Southern Pacific Resource Corp. ("Southern Pacific" or the
"Corporation") (TSX VENTURE: STP) is pleased to announce that it
has closed the acquisition of Senlac Oil Ltd. for a net purchase
price of $89 million. The acquisition includes facilities,
personnel and assets that have produced an average of 5,100 barrels
of heavy oil per day since the effective date on June 1, 2009.
Southern Pacific announced the acquisition of Senlac Oil Ltd. on
October 9, 2009 (the "Senlac Acquisition").
In connection with the Senlac Acquisition, the Corporation is
pleased to announce the release from escrow of the proceeds of its
previously announced private placement of subscription receipts. As
of November 3, 2009, gross proceeds of $52 million have been
released from escrow. This is based on the proceeds of the 104
million subscription receipts issued at $0.50 per subscription
receipt. Common shares of the Corporation have been issued to the
holders of the subscription receipts on the basis of one underlying
common share for each subscription receipt through the facilities
of CDS. Book-Entry Only System customer confirmations will be
entered on November 3, 2009. As a result of the foregoing, the
subscription receipts are now cancelled, null and void. The
Underlying Common Shares are subject to a statutory resale
restriction until February 24, 2010. The offering was a bought-deal
financing with a syndicate of underwriters led by BMO Capital
Markets and including Canaccord Capital Corporation, Raymond James
Ltd. and Byron Capital Markets. The net proceeds of the offering
were utilized to satisfy a portion of the funding for the Senlac
Acquisition. With the closing of the Senlac Acquisition and the
conversion of the subscription receipts the Corporation has 225.6
million shares outstanding.
The Corporation has concluded a $45 million demand revolving
credit facility with BMO Capital Markets. The proceeds of the
credit facility were used to pay the remaining portion of the
purchase price for the Senlac Acquisition and the remainder will be
available for operating purposes. As security for the credit
facility, the Corporation and its subsidiaries, including Senlac
Oil Ltd., have granted security over all of their respective
properties in favour of the bank. The $45 million credit facility
has now been drawn to $37 million, leaving over $7 million of the
facility undrawn.
Acquisition Update
With the completion of the Senlac Acquisition, Southern Pacific
has been materially transformed with the addition of significant
cash flow, immediate steam-assisted gravity drainage (SAGD)
production, experience and technical data. Southern Pacific has
successfully hired the full complement of field staff that operate
the Senlac Thermal Project. The new Southern Pacific staff will
ensure the continued successful operations of the Senlac Thermal
Project, and also retain a wealth of transferable knowledge and
experience that will be invaluable as Southern Pacific prepares to
construct its first SAGD project in the Athabasca oil sands at
STP-McKay. Southern Pacific welcomes the 20 staff members who have
joined its team.
The Senlac Thermal Project continues to perform better than
forecast by Southern Pacific. Since June 1, 2009, the effective
date of the Senlac Acquisition, the heavy oil produced at Senlac
has received a plant gate price equivalent to $C 59.82/bbl, after
all heavy differentials, diluent and transportation costs have been
deducted. Royalties over the same period have averaged 15.4%, ($C
9.21/bbl) and operating costs have averaged $C 7.53/bbl. This has
resulted in an average net operating income of $C 43.08/bbl over
the period of June 1 to October 31, 2009.
Using strip pricing and reasonable estimates for input costs and
royalties, Southern Pacific has budgeted Senlac to generate $C 11.5
million in net operating income for the remainder of 2009, and then
$C 56.0 million in 2010. This cash flow will be utilized to fund
the next phases of development at Senlac, detailed engineering on
the STP-McKay project, and Southern Pacific's winter core hole
program.
STP-McKay Update
The Corporation continues to focus on its 12,000 barrel per day
SAGD oil sands project at STP-McKay. Southern Pacific is pleased to
announce that it has now formalized its ongoing relationship with
AMEC-BDR Limited and Drifter Projects Ltd. The next phase of work
agreed to with both the aforementioned parties is to complete a
front end engineering design (FEED) study for the STP-McKay
facilities. This work is expected to take four months to complete
and keeps the project on schedule with the timing of the
application approval, expected in the third quarter of 2010. Some
minor winter activities are ready to go pending freeze-up,
including additional geotechnical evaluation of the proposed access
road and drilling of groundwater monitoring wells.
Southern Pacific believes the Senlac Acquisition has greatly
enhanced its ability to finance and proceed with the STP-McKay
project in a timely manner. Further, the experience gained through
the Senlac Acquisition should result in operating efficiencies at
STP-McKay once the project is completed.
Stock Option Grant
The Corporation has also granted 5,715,000 stock options to
eligible participants. A total of 3,100,000 of these stock options
were granted to directors and officers of the Corporation. The
options will be granted at an exercise price of $0.56 per common
share, which was the closing price of Southern Pacific's shares on
the date of grant on October 30, 2009. The options will expire five
years from the date of grant. The Corporation has determined that
exemptions from the various requirements of TSX Venture Exchange
Policy 5.9 are available for the granting of the options.
Southern Pacific is also pleased to announce the appointment of
Jeff Barefoot to Vice President, Resource Development. Mr. Barefoot
has been with the Corporation since June, 2008. In his new capacity
and as an officer of the Corporation, Mr. Barefoot will be
responsible for the exploration and underground development of
Southern Pacific's petroleum assets.
Conference Call
Southern Pacific has scheduled a conference call to discuss the
Senlac Acquisition and recent corporate developments. The call is
set for 9 a.m. Mountain Standard Time (11 a.m. Eastern Standard
Time) on Wednesday, November 4, 2009. To participate, please call
416-695-6616 or 1-800-952-4972. A presentation by Byron Lutes,
President & CEO, Southern Pacific, will be followed by a
question and answer period. If you are unable to participate, a
taped broadcast will be available until November 9, 2009. To access
the replay, dial 416-695-5800 or 1-800-408-3053. The pass code is
6106870#.
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, 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 any current or projected 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 completion of
the transactions contemplated by the Acquisition, the equity
financing and the credit facility, the inherent risks involved in
the exploration and development of conventional oil and gas
properties, of oil sands properties and the assets to be acquired
pursuant to the Acquisition, difficulties or delays in start-up and
continuing 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 including those relating to the Acquisition,
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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