Southern Pacific Resource Corp. announced the successful completion of its winter seismic and corehole drilling program. Overall, Southern Pacific is very excited about the work that has been completed on its project lands. In just 17 months since its entry into the oilsands, Southern Pacific has accumulated 219 gross sections of oilsands leases, where it has an 80% working interest, shot 678 kilometers of 2D seismic, 20 square kilometers of 3D seismic and has drilled a total of 87 core holes on its oilsands leases.
Through this process, four project areas have been identified on Southern Pacific's leases. Southern Pacific plans to move forward as expeditiously as demonstrated in the past with the prioritization and development of its projects, as well as its continued exploration program in order to identify new project areas on its leases.
At McKay, Southern Pacific has drilled a total of 32 core holes to date on its 59 section block. Two potential project areas have been identified over the past winter and as a result the drilling program was adjusted to focus on this block in order to obtain as much information on the potential projects as possible. In the McKay North project area, the Corporation was able to increase the drilling density to over 4 wells per section. Over the two project areas, McKay North and McKay South, the core drilling program encountered gross bitumen zones between 26 and 30 meters thick, and continuous net bitumen zones between 12 and 27 meters thick.
The zone porosity ranges from 30% to 35%. In addition, the core holes did not show any evidence of gas or water thief zones that could technically impair SAGD viability. A significant amount of technical data was obtained this winter including 32 full diameter cores over the prospective oilsands horizons, which will be fully analyzed. Downhole formation imaging logs, pressure tests, fluid analyses and warm cap rock cores were also acquired. Plans are now being made to initiate the necessary environmental testing, develop a comprehensive consultation program, and begin the process of preparing an application for a SAGD project. Once the technical data has been completely analyzed and interpreted, Southern Pacific will provide an update on the scope and timing of its McKay projects.
At Leismer, a 3D seismic program was shot in January over the area that was successfully drilled last year. The data was interpreted and the Corporation drilled another 12 core holes in addition to the 17 core holes drilled in this area during the prior year drilling season. Of the 12 core holes, 6 were drilled on the 3D seismic program and 6 were drilled on the southern portion of the block based on 2D seismic data. Gross bitumen zones of 25 to 42 meters thick were encountered and continuous net bitumen zones of 10 to 18 meters thick were encountered within the 3D seismic area. These results, combined with last winter's drilling results in the same area, have confirmed a potential SAGD project area. Of the 6 exploration core holes drilled to the south on 2D seismic, two solid leads were identified and will be used to plan next winter's appraisal program in Leismer.
At Long Lake, Southern Pacific drilled a total of 8 core holes anchored on the 88 km of 2D seismic shot last summer and vintage wells in the area. Of these, 6 of the core holes encountered significant bitumen zones. The gross bitumen zones were between 18 to 38.5 meters thick, and net continuous bitumen zones between 15 to 29.5 meters thick. There are top gas and bottom water issues to deal with on this block; however, Southern Pacific believes it has identified a project area. Further delineation of the project will be planned for next winter.
At Hangingstone, Southern Pacific drilled a total of 18 core holes this winter on its 64 section block. Using the 175 km of 2D seismic shot last summer as a guide to spot the locations on this unexplored block of land, Southern Pacific found prospective leads in 10 of the 18 core holes. Gross bitumen zones between 10 to 34 meters thick and net continuous bitumen zones between 9 to 15 meters thick were encountered in these 10 wells. This block is still relatively unexplored, and an expanded exploration program for this area is planned for next winter, keying off the results of this year's program.
At Kirby, Southern Pacific shot 87 km of 2D seismic at the start of this winter. This data was then interpreted and several leads were identified and targeted for drilling. However, due to the weather related late start on the rest of the program, it was decided to defer the drilling of this block until next winter rather than risk building the winter access roads and not be able to complete the program due to spring break up.
Total net capital expenditures including all seismic acquired in the past 12 months and core hole drilling are approximately $53.4 million. This will leave approximately $18.5 million of working capital at March 31, 2008.
Since December 2007, the Corporation has shot 20 square kilometers of 3D seismic, 87 kilometers of 2D seismic, this is in addition to the 539 kilometers of 2D seismic the Corporation shot and interpreted in the fall of 2007, and drilled 70 core holes over various portions of its 219 gross sections of oilsands leases. Originally, the Corporation planned to drill 115 core holes, however the program had to be reduced due to the weather shortening the drilling season. Warm weather delayed the initiation of the program in December and therefore increased the drill site and access road construction costs. The bitter cold experienced in early February shut most operations down for another week. Finally, a projected early break up necessitated a decision to end the drilling program about one week earlier than last year.
Southern Pacific will complete the analysis and interpretation of all technical data collected this past winter, prioritize the potential project areas and begin the process of preparing a SAGD application for one or more of the projects. In concert with Southern Pacific's internal technical review and planning, McDaniel and Associates are now underway preparing the estimate of bitumen resources for the Corporation. Their final estimates will be done prior to Southern Pacific's year end of June 30, 2008.
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