Southern Pacific Reports Cash Flow of $46.9 Million for the Year Ended June 30, 2012

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CALGARY, ALBERTA -- (Marketwire - Sept. 24, 2012) - 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, 2012.


2012 FISCAL HIGHLIGHTS:

- Completed construction of Phase 1 of the STP-McKay Thermal Project ("STP-McKay Phase 1"). The total project construction was completed at a cost of $468 million, only 4% over the original budget. Steam began circulating to the first well pad on July 1, 2012 and the second well pad on July 13, 2012 with oil production expected in the fourth quarter of calendar 2012;

- Increased proven and probable reserves ("2P") by 38% to 249 million barrels from 181 million barrels primarily due to the filing of the application for the STP McKay Phase 1 Expansion and Phase 2;

- Reported a reclassification of 15.4 million barrels of proved, undeveloped reserves ("PUD") to proved developed producing ("PDP) reserves, increasing PDP reserves by 600% as a result of commencing steaming operations on the first 12 steam assisted gravity drainage ("SAGD") well pairs at STP-McKay;

- Finalized terms of a rail marketing arrangement for STP-McKay Phase 1 volumes which secures access to markets for the project's bitumen product and should also significantly increase its plant gate netback;

- Announced a 6,000 barrel per day ("bbl/day") expansion plan for its STP Phase 1 ("STP-McKay Phase 1 Expansion"), which would give the project a total nominal capacity of 18,000 bbl/day. This will allow the Company to accelerate its production growth forecast;

- Averaged overall production from STP-Senlac of 3,639 bbl/day for the year; and

- Achieved cash from operating activities before changes in non-cash working capital of $46.9 million for the year.

(thousands, except per share and per boe amounts) 		2012 		2011
Petroleum revenue, net of royalties 	$ 	71,750 	$ 	77,349
Cash from operating activities before changes in non- 				
cash working capital 	$ 	46,906 	$ 	51,872
	Per share - basic 	$ 	0.14 	$ 	0.16
	Per share - diluted 	$ 	0.14 	$ 	0.15
Net income 	$ 	11,150 	$ 	14,887
	Per share basic and diluted 	$ 	0.03 	$ 	0.04
Total assets 	$ 	916,826 	$ 	878,887
Net capital expenditures 	$ 	338,563 	$ 	282,252
Total long-term debt 	$ 	400,040 	$ 	379,148
Average product prices ($ per boe) 	$ 	63.41 	$ 	60.17
Operating netback ($ per boe)(1) 	$ 	41.93 	$ 	39.27
Weighted average common shares outstanding 				
	basic 		340,179 		331,902
	diluted 		346,002 		338,834
Production 				
	Heavy oil (bbl/day) 		3,639 		4,230
	Natural gas (mcf/day) 		52 		221
Total (boe/day) 		3,648 		4,267

(1) Operating netback is a non-GAAP measure defined as petroleum and natural gas sales less royalties and less operating costs.


Southern Pacific has filed its Annual Consolidated Financial Statements and Management Discussion and Analysis for the year ended June 30, 2012. 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 www.sedar.com. Copies are also available on the Company's website at www.shpacific.com.


OUTLOOK

Fiscal 2012 was Southern Pacific's busiest year in its history. The successful completion of the STP-McKay Thermal Project marks the end of a five year development plan that began with securing the lands, discovering the resource, preparing an application, completing the approval process and then constructing the project. However, this is only the beginning. Southern Pacific is now in the process of implementing its long term operations program at STP-McKay and is continuing to advance on its next planned projects.

In the near term, Southern Pacific is expecting major growth to its production profile. From first steam, which was achieved on July 1, 2012, the Company expects to ramp up the STP-McKay volumes through the next fiscal year, aiming towards the nominal plant capacity of 12,000 bbl/day. This production base, coupled with the STP-Senlac Thermal Project, should open up new opportunities for Southern Pacific.

On September 10, 2012, Southern Pacific entered into an agreement with a syndicate of underwriters to sell, on a bought deal basis 51.7 million common shares of the Company at a price of $1.45 per common share, for gross proceeds of approximately $75 million plus an over-allotment option of up 7.8 million common shares at the same price. Southern Pacific intends to use the proceeds from this offering to strengthen the Company's balance sheet while it ramps up the STP-McKay project. The offering is expected to close on or about September 28, 2012.


STP-Senlac

At the STP-Senlac Thermal Project, operations have been running consistently through all of calendar 2012 with the plant averaging a 99.2% on-time load factor over that period. Production averaged 3,639 bbl/day in fiscal 2012, with production currently averaging approximately 3,100 bbl/day. Phase J was brought on stream in January 2012, resulting in peak field rates of about 4,500 bbl/day in February. Since then, the field production has been declining normally as it does in between new phases.

