Southern Pacific Resource Corp. ("Southern Pacific" or the
"Corporation") (TSX VENTURE: STP) is pleased to announce the
completion of an independent reserves evaluation for its STP-McKay
project. The evaluation by McDaniel & Associates Consultants
Ltd. ("McDaniel") marks the first time in the Corporation's oil
sands history that Probable ("2P") and Possible ("3P") bitumen
reserves have been recognized on Southern Pacific's asset base.
On May 29, 2009, Southern Pacific filed an application for a
commercial steam assisted gravity drainage ("SAGD") project on its
McKay block. Southern Pacific owns an eighty percent (80%) working
interest in the STP-McKay project, which is comprised of 10.5
sections of the Corporation's 269 gross sections of oil sands
leases on Alberta's Athabasca fairway. On July 7, 2009 Alberta
Environment deemed the STP-McKay project application to be
administratively complete. Formal public notification and newspaper
advertisement of the application will now commence shortly.
The following table summarizes McDaniel's estimate of the
Corporation's reserves within the STP-McKay project area effective
June 30, 2009 (the "Report"):
--------------------------------------------------------
80% WI Net Present
Exploit- Gross 80% Value @ 10%
able Lease WI Recov- (before tax)(3)(4)
Bitumen Recov- erable Recov- -------------------
in erable (MMbbl) ery $C
Place (MMbbl) (4) Factor (million) $C/share
---------------------------------------------------------------------------
Probable
Undeveloped(1) 188.4 67.6 54.1 35.9% $121 $ .99
Total Proved +
Probable (2P) 188.4 67.6 54.1 35.9% $121 $ .99
Possible
Undeveloped(2) 112.2 54.7 43.8 $180 $1.48
Total Proved +
Probable + Possible
(3P) 300.6 122.3 97.8 40.7% $301 $2.48
---------------------------------------------------------------------------
(1) Probable reserves are those additional reserves that are less certain
to be recovered than proved reserves. It is equally likely that the
actual remaining quantities recovered will be greater or less than the
sum of the estimated Proved plus Probable reserves.
(2) Possible reserves are those additional reserves that are less certain
to be recovered than probable reserves. There is a 10% probability that
the quantities actually recovered will equal or exceed the sum of
proved plus probable plus possible reserves.
(3) Future net revenues associated with reserves and resources do not
necessarily represent fair market value.
(4) The estimates of reserves and future net revenue for individual
properties may not reflect the same confidence level as estimates of
reserves and future net revenue for all properties, due to the effects
of aggregation.
The Report was prepared in accordance with National Instrument
51-101 ("NI 51-101") using the assumptions and methodology outlined
in the Canadian Oil and Gas Evaluation Handbook ("COGEH"). Under
McDaniel's interpretation of the COGEH guidelines, the STP-McKay
project has achieved critical milestones, including the recent
submission of a complete project application to the Energy
Resources Conservation Board and Alberta Environment. For a copy of
the application, visit the Corporation's website at
www.shpacific.com. As a result of the submission of the
application, the estimated recoverable bitumen within the initial
project area has been reclassified as 2P and 3P reserves. Under
McDaniel's application of the COGEH guidelines, Proved reserves
will be assigned when they are satisfied that regulatory approvals
have been obtained upon review of the project application, and
corporate sanction of the project has taken place. These approvals
are expected within the next 12 to 14 months.
The 3P Exploitable Bitumen In Place recognized in the Report in
the STP-McKay project area represents a 50% increase over the
previous year's estimate. This increase was largely due to the
results of this past winter's successful 21-well delineation
program in the project area. The reserves assigned in the Report
generate a project life of 24 years in the 2P case and 37 years in
the 3P case. The Report has applied recovery factors averaging 36%
for the 2P case and 41% for the 3P case. Southern Pacific believes
these recovery factors are conservative, fully attainable and
clearly demonstrated by offset analog projects. Additionally,
Southern Pacific included in its project application a relatively
new but simple technique of "wedge wells" to further enhance
project recovery by extracting heated, but unswept, bitumen from
between and below the SAGD well pairs. This recovery technique is
not widely recognized under COGEH guidelines for reserves
assignment and is not likely to be until additional industry
examples are developed. Southern Pacific is satisfied with the
Report as it recognizes a level of reserves that justifies both
technically and economically the STP-McKay project application.
The net present value figures shown in the table above were
calculated based on McDaniel's April 1, 2009 price forecast.
McDaniel will generate additional forecasts based on the July 1,
2009 price forecast, when they have completed the heavy oil portion
of that forecast.
