Act of 1933, as amended (the "US Securities Act").

The Offering is subject to certain conditions precedent, including approval of the Toronto Stock Exchange and prior or concurrent closing of the Second Lien Term Loan Facility and a First Lien Revolving Loan Facility, each as defined and described below. Closing is expected to occur on or about January 5, 2011.

The Company intends to use the proceeds of the Offering to fund the development of STP-McKay. STP-McKay is a 100% owned and operated steam-assisted gravity drainage ("SAGD") project with a design capacity of 12,000 bbl/d of bitumen treatment and 33,600 bbl/d of steam generation.

This press release does not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdictions. These securities have not been registered under the US Securities Act or any state securities law, and they may not be sold in the United States unless an exemption from registration is available. This press release does not constitute an offer to sell or a solicitation of an offer to buy securities in the United States.

Forward-Looking Information

This news release contains certain "forward-looking information" within the meaning of applicable securities law including, but not limited to: the proposed financing plan for Southern Pacific which contemplates the bought deal Offering, marketing of a Second Lien Term Loan Facility and the securing of a First Lien Secured Credit Facility, and the proposed use of proceeds in connection therewith. 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 with respect to results of operations, production, future commodity prices and exchange rates, future capital and other expenditures, business prospects and future economic and market conditions as at the date the statements are made. Forward- looking information is 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 securing required regulatory approvals and in the construction, commissioning and start-up operations, the uncertainties involved in interpreting drilling results and other geological data, fluctuating commodity prices, the possibility of unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed for construction of STP-McKay in the future and risks and uncertainties associated with the impact of general economic conditions and other factors including unforeseen delays. As an oil sands enterprise in the early stage of development with heavy crude and 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 as required. There can be no assurance that the Company will be able to complete its debt financing plan on terms and conditions satisfactory to Southern Pacific or at all. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans and the timing of capital expenditures, 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. Due to the risks and uncertainties associated with forward-looking information, the reader is cautioned not to place undue reliance on this forward-looking information.

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