Southern Pacific Concludes Strategic Review Process

Southern Pacific Concludes Strategic Review Process 
CALGARY, ALBERTA -- (Marketwired) -- 08/21/14 --   Southern Pacific
Resource Corp. ("Southern Pacific" or the "Company") (TSX: STP) has
concluded its strategic review process.  
On December 11, 2013 Southern Pacific announced the initiation of a
strategic review process ("SRP") aimed at identifying and considering
all strategic and financial alternatives available to the Company.
The SRP was initiated after realization that the original 12 well
pairs drilled at the STP-McKay Thermal Project were unlikely to fill
the process facility to its design capacity of 12,000 bbl/d and that
additional workovers on the existing pairs as well as the addition of
new well pairs would likely be required. RBC Capital Markets were
retained as a strategic advisor to Southern Pacific's Board of
Directors throughout the SRP. In March 2014, as part of the SRP, the
Company completed the addition of a new first lien debt facility,
replacing the then existing facility which improved Southern
Pacific's current liquidity. The consideration of other strategic
alternatives aimed at maximizing stakeholder value was also fully
explored. During the SRP, proposals were received and the SRP was
extended longer than expected in order to fully explore the
proposals. However, it was determined by the Company's Board of
Directors that none of the proposals received were acceptable and it
was further concluded that the current best alternative for all
stakeholders is to continue with the development of the Company's
existing assets, initially focused on increasing production rates at
With the strategic process concluded, Southern Pacific has reduced
its number of employees to reflect a narrower focus but will be
staffed appropriately to continue its base of operations and
near-term development. The immediate development plan will be to
continue with workovers aimed at improving productivity from the SAGD
well pairs at STP-McKay. In 2014, to date, Southern Pacific has
successfully completed three workovers on its SAGD well pairs at
STP-McKay, which involved the installation of inflow control devices
("ICDs") into the existing producers of the well pairs (refer to
press releases dated March 17 and June 17, 2014). The ICD system is
intended to improve wellbore conformance in a two part process.
First, the horizontal producer length is segmented with isolation
packers and second, the ICD devices are installed into the segments
and are designed to restrict the inflow of steam from reservoir short
circuits, thus promoting conformance in other sections of the
wellbore. This allows production to occur with less rate restriction
on the entire well pair. The success of these ICDs is apparent as
data is collected. To date, the Company has been pleased with the
performance of the ICDs and with the configurations installed, has
been able to improve well bore conformance and operate the well pairs
with a reduced risk of steam short circuits damaging wellbore
integrity. In aggregate, these three installations have improved oil
rates by over 60% to date (the three ICD installed well pairs
produced 870 bbl/d in total for July) as compared to the rates prior
to each installation. It is expected these wells will continue to
improve over time as conformance and steam chambers are developed.
The Company will now be installing additional ICDs into several
additional well pairs in the field. A service rig has been moved on
site and will remain on site for approximately eight weeks and will
install ICDs into four well pairs and a steam splitter into the
injector of a fifth well pair. All of the planned workovers affect
well pairs that have been rate restricted or shut-in throughout the
SRP, in order to manage steam short circuits and protect the well
pairs integrity prior to running the ICDs. With the completion of
these installations, the Company will have installed ICDs into seven
of its 12 well pairs. Pending results from those installations, an
additional three well pairs may be equipped with ICDs later in the
year. There are two well pairs that are not expected to require ICD
installations in order to improve conformance; one has developed good
conformance without ICDs and the other well pair will have a steam
splitter installed in the injector as the method to improve
Southern Pacific also has received regulatory approval to downspace
the existing McKay well pads with additional SAGD well pairs. As
mentioned in the Company's December 11, 2013 press release, the
Company believes additional well pairs will be required in order to
fully utilize the available steam capacity at the STP-McKay Thermal
Project. Southern Pacific believes the most prudent strategy is to
add them between the existing well pairs, which were originally
spaced 100 m apart, allowing ample room for additional well pairs to
be drilled. Southern Pacific filed its application with the Alberta
Energy Regulator ("AER") to downspace Pads 101 and 102 in February
2014 and received approval in July 2014. The total Pad 102 downspace
project cost is estimated at $51 million. This project's timing has
also been affected by the Company's SRP. A revised timing estimate of
first steam to the downspaced wells on Pad 102 would be mid 2015 or
later, and this is dependent upon the Company obtaining sufficient
liquidity to proceed with this project. 
At STP-Senlac, the Company has full regulatory approval to drill the
next pad of three well pairs, Phase L, at an estimated remaining cost
of $18.8 million. The timing of initiating this project has also been
delayed as a result of the SRP and the timing of the drilling will be
dependent upon confirming the results of the ICD installations at
STP-McKay as increasing volumes at STP-McKay is the near term focus
for the Company. If the ICD results are as expected, and with
approvals in place, Phase L drilling could commence on short notice,
but the final timing has not been determined.  
In July, production for STP-McKay averaged 2,064 bbl/d. At Senlac,
July's production averaged 1,612 bbl/d. The Company's estimated
working capital as of June 30 is $34 million. The Corporate year-end
financial statements are scheduled for release during the last week
of September 2014.  
The Company is also announcing the resignation of Mr. Mike O'Krancy
(Vice President, Projects) and the retirement of Mr. Ron Clarke
(Chief Operating Officer), effective September 1, 2014. Southern
Pacific would like to thank them for their efforts and contributions
over the past several years, and wishes them well in their future
endeavors. Additionally, Mr. Ward Mallabone has elected to step down
as a Director of the Board. The Company would like to thank Mr.
Mallabone for his guidance and direction over the past eight years.  
About Southern Pacific  
Southern Pacific Resource Corp. is engaged in the exploration,
development and production of in-situ oil sands in Alberta's
Athabasca region, and the thermal production of heavy oil in Senlac,
Saskatchewan. Southern Pacific trades on the TSX under the symbol
This news release contains certain "forward-looking information"
within the meaning of such statements under applicable securities law
including but not limited to: the timing of installation of
additional ICDs on well pairs, the estimated cost and timing of the
Pad 102 downspace project, and the estimated cost for drilling Phase
L at STP-Senlac.  
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,
Southern Pacific's ability to obtain additional liquidity to commence
or continue with planned projects, conformance acceleration
techniques, 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
The impact of any one risk, uncertainty or factor on a particular
forward-looking statement is not determinable with certainty as the
factors are interdependent, and the Board's and management's future
course of action would depend on its assessment of all information at
the time.  
The reader is cautioned not to place undue reliance on this
forward-looking information. 
Southern Pacific Resource Corp.
Byron Lutes
President & CEO
Southern Pacific Resource Corp.
Howard Bolinger
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