News Column

CORRECTION FROM SOURCE: Southern Pacific Announces Financial and Operational Results for the Quarter Ended March 31, 2013

May 10 2013 12:00AM

Marketwire

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CALGARY, ALBERTA -- (Marketwired) -- 05/10/13 -- Southern Pacific Resource Corp. ("Southern Pacific" or the "Company") (TSX: STP) today announced its financial and operational results for the quarter ended March 31, 2013.

This press release provides, in the table below, corrected information for Southern Pacific's cash from operating activities before net changes in non-cash working capital and weighted average common shares outstanding. The unaudited condensed consolidated financial statements and related management's discussion and analysis for the period reflected the correct information and is unchanged, which should be reviewed in conjunction with this press release.

2013 FISCAL Q3 HIGHLIGHTS:

-- Total Company production including the capitalized production from STP- McKay Phase 1 and STP-Senlac was 3,794 barrels per day ("bbl/day") for the three months ended March 31, 2013, and for the first seven days of May has averaged 4,350 bbl/day based on field estimates;-- At STP-McKay, the Company continues to make progress in ramping up production. The project produced an average of 1,237 bbl/day during the quarter;-- As a result of successfully securing contracts directly with major refineries in the U.S. Gulf Coast at the beginning of 2013, the plant gate price relating to STP-McKay over this period averaged approximately $40.50/bbl, net of all transportation and diluent costs;-- At STP-Senlac, the Company averaged 2,557 bbl/day during the quarter. The Company has successfully placed the second of three well pairs on production relating to Pad K on April 24, 2013. The final well pair is expected to be placed on production in June;-- At STP-Senlac, Southern Pacific had sold approximately 47% of its oil by rail for the quarter, resulting in an overall plant gate price of $50.24/bbl, an improvement in the plant gate price of approximately $10.00/bbl as compared to the Western Canada Select ("WCS") price that was received on the remaining volumes from STP-Senlac during the quarter; and-- The Company has increased its senior secured first lien revolving credit facility to $100 million on May 9, 2013.-------------------------------------------------------------------------------------------------------------------------------------------------------- Three months ended(thousands, except per share and per Three months ended March 31, boe amounts) March 31, 2013 2012--------------------------------------------------------------------------------------------------------------------------------------------------------Petroleum revenue, net of royalties $9,104 $21,598Cash from operating activities before net changes in non-cash working capital ($234) $16,502 Per share basic and diluted ($0.00) $0.05Net income (loss) ($16,350) $11,553 Per share basic and diluted ($0.04) $0.03Total assets $991,142 $919,850Combined average product prices ($ per boe) $50.24 $64.52Operating netback ($ per boe)(1) $23.36 $44.41Weighted average common shares outstanding basic 397,653 340,512 diluted 397,653 348,000Production(2) Heavy oil (bbl/day) 2,557 4,156--------------------------------------------------------------------------------------------------------------------------------------------------------1. Operating netback is a non-GAAP measure defined as petroleum sales less royalties and less operating costs.2. Total production excludes the capitalized production of 1,237 bbl/day from STP-McKay for the three months ended March 31, 2013, which commenced production ramp up in late October 2012.



Southern Pacific has filed its Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis for the three and nine months ended March 31, 2013 on SEDAR at www.sedar.com. Copies are also available on the Company's website at www.shpacific.com.

OUTLOOK

Southern Pacific is in the process of adding significant production growth throughout fiscal 2013 and 2014. The Company expects to ramp up the STP-McKay volumes through the remainder of this and the next fiscal year, with production expected to approach nominal plant capacity of 12,000 bbl/day in fiscal 2014. This production base, coupled with STP-Senlac, should open up new opportunities for Southern Pacific as the Company utilizes its cash flow to finance continued growth.

STP-McKay Thermal Project

STP-McKay exited the quarter at approximately 1,200 bbl/day. During the month of April, production averaged 1,023 bbl/day and has averaged 1,250 bbl/day for the first seven days of May. STP-McKay reached cumulative bitumen production of over 200,000 bbls since steam-assisted gravity drainage ("SAGD") production ramp-up commenced in October 2012.

The month of April provided some significant steps forward in the ramp-up of the STP-McKay project. An additional well pair was converted to full-time SAGD mode, bringing the total wells on full-time SAGD to six. Operations were focused in April and continue to be focused on increasing the overall operating pressure of these six well pairs by increasing steam injection, which in turn adds more heat and allows steam chamber growth, both vertically and laterally. The increased operating pressure resulted in an initial loss of fluid rate in early April as fluids were redistributed into the reservoir, but the ambient reservoir pressure has now stabilized with the steam chambers and the well pairs have shown positive improvements in their production rates over the last three weeks. Of the remaining six well pairs, another well pair was also converted to full-time SAGD in early May bringing the total to seven in full-time SAGD mode. An additional three well pairs have produced for extended periods in SAGD mode, but the Company has currently elected to return them to circulation in order to improve wellbore conformance. These three well pairs are believed to be close to a full-SAGD conversion and will be tested again over the next several weeks. There are two well pairs that continue to circulate and have not established enough conformance to operate in extended SAGD mode, however, improved conformance has been noted in these pairs as well. The Company has developed guidelines related to controlling temperature and subcool within the wellbores, which are aimed at protecting the wellbore integrity. If a well pair approaches these guidelines, the well pair is returned to circulation for a few weeks after which a SAGD conversion will be attempted again. By repeating this process over the past several months, significant improvements in well pair conformance have been observed and pairs have been fully converted to SAGD, which provides confidence in the successful conversion of the remaining well pairs. The STP-McKay Thermal Project has ample steam capacity available with only approximately 32% of 34,700 bbl/day of steam capacity utilized during the quarter. The central processing facility continues to operate at high levels of reliability, with no significant downtime since the plant was commissioned last summer.