In preparation for Phase K, the Company recently completed the drilling of a strat well. That well confirmed a better than prognosis 15 m thick oil zone in Phase K. The first well of Phase K should spud in mid-October, with production anticipated in February 2013. Regulatory approval for the drilling of Phase K was delayed by approximately three months due to recently introduced Saskatchewan regulations, which now require an environmental review of enhanced oil recovery scheme amendments. The new regulatory process has now been incorporated into the Company's development planning cycle and regulatory delays on future phases of development are not anticipated.


STP-McKay Phase 1 Operational Update

Operations continue to progress well at the STP-McKay Thermal Project as the steam circulation period advances on all of its first 12 SAGD well pairs. The first pad of six well pairs commenced steaming on July 1, 2012, with the second pad of six well pairs following on July 13, 2012. To date, the plant has been running consistently, delivering all steam requirements to the wellbores at a 99% on-time load factor. The wells are warming up in a manner that indicates good conformance along the horizontal sections. It is anticipated the wells will need three to four months of steam circulation before being placed into production. Southern Pacific expects production to begin in the fourth quarter of 2012. The project was completed at a total cost of $468 million.

The Company finalized its marketing arrangements on June 27, 2012. Under this arrangement, Southern Pacific expects to significantly increase its plant gate bitumen netback using rail transportation that reduces diluent costs, and offers access to Brent-based pricing as opposed to selling its bitumen into a pipeline that offers access to West Texas Intermediate (WTI) based pricing.

Southern Pacific's bitumen volumes will be trucked approximately 60 km from the STP-McKay plant gate to Lynton, Alta., a CN rail terminal located immediately south of Fort McMurray. From Lynton, volumes will be transferred into rail cars and shipped approximately 4,500 km over CN's network and a short-line rail partner to a terminal in Natchez, Miss. The bitumen will then be transferred to barges that will deliver the product as feedstock to refineries on the Gulf Coast.

There are a number of significant benefits to this rail-based solution for Southern Pacific. Diluent cost savings are a key driver for this arrangement. Diluent savings are achieved on two fronts. The amount of process diluent required at the plant site will be significantly lower than what is required to meet pipeline specifications. By transporting bitumen via CN, Southern Pacific will only require process diluent to blend with its bitumen, thus lowering the total diluent requirements by approximately 33%. Secondly, Southern Pacific has the opportunity to backhaul lower priced diluent from the Gulf Coast utilizing its empty return rail cars.

Another important driver for securing this marketing arrangement is the security of access to the world's largest market for heavy crude. Given recent regulatory delays around additional pipeline capacity to accommodate growing bitumen volumes from Alberta, the Company has now secured direct and immediate access into the Gulf Coast market. Because of these access issues, the Gulf Coast market for heavy crude currently trades at a premium to WTI, whereas Alberta-based blended bitumen and diluent ("dilbit") products arriving by pipeline into the Cushing, Okla., region of the U.S. are experiencing significant pricing discounts due to capacity constraints.

The rail and terminal arrangements described above have an average term of five years, with options for extension and expansion related to Southern Pacific's STP-McKay Phase 1 Expansion and Phase 2 plans. Expansion opportunities being discussed include the construction of a pipeline system to the CN Lynton terminal or building a rail spur to the STP-McKay plant site. Either option would remove the trucking component and further reduce diluent costs. While the Gulf Coast is the initial target market, the details within the arrangement provide Southern Pacific with the flexibility to deliver its bitumen to other North American markets or to export terminals along the west coast.


STP-McKay Phase 1 Expansion and Phase 2 Update

On May 10, 2012, Southern Pacific announced plans to expand STP-McKay to a design capacity of 18,000 bbl/day. The expansion is anticipated to significantly reduce future overall capital costs in the entire project and accelerate the Company's production growth forecast. Southern Pacific's internal technical team identified a unique opportunity to expand the existing STP-McKay Phase 1 central process facilities by as much as 50% (6,000 bbl/day of bitumen based on a steam-oil ratio ("SOR") of 2.8) at an estimated cost of approximately $25,000 per barrel of designed capacity, or $150 million, including additional well pairs. The entire expansion should fit comfortably within the existing Phase 1 central process facility site, making this expansion both cost effective and environmentally responsible.

Southern Pacific continues to work on the regulatory approval process for the Phase 1 Expansion and Phase 2 of STP-McKay. Throughout the summer, the Company has been preparing its responses to the first round of Supplementary Information Requests (SIRs) requested by the Alberta regulators. The responses should be completed by mid September, which should keep the approval process on track for approval by the fourth quarter of 2013.


