Southern Pacific Resource Corp.

Southern Pacific Resource Corp.

October 31, 2012 16:04 ET

Southern Pacific Sells First Barrels of Bitumen from STP-McKay Thermal Project

CALGARY, ALBERTA--(Marketwire - Oct. 31, 2012) - Southern Pacific Resource Corp. (TSX:STP) ("STP" or the "Company") is pleased to announce that sales of diluted bitumen ("dilbit") have commenced from its STP-McKay Thermal Project near Fort McMurray, Alberta.

On October 24, 2012 the first load of dilbit was hauled by truck for sale to an intra-Alberta market. Since then, approximately 9,000 barrels of dilbit have been hauled for sale to several local markets. Bitumen needs to be diluted on site in order to separate the bitumen from produced water. Most of the dilbit loads from the facility's sales tanks have contained less than one percent by volume of residual water and sediment, indicating that the facility has been performing well in terms of separating the produced fluids and effectively treating the dilbit product to remove impurities. Southern Pacific will continue to deliver its dilbit volumes to Alberta markets until such time as its rail marketing arrangement, announced on June 27, 2012, is ready to commence transporting volumes to the US Gulf Coast. The rail marketing arrangement is scheduled to commence on January 1, 2013.

The start-up of the STP-McKay Thermal Project continues to advance as scheduled. To date, two steam assisted gravity drainage ("SAGD") well pairs have been successfully converted from the warm-up circulation phase to production. Combined production from these two wells is currently averaging about 700 barrels per day (bbl/d) at intentionally restricted rates; this will allow the SAGD steam chambers to build as uniformly as possible along the horizontal wellbores. There are another five SAGD well pairs in various stages of conversion to the production phase and five SAGD well pairs that will likely remain in the circulation phase until the aforementioned conversions are complete. As the Company has stated previously, it is expected to take approximately 12 to 18 months for steam injection and production levels to ramp up to the full capacity of the facility. Phase 1 is capable of generating up to 37,500 bbl/d of steam and producing up to 12,000 bbl/d of bitumen under its existing approval.

Southern Pacific also filed an application in November 2011 to increase the bitumen processing capacity of STP- McKay Phase 1 to 18,000 bbl/d. Regulatory approval for this Phase 1 Expansion plus an additional 18,000 bbl/d of bitumen processing capacity in Phase 2 is expected late in 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, including the STP-McKay Phase 1 Expansion and STP-McKay Phase 2.

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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