Unconventional Oil

[kraftdinner]

Southern Pacific to acquire 80% Fort McMurray interest


2007-06-01 07:32 MT - News Release

Mr. Dave Antony reports

SOUTHERN PACIFIC ADDS SIGNIFICANT ACREAGE TO ITS HOLDINGS

Southern Pacific Resource Corp. has signed a binding letter of intent, dated May 31, 2007, to acquire an 80-per-cent interest in 76 sections (38,912 acres net to Southern Pacific) of land in the Fort McMurray area of the Athabasca oil sands fairway. This area is very active with SAGD (steam-assisted gravity drainage) projects in various stages of development. This land adds to the existing 25 sections that Southern Pacific currently holds. Southern Pacific will acquire the interest in the project for total consideration of $16-million. The consideration to be paid includes a cash payment of $9.6-million and the issuance of Southern Pacific shares with a deemed value of $6.4-million.

The land is being acquired from Bounty Developments Ltd. which holds greater than 10 per cent of the issued and outstanding common shares of the corporation; in addition, Jon Clark is both an employee of Bounty Developments and a director of the corporation.

The lands have been evaluated by the corporation and based on the management evaluation; the corporation is very excited about the prospectivity of this new acquisition. There has not been an independent resource evaluation prepared on the newly acquired lands, but the corporation intends to have this completed as soon as possible. Once National Instrument 51-101-compliant reports on the prospects are completed, additional information will be released relating to the lands and the future exploration and development plans.

The corporation has plans to continue to expand its land base through future Crown land sales as well as through the continuing evaluation of other acquisition opportunities.

Following the closing of the transaction, the first stage of the project is to shoot an extensive 2-D seismic program and to offset existing oil sand pay on the land by drilling a number of vertical test wells. The objective is to delineate the size and number of oil sands resources for future SAGD development plans.

Southern Pacific recently completed its winter drilling program. The drilling, coring and logging of all wells in the 17 well program were completed on March 22, 2007. The wells covered only eight sections out of the total of 25 sections held by the corporation. The information from the winter drilling program is being evaluated by Degolyer and MacNaughton, the independent reservoir engineering firm chosen by the corporation. The results of this evaluation will be part of the updated reserve report which is being prepared by Degolyer and MacNaughton. It is anticipated that this evaluation will be completed in June.

We seek Safe Harbor.