Southern Pacific did not engage McDaniel to update its lands
outside of the STP-McKay project because no additional exploration
work has been undertaken on these lands since last year's McDaniel
report. The Corporation elected to reduce costs by retaining the
previous year's estimates of Discovered and Contingent Resources
outside the STP-McKay project area. The table below summarizes
these resources:
--------------------------------------------------------------
Southern Pacific Net Resources (MMbbl)
as per McDaniel & Associates effective June 30, 2008
--------------------------------------------------------------
Contingent(ii)
Discovered(i) --------------------------------
Property PIIP Low (P90) Best (P50) High (P10)
--------------------------------------------------------------
McKay(iii) 713.9 1.2 3.6 10.6
Long Lake 466.5 40.0 54.6 76.9
Hangingstone 742.5 8.2 14.5 25.0
Leismer(iiii) 729.8 4.6 12.0 25.9
Kirby 547.0 0.0 0.0 0.0
--------------------------------------------------------------
Total 3,199.7 54.0 84.7 138.4
--------------------------------------------------------------
(i) - The Discovered volume reported represents McDaniel's Best
(P50) estimate
(ii) - Discovered PIIP resource not recognized as Contingent are
classified as Unrecoverable
(iii) - Volumes exclude the STP-McKay Project Area McMurray
Interval. McKay contingent resource estimates are current as
of June 30, 2009.
(iiii) - Leismer contingent resource volumes have been sub-classified
at sub-economic
Now that its first project application has been submitted,
Southern Pacific is in the planning stages of next winter's
drilling program. The drilling program will include the further
delineation of its Discovered and Contingent Resources listed above
in order to finalize the Corporation's next bitumen project. In
addition to the Corporation's bitumen reserves and resources,
Southern Pacific has engaged GLJ Petroleum Consultants to complete
an independent review of its conventional oil and gas reserves,
which is expected to be completed by the end of July 2009.
Southern Pacific is a full cycle oil and gas exploration and
production company focused on the development of the Corporation's
vast in-situ oil sands resource base in Alberta's Athabasca oil
sands region.
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.
Definitions
"Best (P50)" means (the best estimate of the quantity that will
actually be recovered from the accumulation. If probabilistic
methods are used, there should be at least a 50 percent probability
(P50) that the quantities actually recovered will equal or exceed
the best estimate).
"Contingent Resources" means those quantities of petroleum
estimated, as of a given date, to be potentially recoverable from
known accumulations using established technology or technology
under development, but which are not currently considered to be
commercially recoverable due to one or more contingencies.
Contingencies may include factors such as economic, legal,
environmental, political, and regulatory matters or a lack of
markets. It is also appropriate to classify as contingent resources
the estimated discovered recoverable quantities associated with a
project in the early evaluation stage.
"Discovered Petroleum Initially-in-Place" or "Discovered PIIP"
or "Discovered Resources" means that quantity of petroleum that is
estimated, as of a given date, to be contained in known
accumulations prior to production. The recoverable portion of
discovered petroleum initially-in-place includes production,
reserves and contingent resources; the remainder is
unrecoverable.
"High (P10)" means (an optimistic estimate of the quantity that
will actually be recovered. It is unlikely that the actual
remaining quantities recovered will exceed the high estimate. If
probabilistic methods are used, there should be at least a 10
percent probability (P10) that the quantities actually recovered
will equal or exceed the high estimate).
"Low (P90)" means (a conservative estimate of the quantity that
will actually be recovered from the accumulation. If probabilistic
methods were used, the term reflects a P90 confidence level).
"Probable reserves" means those additional reserves that are
less certain to be recovered than proved reserves. It is equally
likely that the actual remaining quantities recovered will be
greater or less than the sum of the estimated Proved plus Probable
reserves.
"Possible reserves" means those additional reserves that are
less certain to be recovered than probable reserves. It is unlikely
that the actual remaining quantities recovered will exceed the sum
of the estimated Proved plus Probable plus Possible reserves.
"Proved reserves" means those reserves that can be estimated
with a high degree of certainty to be recoverable. It is likely
that the actual remaining quantities recovered will exceed the
estimated Proved reserves.
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, 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 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.
Neither 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.
Contacts: Southern Pacific Resource Corp. Byron Lutes President
& CEO 403-269-1529 blutes@shpacific.com Southern Pacific
Resource Corp. Dave Antony Chairman 403-269-5219
dantony@shpacific.com www.shpacific.com
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