STP-Senlac Thermal Project

Production averaged 2,557 bbl/day for the quarter, compared to 2,542 bbl/day in fiscal Q2 2013. During the month of April, production averaged approximately 2,850 bbl/day. Based on field estimates, production at STP-Senlac averaged over 3,100 bbl/day for the first seven days of May. The start up of Pad K was initiated in January with the first of three well pairs that were placed on production on March 9, 2013, and the second well pair on April 24, 2013. These well pairs are now being ramped-up in full-time SAGD mode and should reach their maximum rates in three to five months. The final well pair has commenced its steam circulation phase May 9, 2013 and will be placed on production in mid-to-late June.

The next planned phase of SAGD well pairs, Pad L, is expected to spud this fall following regulatory approval and be on production early 2014.

Rail Marketing

During a period where deep discounts and volatility surfaced for heavy oil pricing in Western Canada, Southern Pacific initiated its five year term, Gulf Coast marketing strategy, securing contracts directly with major refineries in the U.S. Gulf Coast at the beginning of the calendar year. These contracts, which secured pricing for the months of January through March 2013, provided access to U.S. Gulf Coast based pricing for the Company's product at STP-McKay and substantially improved overall plant gate netbacks, reduced volatility of sales prices and increased the certainty of cash flow. Net of all transportation and diluent costs, the plant gate price over this period averaged approximately $40.50/bbl, which is over a $15.00/bbl premium to intra-Alberta equivalent pricing over the period. As volumes ramp-up at STP-McKay, the plant gate netback is expected to improve on a relative basis to existing pricing due to increased efficiencies in the rail marketing program.

The Company has secured a one-year oil marketing deal effective April 1, 2013, that provides U.S. Gulf Coast pricing for its bitumen product at STP-McKay that is being shipped under the Company's rail transportation arrangements. This deal with a major U.S. Gulf Coast refiner has pricing based off the Maya benchmark, a widely traded heavy crude with similar properties to Southern Pacific's diluted bitumen. Based on the next 12 months' futures pricing the Company expects to receive significantly enhanced plant gate bitumen netback of approximately $43.00/bbl, which is about $9.00/bbl higher than the forecast intra-Alberta markets currently available.

Southern Pacific had sold approximately 1,200 bbl/day of its oil by rail at STP-Senlac for the quarter. As a result, the Company received an improvement in plant gate netbacks of approximately $10.00/bbl as compared to a WCS netback on total volumes from STP-Senlac during the quarter. The Company has added flexibility to its marketing options, and will be able to continue to direct the Senlac heavy oil product to the most favourable markets.

Increase of First Lien Credit Facility to $100 million

On May 9, 2013, the Company has increased its senior secured first lien revolving credit facility, with a syndicate of financial institutions, to $100 million from $75 million. Southern Pacific's banking syndicate includes its existing five lenders, Toronto-Dominion Bank, Bank of Montreal, Royal Bank of Canada, Alberta Treasury Branches, Credit Suisse and the Company is pleased to announce that Goldman Sachs Lending Partners LLC has joined the lending syndicate.

The increase provides additional financial liquidity to Southern Pacific. The credit facility includes provisions to increase the borrowing base as the Company's production base expands during ramp-up. As well, Southern Pacific has the ability to add an additional $140 million of second lien debt, subject to first lien approval, if the Company elects to do so in the future.

Conference Call

A conference call will be held to review the fiscal Q3 results at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on Friday, May 10, 2013. To participate, please dial (866) 225-0198 (toll-free in North America) or (416) 340-8061.

A replay of the conference call will be available until May 17, 2013. To listen to the recording, please call (800) 408-3053 or (905) 694-9451 and enter passcode 2588812.

An updated corporate presentation is now available on Southern Pacific's website at 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 and lending costs, 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 oil and gas properties and of oil sands properties, delays in ramp-up operations, the uncertainties involved in interpreting drilling results and other geological data, fluctuating oil prices and discounts, 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, Southern Pacific faces risks including those associated with exploration, development, ramp-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.

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.

"Plant gate netback" is a non-GAAP measure defined as petroleum and natural gas sales less transportation and diluent costs.



Contacts:
Southern Pacific Resource Corp.
Greg Foofat
Investor Relations
403-930-5621
gfoofat@shpacific.com

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





Source: Marketwire


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