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Press release from Marketwire

Southern Pacific Reports Cash Flow of $9.2 Million for the Quarter Ended September 30, 2012

Thursday, November 08, 2012

Southern Pacific Reports Cash Flow of $9.2 Million for the Quarter Ended September 30, 201218:05 EST Thursday, November 08, 2012CALGARY, ALBERTA--(Marketwire - Nov. 8, 2012) - Southern Pacific Resource Corp. ("Southern Pacific" or the "Company") (TSX:STP) is pleased to announce its financial and operational results for the quarter ended September 30, 2012.2013 FISCAL Q1 HIGHLIGHTS:Commenced steam circulation to the steam assisted gravity drainage ("SAGD") well pairs at the STP-McKay Thermal Project ("STP-McKay") near Fort McMurray, Alberta. Steam began circulating to the first well pad on July 1, 2012. To date, three wells pairs have been converted from the warm-up circulation phase to production; Completed a bought deal equity financing, resulting in gross proceeds of $80.7 million; Averaged production from the STP-Senlac Thermal Project ("STP-Senlac") near Unity, Saskatchewan of 3,051 bbl/day; Achieved cash from operating activities before net changes in non-cash working capital of $9.2 million; and Earned net income of $7.9 million.(thousands, except per share and per boe amounts)Three months ended September 30, 2012Three months ended September 30, 2011Petroleum revenue, net of royalties$14,201$17,154Cash from operating activities before net changes in non-cash working capital$9,156$10,675Per share basic and diluted$0.03$0.03Net income (loss)$7,887$(697)Per share basic and diluted$0.02$(0.00)Total assets$999,089$919,527Net capital expenditures$40,851$105,903Total long-term debt$392,284$400,760Combined average product prices ($ per boe)$60.61$59.65Operating netback ($ per boe)(1)$37.94$37.25Weighted average common shares outstandingbasic341,488339,305diluted346,563345,339ProductionHeavy oil (bbl/day)3,0513,778Natural gas (mcf/day)1938Total (boe/day)3,0543,784(1)Operating netback is a non-GAAP measure defined as petroleum sales less royalties and less operating costs.Southern Pacific has filed its Interim Condensed Consolidated Financial Statements and Management Discussion and Analysis for the three months ended September 30, 2012 on SEDAR at www.sedar.com. Copies are also available on the Company's website at www.shpacific.com.OUTLOOKSouthern Pacific is anticipating significant production growth throughout fiscal 2013. The Company expects to ramp up the STP-McKay volumes through the next fiscal year, with production expected to reach nominal plant capacity of 12,000 bbl/day in fiscal 2014. This production base, coupled with the new wells being added at STP-Senlac, should open up new opportunities for Southern Pacific as the Company uses its cash flow to finance continued growth.STP-McKay Thermal Project On October 24, 2012, the first load of diluted bitumen ("dilbit") from STP-McKay was hauled by truck for sale to an intra-Alberta market. Since then, approximately 17,000 barrels of dilbit have been hauled for sale to several local markets. Bitumen needs to be diluted on site in order to separate the bitumen from produced water. Most of the dilbit loads from the facility's sales tanks have contained less than one percent, by volume of residual water and sediment, indicating that the facility has been performing well in terms of separating the produced fluids and effectively treating the dilbit product to remove impurities. Southern Pacific will continue to deliver its dilbit volumes to Alberta markets until the Company begins transporting dilbit to the U.S. Gulf Coast under its previously announced rail marketing arrangement. The rail marketing arrangement is scheduled to commence on January 1, 2013. Start-up of STP-McKay continues to advance as scheduled. To date, three SAGD well pairs have been successfully converted from the warm-up circulation phase to production. Combined production from these three wells is currently averaging 850 barrels per day (bbl/d) at intentionally restricted rates; this will allow the SAGD steam chambers to build as uniformly as possible along the horizontal wellbores. There are another four SAGD well pairs in various stages of conversion to the production phase and five pairs that will likely remain in the circulation phase until the conversions are complete. As the Company has previously stated, it is expected to take approximately 12 to 18 months for steam injection and production levels to ramp up to the full capacity of the facility. Phase 1 is capable of generating up to 37,500 bbl/d of steam and producing up to 12,000 bbl/d of bitumen under current approval. STP-Senlac Thermal Project At STP-Senlac, a drilling rig moved on site in October 2012 and is currently drilling six horizontal wells which will comprise Phase K. Phase K consists of three SAGD well pairs. Production from this pad is expected to begin towards the end of February 2013. Production levels are expected to materially increase as Phase K is brought on stream. Rail Marketing Arrangement Southern Pacific's rail marketing arrangements at both STP-McKay and STP-Senlac continue to progress. The Company announced on June 27, 2012 a unique arrangement to transport its bitumen product from STP-McKay to the U.S. Gulf Coast using rail. This arrangement includes dedicated loading and offloading capacity at two new rail terminals, located in Lynton, Alberta and Natchez, Mississippi. Both terminals, as well as approximately 500 rail cars, are under construction on or ahead of schedule. Southern Pacific has been working with several U.S. Gulf Coast refineries to arrange the end markets for its production. The Company has also identified sources in the U.S. Gulf Coast from which to purchase diluent that will be used in the STP-McKay plant process. This product will be transported back to STP-McKay utilizing its rail cars on the return trip from the U.S. Gulf Coast. The economics for shipping bitumen via rail continue to be favourable in the current pricing environment, bolstered by the wide Brent/WTI differential, lower Gulf Coast diluent costs, and the requirement for less diluent than would be required to ship bitumen by pipeline. Since September, Southern Pacific has been transporting approximately one third of its production volumes at STP-Senlac by rail, utilizing a newly constructed rail loading terminal located at Unity. The marketing arrangement guarantees a premium to the current Western Canadian Select (WCS) pricing. The Company is considering moving additional volumes in this manner.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 per-barrel 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). The entire expansion should fit comfortably within the existing Phase 1 central process facility site, making this expansion both cost effective and environmentally responsible. Detailed engineering for the Phase 1 Expansion is currently underway and should be completed in June 2013. Southern Pacific continues to work on the regulatory approval process for the Phase 1 Expansion and Phase 2 of STP-McKay. Throughout the last few months, the Company has been preparing its responses to the first round of Supplementary Information Requests (SIRs). The responses were completed on October 31, 2012, from which the Company anticipates approval of the application towards the end of calendar 2013.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 p.m. at the Conference Centre, Bow Valley Square.AdvisoryThis 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. 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. Non-GAAP measures have no standardized meaning prescribed by International Financial Reporting Standards ("IFRS"). Because operating netback is commonly used in the oil and gas industry, the Company believes its inclusion is useful to investors to evaluate performance. Investors are cautioned that this non-GAAP measure should not be construed as an alternative to measures calculated in accordance with IFRS as, given its non-standardized meaning, it is unlikely to be comparable to similar measures presented by other issuers."Cash from operating activities before net changes in non-cash working capital"is a non-GAAP measure. Because this measure is commonly used in the oil and gas industry, the Company believes its inclusion is useful to investors. The Company uses this measure to evaluate its performance. The Company's determination of cash from operating activities before net changes in non-cash working capital may not be comparable to similar measures reported by other companies.FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: Southern Pacific Resource Corp.Byron LutesPresident & CEO403-269-1529blutes@shpacific.comSouthern Pacific Resource Corp.Howard BolingerCFO403-269-2640hbolinger@shpacific.comwww.shpacific.com