Southern Pacific Commences SAGD Drilling at STP-McKay, Appoints Director
CALGARY, ALBERTA -- (Marketwire) -- 03/23/11 -- Southern Pacific Resource Corp. ('Southern Pacific' or the 'Company') (TSX: STP) is pleased to announce that drilling has commenced on the first steam-assisted gravity drainage (SAGD) well pair at the Company's STP-McKay Thermal Project, located 45 km northwest of Ft. McMurray, Alberta. Precision Drilling rig #199, a slant hole drilling rig, will be on site for approximately five months as it drills 24 individual wellbores, which will comprise the first 12 SAGD well pairs for the project.
STP-McKay Phase 1 Construction
To achieve this milestone at STP-McKay, a number of significant events have taken place since the Company received formal approval in October 2010 for an oil sands project with a design capacity of 12,000 barrels per day of bitumen. Southern Pacific completed construction of a 29 km all-season access road into the plant site to allow for all-season access in and out of the site. The majority of the earth works have been completed for the Central Process Facility (CPF) and the first two SAGD well pads. Southern Pacific constructed a 14 km, 8-inch diameter natural gas pipeline to the CPF that will be used to transport natural gas to fire the electricity/steam cogenerators and steam generators. Source water wells and pipeline tie-ins have also been completed. Over 90% of the major equipment purchase orders have been issued and the total cost spent to the end of February is approximately $100 million, with another $118 million of project costs fixed. The total project cost estimate, including contingency, remains at $450 million. Southern Pacific has installed cameras on the radio communications tower at the CPF, which have been generating daily photographs of the construction progress. The photographs are available for viewing on the Company's website at www.shpacific.com.
STP-McKay Phase 2 Expansion Plans
Southern Pacific has also completed drilling 38 core holes in and around the STP-McKay project area. The core holes were drilled on time and under budget. Several of these core holes were cased and equipped with sensitive pressure and temperature gauges that will be used to monitor steam chamber parameters within the SAGD patterns. The core hole data is currently being interpreted and results from the program are expected to be released within the next 30 days. Southern Pacific will use these interpreted results to finalize the size and timing of the STP-McKay Phase 2 expansion plans.
STP-Senlac Thermal Project Update
Southern Pacific's producing SAGD project, the STP-Senlac Thermal Project in southwest Saskatchewan, continues to operate smoothly, with its past six month production rate averaging 4,150 barrels per day. The first of two new SAGD well pairs, comprising Phase H, will be placed on production by the end of March, with the second well pair expected to come on stream about two weeks behind the first pair. Consistent with Southern Pacific's plan, these wells should assist in maintaining the Senlac production levels between 4,000 - 5,000 bbl/d on an annual basis. The Company expects to drill Phase J, which consists of three SAGD well pairs, in the third quarter of calendar 2011. The Phase J well pairs will remain on standby, ready to be placed on production once there is room in the plant to accommodate one or more of them.
Director Appointed
Southern Pacific is also pleased to announce the appointment of Ken Cullen to its board of directors. Prior to his retirement in 2006, Mr. Cullen, a chartered accountant, served as a partner of Deloitte & Touche LLP for 30 years, including 24 years in Calgary and six in Vancouver. He practiced in the Assurance and Advisory (Audit) group. During that time, he worked with public petroleum and natural gas exploration and production companies, including junior and intermediate players. More recently, Mr. Cullen served on the board of Parkbridge Lifestyle Communities Inc., a public real estate company acquired by the British Columbia Investment Management Corp. in January 2011. Mr. Cullen subsequently joined the board of Birchcliff Energy in February 2011.
Mr. Cullen's appointment to Southern Pacific's board fills a vacancy created by Douglas Allen, who has stepped down in order to focus on his other business ventures.
'I would like to thank Douglas for his contribution to our continued success,' said Byron Lutes, Southern Pacific's President & Chief Executive Officer. 'We look forward to working with Ken as we progress Southern Pacific's second thermal project to the point of production and continue the development plans on additional thermal projects.'
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's Common Shares trade on the TSX under the symbol 'STP.'
Forward-Looking Information
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 approval, construction or expansion 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 SAGD heavy oil 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.
Contacts:
Southern Pacific Resource Corp.
Byron Lutes
President & CEO
403-269-1529
blutes@shpacific.com
Southern Pacific Resource Corp.
Howard Bolinger
CFO
403-269-2640
hbolinger@shpacific.com
www.shpacific.com