Southern Pacific to Acquire Canadian O&G Company Saxony Petroleum

Southern Pacific has entered into a definitive agreement to acquire Saxony Petroleum Inc., a private Alberta-based oil and gas company. The acquisition is designed to provide Southern Pacific with additional cash flow from conventional production as the Corporation continues to focus on the significant potential of its Alberta oil sands assets.

Southern Pacific has offered to acquire all of the outstanding shares of Saxony on the basis of 0.8302 common shares of Southern Pacific for each common share of Saxony, for a maximum issuance of 14 million common shares of Southern Pacific (the "Transaction"). All convertible securities of Saxony would be cancelled in connection with the Transaction.

Saxony is an arm's length, privately held oil and gas exploration company focused primarily in Alberta. Saxony produces approximately 130 barrels of oil equivalent per day (boe/d), with an additional 15 boe/d expected to be on stream by the closing of the Transaction. About 75% of the production is sweet natural gas, with the remainder being oil and natural gas liquids. When added to the volumes Southern Pacific acquired through its recent acquisition of Rochester Energy Corp., Southern Pacific expects its post Transaction production to be approximately 180 boe/d. The Saxony transaction also adds more than 45,000 net acres of undeveloped land targeting conventional production in west-central Alberta fields known as Sutton, Sawn Lake, Brazeau and Adams.

Southern Pacific believes the Transaction with Saxony will strategically complement its primary business objective, namely the development and exploitation of its 269 gross sections (225 net sections) of oil sands leases in the Athabasca fairway. The Saxony assets provide Southern Pacific with cash flow and opportunities without any increase in general and administrative expense. Southern Pacific reviewed the assets of Saxony and recognizes a stable production profile along with additional exploitation upside.

Assuming the maximum issuance of 14 million shares at Southern Pacific's March 12, 2009 share price of $0.16, the deemed value of the Transaction is $2.24 million, for an enterprise value of $4.14 million including the assumption of $1.9 million in Saxony's bank debt. Southern Pacific's management has communicated with Saxony's lender, and assuming completion of the Transaction, there is not expected to be any downward adjustments to the existing credit facility of $3.25 million. Excluding Saxony's bank debt, Southern Pacific expects to exit the current fiscal year's capital program with at least $6.0 million in working capital at June 30, 2009.

A reserves estimate in relation to the Saxony lands has recently been completed by GLJ Petroleum Consultants Ltd. and is effective December 31, 2008.

In addition to regulatory approval, the Transaction is subject to the approval of Saxony shareholders at a special meeting expected to be held on, or about, April 29, 2009, with closing anticipated before May 15, 2009.

The Boards of Directors of Southern Pacific and Saxony have approved the Transaction. Management, directors and certain shareholders of Saxony have entered into voting agreements representing 25.6% of the outstanding shares of Saxony. Saxony's board has determined that this transaction is fair and is in the best interest of Saxony and the holders of Saxony common shares.

The Transaction is expected to close in the second quarter of 2009. The Agreement contains a mutual break fee of $500,000 which is payable under certain circumstances if the transaction is not completed.


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