Southern Pacific Year End Reserves

In a report prepared by GLJ Petroleum Consultants ("GLJ"), the Company's independent reserves evaluator, effective June 30, 2012 (the "GLJ Report"), Proved Developing and Producing ("PDP") reserves increased by more than 600% from the previous estimate dated June 30, 2011. The increase in PDP reserves is directly attributable to the STP-McKay Thermal Project becoming operational. There has also been a 38% increase in the Corporation's Proven plus Probable ("2P") reserves over the past fiscal year. This increase reflects revisions arising from the application submission for the Phase 1 Expansion and Phase 2 at the STP-McKay Thermal Project. Combined, a total nominal design capacity of 36,000 bbl/d of bitumen has been utilized to reflect the development plans for the 2P reserves category.

Of note, despite having produced approximately 1.3 million barrels, the STP-Senlac Thermal Project's remaining Total Proved ("1P") and 2P remaining reserves were increased with 0.9 and 0.5 million barrels of technical revisions in each category respectively. The increases reflect the strong performance of the project that have met or exceeded previous evaluations' performance predictions. Listed below is a summary of the Corporations reserves and effective June 30, 2012. The Corporation's contingent resources volumes remained relatively unchanged and are available for review in the Corporation's Annual Information Form, which has been filed concurrent with this release.


Southern Pacific Net Reserves and NPV effective June 30, 2012 Summary at June 30, 2012 and Variance (%) to June 30, 2011

Net Reserves Before Tax Net Present Value (Cdn $ million)
(MMbbl) @ 8 % @ 10 % @ 12 %
Proved Producing (PDP) 18.1 605 % $ 378 325 % $ 355 308 % $ 335 294 %
Total Proved (1P) 120.4 0 % $ 1,201 34 % $ 1,015 40 % $ 874 45 %
Proved + Probable Reserves (2P) 248.9 38 % $ 2,009 45 % $ 1,593 44 % $ 1,274 39 %
Proved + Probable + Possible (3P) 343.5 65 % $ 2,688 55 % $ 2,095 51 % $ 1,661 45 %

Estimated values may not represent fair market value.


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."

The Corporation's Annual General and Special Meeting of shareholders will be held in Calgary, Alberta on November 22, 2012 at 2:30 pm at the Conference Centre, Bow Valley Square.

Or visit our website at: www.shpacific.com.


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.

This press release contains reference to contingent resources. The definition of contingent resources is set forth below. The contingencies which currently prevent the classification of the resource as a reserve include factors such as economic, legal, environmental, political, and regulatory matters or a lack of markets.

There are numerous uncertainties inherent in estimating quantities of Contingent Resources and future net revenues to be derived therefrom, including factors beyond the Company's control. The reserves, resources and estimated future net cash flow from the Company's properties have been independently evaluated by GLJ. These evaluations include a number of assumptions relating to factors such as initial production rates, production decline rates, ultimate recovery of reserves and resources, timing and amount of capital expenditures, marketability of production, future prices of blended bitumen, crude oil and natural gas, operating costs, well abandonment and salvage values, royalties and other government levies that may be imposed over the producing life of the reserves and resources. These assumptions were based on prices in use at the date the relevant evaluations were prepared, and many of these assumptions are subject to change and are beyond the Company's control. Actual production and cash flow derived therefrom will vary from these evaluations, and such variations could be material. Estimates with respect to reserves and resources that may be developed and produced in the future are often based upon volumetric calculations, probabilistic methods and upon analogy to similar types of reserves and resources, rather than upon actual production history. Estimates based on these methods generally are less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon production history will result in variations, which may be material, in the estimated reserves or resources.

Reserve and resource estimates may require revision based on actual production experience. Such figures have been determined based upon assumed commodity prices and operating costs. Market price fluctuations of crude oil and natural gas prices may render uneconomic the recovery of certain grades of bitumen. The present value of estimated future net revenue referred to herein should not be construed as the fair market value of estimated bitumen, crude oil and natural gas reserves and bitumen resources attributable to the Company's properties. The estimated discounted future revenue from reserves are based upon price and cost estimates which may vary from actual prices and costs and such variance could be material. Actual future net revenue will also be affected by factors such as the amount and timing of actual production, supply and demand for bitumen, crude oil and natural gas, curtailments or increases in consumption by purchasers and changes in governmental regulations or taxation.

References to Contingent Resources do not constitute, and should be distinguished from, references to reserves. Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Contingent Resources are 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. Not all technically feasible development plans will be commercial. The commercial viability of a development project is dependent on the forecast of fiscal conditions over the life of the project. For Contingent Resources the risk component relating to the likelihood that an accumulation will be commercially developed is referred to as the "chance of development." Not all exploration projects will result in discoveries. The chance that an exploration project will result in the discovery of petroleum is referred to as the "chance of discovery." Thus, for an undiscovered accumulation the chance of commerciality is the product of two risk components - the chance of discovery and the chance of development.

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.

"Operating netback" is a non-GAAP measure defined as petroleum and natural gas sales less royalties and less operating and transportation costs.

"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

"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. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of 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.



Contact

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