Southern Pacific Resource Corp. ("Southern Pacific" or the
"Corporation") (TSX VENTURE: STP) announces that it has entered
into a definitive agreement (the "Agreement") to acquire Saxony
Petroleum Inc. ("Saxony"), 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 $6.0 million in working capital at June 30, 2009.
A reserves estimate in relation to the Saxony lands has recently
been completed by GLJ Petroleum Consultants Ltd. and is effective
December 31, 2008. The table below summarized these results for the
Saxony properties.
Summary of Reserves and Values
Effective December 31, 2008
GLJ January 1, 2009 Price Deck
Proved Total
Plus Proved
Proved Total Probable Plus
Producing Proved Producing Probable
MARKETABLE RESERVES
Light/Medium Oil (Mbbl)
Total Company Interest 60 61 78 101
Heavy Oil (Mbbl)
Total Company Interest 0.9 0.9 1.5 1.5
Gas (MMcf)
Total Company Interest 1,226 2,586 1,529 4,971
Natural Gas Liquids (Mbbl)
Total Company Interest 17 33 22 67
Oil Equivalent (Mbbl)
Total Company Interest 282 525 356 998
BEFORE TAX PRESENT VALUE (M$)
0% 8,207 12,522 10,809 27,313
5% 6,501 9,452 8,065 20,012
8% 5,788 8,152 7,004 17,080
10% 5,398 7,440 6,446 15,509
12% 5,062 6,826 5,976 14,171
15% 4,635 6,051 5,395 12,503
20% 4,079 5,049 4,663 10,374
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.
About Southern Pacific
Southern Pacific Resource Corp. is a publicly traded junior oil
and gas company engaged in the development, exploration and
production of in-situ oil sands in Western Canada. The Company has
an average 84% working interest in 269 sections of oil sands leases
in five areas, including a significant project area at McKay.
Readers' Advisory
Barrel of Oil Equivalent: Where amounts are expressed on a
barrel of oil equivalent ("boe") basis, natural gas volumes have
been converted to boe at a ratio of 6,000 cubic feet of natural gas
to one barrel of oil equivalent. This conversion ratio is based
upon an energy equivalent conversion method primarily applicable at
the burner tip and does not represent value equivalence at the
wellhead. Boe figures may be misleading, particularly if used in
isolation.
Safe Harbour
This 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 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 forward-looking statements.
The reader is cautioned not to place undue reliance on this
forward-looking information.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contacts: Southern Pacific Resource Corp. Dave Antony CEO (403)
269-5219 Email: dantony@shpacific.com Southern Pacific Resource
Corp. Byron Lutes President (403) 269-1529 Email:
blutes@shpacific.com Website: www.shpacific.com
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