Southern Pacific Announces First Steam at STP-McKay
CALGARY, ALBERTA -- (Marketwire) -- 07/03/12 -- Southern Pacific ("STP" or the "Company") (TSX: STP) is pleased to announce that steam began circulating through the steam assisted gravity drainage ("SAGD") wellbores at the STP-McKay Thermal Project on July 1. First steam is not only an important milestone in the McKay project development, it is an historic event for Southern Pacific as it represents the completion of the construction, commissioning and start-up of the Company's first major project undertaking. Steam will now be circulated through the SAGD wellbores for a period of three to four months, after which bitumen production is scheduled to begin.
Southern Pacific discovered the STP-McKay Thermal Project through exploration during the winter of 2007/08. In May 2009, the Company submitted an application for a 12,000 barrel per day (bbl/d) facility to Alberta's regulatory bodies, which was subsequently approved in October 2010. Southern Pacific then began construction of the project in December 2010. After 18 months of construction, Phase 1 of the project has now commenced operation. Southern Pacific has also filed an application for expansions at STP-McKay totalling an additional 24,000 bbl/d, split between an expansion in Phase 1 and a new facility at Phase 2. The application is well advanced and approval is expected in late 2013.
Although final invoices are still being received, Southern Pacific now projects the final capital cost for Phase 1 to be $468 million, four percent over the original budget of $450 million. This includes an additional $15 million of scope changes designed to improve reliability and decrease operating costs. Based on the incurred capital to the end of the first calendar quarter of 2012, Southern Pacific had been forecasting to finish the project slightly under budget. However, increased industry activity in the second quarter affected the module fabrication costs and delivery schedules, which resulted in increased construction costs in order to meet the project schedule. Now that first steam has commenced, cleanup of the site and demobilization of crews and equipment will be occurring over the next several weeks.
Southern Pacific is very pleased with the execution of the STP-McKay project. The Company wishes to extend its appreciation for the tremendous efforts of the staff and contractors who have logged over 1.2 million hours on the project site, and a similar number of hours in various fabrication shops and offices around North America. The site itself is proud to report a safety record of only one minor loss time accident(s) during the entire drilling and construction period, well below the industry average.
Southern Pacific is also pleased to announce the promotion of Mike O'Krancy to Vice President, Projects. Mike has been with Southern Pacific for almost two years in the capacity of Manager, Projects and was in charge of the successful construction of the STP-McKay Thermal Project.
An updated corporate presentation is available on Southern Pacific's website (www.shpacific.com).
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. Specific risk factors related to STP-McKay Phase 1 Expansion and STP-McKay Phase 2 include, but are not limited to, the timeline for approval of the application, the expected increase in the proven plus probable reserves and net present value, development plans and the anticipated geological characteristics.
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.
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