2 Reader's Advisory Forward-looking Statements: Reserves Definitions All statements other than statements of historical fact may be forward-looking statements. These statements relate to future events or Southern Pacific Resource Corp.’s (the “Company”) future performance. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Corporation believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this presentation should not be unduly relied upon by investors. These statements speak only as of the date of this presentation and are expressly qualified, in their entirety, by this cautionary statement.References to "contingent resources" or "resources" in this presentation do not constitute, and should be distinguished from, references to "reserves". "Reserves" are those remaining quantities of oil and gas anticipated to be economically recoverable from these known accumulations from a given date forward. "Resources" are oil and gas volumes that are estimated to have originally existed in the earth's crust as natural accumulations but are not capable of being classified as "reserves", and "contingent resources" are a sub-category of resources that means those quantities of oil and gas estimated to be potentially recoverable from known accumulations but which cannot be classified as "reserves" for a variety of reasons, including that they may not be currently economic. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.“Contingent Resources” means those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage.In particular, this presentation contains forward-looking statements, pertaining to the following:supply and demand for oil and natural gas;the quantity of reserves;the quantity and economic viability of resources;the value of reserves;the flow rates of wells;capital expenditure programs;“Low (P90)” means a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.development of reserves;potential acquisitions; andexpectations regarding the Corporation's ability to raise capital.With respect to forward-looking statements contained in this presentation, the Corporation has made assumptions regarding, among other things: “Best (P50)” means the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.the legislative and regulatory environment;information regarding reserve and resource potential;the Corporation's ability to obtain additional financing on satisfactory terms;“High (P10)” means an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.ability to develop reserves and resources and costs regarding such development;availability and costs of infrastructure;The Corporation's actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth below and elsewhere in this presentation: “Probable reserves” means those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated Proved plus Probable reserves.volatility in the market prices for oil and natural gas;uncertainties associated with estimating reserves and resources;geological, technical, drilling and processing problems;“Possible reserves” means those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated Proved plus Probable plus Possible reserves.liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations;incorrect assessments of the value of acquisitions;incorrect estimates of costs;“Proved reserves” means those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated Proved reserves.competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; andweather conditions.Future net revenues associated with reserves and resources do not necessarily represent fair market value.The forward-looking statements or information contained in this presentation are made as of the date hereof and the Corporation undertakes no obligation to update or revise any forward‑looking statements, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. Certain of the forward-looking statements regarding the Corporation’s financial outlook, anticipated revenue, future expenditures and cash flow forecasts may constitute future-orientated financial information (“FOFI”). Management of the Corporation approved the inclusion of the FOFI in the presentation based on the assumptions listed above on May 1, The FOFI included in this presentation has been provided only for the periods listed and for the sole purpose of providing an estimated guideline for the Corporation’s possible future financial position and the FOFI may not be appropriate for other purposes.The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.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.
3 The Southern Pacific Strategy FOCUSED: We develop and produce bitumen and heavy oil using horizontal wells and steam.INDEPENDENT: We control and operate 90% of our lands, allowing us to develop at a pace that fits our objectives.DEMONSTRATED EXECUTION: Solid operations & construction expertise, plus proven financing capacity.FOCUS ON CAPITAL EFFICIENCY: Scalable projects can be managed cost effectively, avoid unproven technologies, improve existing technologies by reducing cost or increasing throughput
4 STP Overview Contingent Resources (MMbbl) Corporate Reserves (MMbbl) Trading symbolTSX:STPShares outstanding - basic340 millionShares outstanding - fully diluted364 millionAverage daily trading volume (last 6 mo avg.)1.2 millionMarket Capitalization (Oct. 31, 2011)$498 millionWorking Capital Estimate (Sept )$185millionTotal Corporate Debt (Sept. 30, 2011)$401 millionInsider Ownership - fully diluted5%Number of Employees80 (office & field)Contingent Resources (MMbbl)Corporate Reserves (MMbbl)2P = & 3P = mmbblRefer to slide 2 for definitions of reserves and contingent resources categories.Estimates prepared by GLJ Petroleum Consultants effective June 30, 2011, except for the Red Earth contingent resource estimate , which was completed by Sproule and Associates.
