Southern Pacific Reports Increase in Reserves at Leismer Area
Southern Pacific Resource Corp. received the results of the updated resource report from Degolyer MacNaughton Canada Ltd. ("D&M") in regard to their South Leismer area. The Leismer South area consists of 25 contiguous sections of 80% owned lands in Townships 75-76-10W4. The Corporation's bitumen resource base increase reflects the completion of the seismic and successful drilling at South Leismer, which was completed in the spring of 2007.
These estimates do not include any of the potential resources from the recently acquired 76 sections of land. This acquisition was announced on July 12, 2007. The total potential resource base of the Corporation, which will include these results as well as the report on the new lands, will be available in the next 30 days. The aggressive land acquisition and exploration program of the Corporation will continue through the summer and into the next winter's exploration program.
The resource reserve report was prepared by D&M, effective April 30, 2007, estimating the extent and value of the probable, possible and contingent reserves on the 25 sections of land. The report was prepared using assumptions and methodology guidelines outlined in the Canadian Oil and Gas Evaluation Handbook and in accordance with National Instrument 51-101.
Southern Pacific's probable and possible recoverable reserves on the lands at Leismer South were estimated to be 198.0 million barrels, 115.8 million barrels of probable recoverable reserves, with possible recoverable reserves estimated to be 82.2 million barrels. This is an increase of 42.3 million barrel in the probable and possible categories; D & M were also able to assign contingent and prospective resources to the Leismer lands at a best estimate basis of an additional 119.8 million barrels. This gives the Corporation a total of probable, possible and best estimate contingent reserves of 312.3 million barrels. This is 101% increase on the initial report, which was published in August 2006.
Probable, possible reserves and low-estimate total resources (contingent and prospective) were estimated at 275.6 million barrels. Proved and probable reserves and best-estimate total resources were estimated at 312.3 million barrels. Proved, probable and possible reserves and high-estimate total resources were estimated at 350.6 million barrels.
The probable and possible recoverable reserves were utilized by D&M to generate the forecast future before tax net value of $697-million at 10-percent discount factor, using D&M's forecast pricing structure. The D&M report used D&M's current price deck, adjusted for the type of crude oil to be produced at Leismer South. The prices used commenced in 2009 at $40.22 per barrel and with increases at a rate of approximately 2 per cent per year thereafter for the life of the project. These estimated values disclosed herein do not represent fair market value.
August 31, April 30, 2006 2007 (Millions of Barrels) Proved 0 0 Proved and probable 100.5 115.8 Proved, probable and possible 155.7 198.0 Proved plus low-estimate contingent resources 0 275.6 Proved and probable plus best-estimate contingent resources 155.7 312.3 Proved, probable and possible plus high-estimate contingent resources 155.7 350.6Probable reserves are those additional reserves that are less certain to be recovered than proven reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the proven plus probable reserves.
Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is only a 10-per-cent probability that the quantities actually recovered will equal or exceed the sum of the proven plus probable plus possible reserves.
Contingent resources are those quantities of oil and gas, estimated on a given date, to be potentially recoverable from known accumulations but are not currently economic. The D&M report has categorized these resources as contingent as additional delineation drilling, development planning, project design and further regulatory applications are required.
Low-estimate contingent is considered to be a conservative estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, this term reflects P90 confidence level.
Best-estimate contingent is considered to be the best estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, this term is a measure of central tendency of the uncertainty distribution (P50).
High-estimate contingent is considered to be an optimistic estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used the term reflects a P10 confidence level.
Southern Pacific is also pleased to report that they have acquired an 80 interest in an additional 24 sections of land at the July 11, 2007 Crown land sale. This increased acreage includes 11 additional contiguous sections of land at South Leismer; the new land is at the south end of the property, which follows the oilsands trend on the property. This additional acreage was not included in the resource figures above.
The Corporation now holds an 80% interest in a total of 125 sections of land (64,000 net acres) in three core areas. It plans to continue with its aggressive acquisition strategy in the future.
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