CALGARY, ALBERTA — (Marketwire) — 09/21/11 — Southern Pacific Resource Corp. (“Southern Pacific” or the “Company”) (TSX: STP) is pleased to announce its financial and operational results for the year ended June 30, 2011.
2011 FISCAL HIGHLIGHTS:
Southern Pacific has filed its Annual Consolidated Financial Statements and Management Discussion and Analysis for the year ended June 30, 2011.Southern Pacific has also filed its Form 51-101F1 – Statement of Reserves Data and Other Oil and Gas Information, Form 51-101F2 – Report on Reserves Data by Independent Qualified Reserves Evaluator, and Form 51-101F3 – Report of Management and Directors on Oil and Gas Disclosure, under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. The oil and gas information is included in the Annual Information Form filed by Southern Pacific. Such filings can be accessed electronically on SEDAR at . Copies are also available on the Company–s website at .
OUTLOOK
Southern Pacific remains focused on the construction and operation of Phase 1 of STP-McKay. The 12,000 bbl/d steam-assisted gravity drainage (SAGD) project was approved in the fall of 2010, and construction has been underway since. The Company continues to expect the project to be completed within its budgeted time frame and now expects the total cost to come in below the original $450 million budget. The revised final project cost estimate, including contingency, is between $415 and $440 million, including the addition of $15 million of scope changes that are expected to enhance the reliability of the plant and reduce operating costs. This estimate is $10 to $35 million below the original budget.
The project milestones have been most recently marked by the successful drilling of 12 SAGD well pairs, which were drilled with excellent results. All 12 of the SAGD well pairs encountered high quality reservoir throughout and, most notably, the absence of lean zones and shale barriers in any of the well bores. This gives management confidence that the well pairs will perform as expected in the initial design. All horizontal sections were drilled to design length, with none of the well bores departing the exploitable reservoir. Southern Pacific completed the drilling operations with no re-drills or side tracks, nor with any difficulty running the slotted liners in the horizontal sections.
At the central process facility site, various structures are beginning to elevate above ground level, as the earthworks including site civil preparation and pile driving near completion. The Company recognized significant savings in the plant and pad site civil works, thanks in part to efficient construction management and contractors, and also because competent clay material was found locally from which to construct the sites.
The main construction operations underway at the plant site include continued pile driving, pouring cement foundations, erecting storage tanks and constructing the 85 person operations camp. Over 80% of the modules, skids and equipment packages have been released for shop fabrication. Modules have started to arrive on site and are scheduled to continue to arrive over the coming months.
From a timing perspective, Southern Pacific expects first steam to the SAGD well pairs will occur on schedule in the second quarter of calendar 2012. The Company remains fully funded to complete, start up and add production volumes from the STP-McKay project.
At the STP-Senlac Thermal Project (“STP-Senlac”) located near Unity in southwestern Saskatchewan, Southern Pacific remains committed to its development plan, which includes maintaining production levels on an annual basis between 4,000 and 5,000 bbl/d. Over the past quarter, the property achieved an average production rate of 4,829 bbl/d. This increased production level is primarily a result of the recent addition of Phase H, which consists of two SAGD well pairs placed on production in April 2011.
As part of its development strategy, Southern Pacific is now drilling and preparing Phase J for production. Phase J consists of three SAGD well pairs; these well pairs may not all be needed until later in the fiscal year and they will be layered into the facility as capacity permits.
Southern Pacific recently completed a scheduled bi-annual maintenance turnaround at STP-Senlac. The turnaround took only 9 days to complete as compared to a 14 day budget. All the wells are now back on production.
The STP-Red Earth Thermal Project also commenced operations in the fourth quarter. Southern Pacific re-activated this 1,000 bbl/d pilot project this past June. The Company is testing three separate well bores, using cyclic steam stimulation (“CSS”) as the technique for recovery. Each well bore has a unique configuration and the Company intends to continue testing the wells through the fall of 2011. Following this initial testing, Southern Pacific will analyze the data and determine the next steps in establishing an overall development plan for this project and future expansion plans.
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.”
Advisory
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.
Definitions
“Barrels of oil equivalent” (boe) maybe misleading, particularly if used in isolation. A boe conversion of 6 mcf to 1 barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
“Funds from operations” and funds from operations per share are non-GAAP terms that represent cash generated from operating activities before changes in non-cash working capital and asset retirement expenditures. Southern Pacific considers funds from operations to be a key measure as it demonstrates the Company–s ability to generate the cash necessary to fund future growth through capital investment. Funds from operations may not be comparable with the calculation of similar measures for other companies. Funds from operations per share is calculated using the same share basis which is used in the determination of net income (loss) per share.
“Operating netback” is a non-GAAP term defined as petroleum and natural gas sales less royalties and less operating and transportation costs.
Contacts:
Southern Pacific Resource Corp.
Byron Lutes
President & CEO
403-269-1529
Southern Pacific Resource Corp.
Howard Bolinger
CFO
403-269-2640