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.
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.
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