5 Strategic Land Position Alberta: 436 sections (242,176 net acres) of oil sands leases with 87% average working interestSaskatchewan: 12 month average of ~4,300 barrels per day (bbl/d) of 100% working interest heavy oilNeed new map with Ells on it, rename McKenzie to Ells
6 STP-Senlac Thermal Project (drilling)4, ,000 bbl/d for the next yearsBest in class SOR of 2.0 – 2.2Experienced operations personnel~ $65 million/year net operating income~ $20 million/year of capital for next two yearsRefer to slide 2 for cautionary statements about forward-looking information.
7 STP-Senlac: Historical Production STP Operates SenlacOptimal plant throughput rangePHASEA B C D E F G H J K - AASTP plan is to accelerate drilling frequency, and keep the plant filled between 4,000 – 5,000 bbl/d on averageAllows more consistent operation and reduces peak individual well rate demands which may enhance recovery
8 Commodity Hedging WTI Natural Gas Purchase Conservative hedging strategy to protect existing cash flow which is then used for growth projectsNatural Gas Purchase
9 Netback Comparison: Senlac and McKay Forecast2013 Netbacks at ~ 90% Design CapacityActual Netbacks from SenlacAssumptions: WTI = $US 90/bbl; FX = $US 1.00/$C; management estimates of future costs, differentials, tariffs, royalties and transportation .
10 STP-McKay Thermal Project 45 km NW Ft. McMurray10.5 section project area100% STP working interestRegulatory approvals in placePhase 1 construction fully underwayPhase 1 Design:12,000 bbl/d oil33,600 bbl/d steamSuncor MacKay SAGD Project(Analog)STP LandsSTP-McKay Thermal ProjectSTP Lands
11 STP-McKay Phase 1: Project Overview Future Phase 1 Well pads12 SAGD well pairs: successfully drilled through high quality reservoirPhase 2- Future Central Plant Facility location29 km all season access road & 14 km natural gas pipeline - completePhase 1 - Central Plant Facility
12 STP-McKay Phase 1: Construction Update Central Process Facility Steam Generators – on site and being assembledOver 4,100 of 5,300 piles have been setElectrical work to has commencedLargest pieces are now on siteCogen – major components placed, assembly underwayTank Farm: 6 of 7 tanks erected, facility and piperack modules arriving on site and being placed on piles
13 STP-McKay Phase 1: Construction Update Well Pads Service rig completing slant SAGD wells12 SAGD well pairs + 1 HZ CSS well successfully drilled, completions underwayPiling at pads nearly completeSurface facilities on 1st pad will commence construction in NovemberSAGD Wellheads ready from installationSurface steam and effluent pipelines from CPF to well pads under construction
14 STP-McKay Phase 1: Construction Update Camps and Infrastructure Service rig completing slant SAGD wells300 person operations camp – to be removed after start -up29 km all season access road complete14 km 8” natural gas fuel pipeline completeOver 57% of permanent operations staff positions filled, including 90% of management/senior personnelWater source wells drilled, equipped and pipeline connected to plantSAGD Wellheads ready from installation84 person operations camp - complete by DecemberMcKay River single span bridge
15 STP-McKay Phase 1: SAGD Well Completions: STP-McKay Phase 1: SAGD Well Completions: Leading Edge in Wellbore DesignWellbores have been completed to allow optimal flexibility for steam distribution and production gathering points along wellboresDistributed temperature and pressure monitoring along wellboresWill provide operational flexibility to ensure wellbore conformance3 steam distribution points800 – 1100 m lengthGas Lift: coiled tubing strings3 production entry points
16 STP McKay Phase 1: Spending Update Capital forecast reduced $10 million to $440 millionThis includes ~ $15 million of unbudgeted scope changes includingAdditional 40,000 bbl dilbit storage tankIncreased water recycle on evaporatorsExpanded truck loading facilities72% of costs are now considered firm$30 million contingency within this forecastSpend breakdown as of Sept. 30th, 2011Fixed costs represent items bid out or flat rateReimbursable costs represent hourly or rate based variable costs
17 STP-McKay Phase 1: Timeline to Production CurrentQ1Q2Q3Q420102012Refer to slide 2 for cautionary statements about forward-looking information.
18 Senlac and McKay Phase 1: Production Profile Refer to slide 2 for cautionary statements about forward-looking information.
19 Simple model assumes cash sweep to pay down debt is first priority Corporate Cash Flow - Base Case Model (STP-Senlac and STP-McKay Phase 1 Only)Simple model assumes cash sweep to pay down debt is first priorityAssumptions:WTI = $US 90/bbl flatFX $US/$CDNHeavy Differential = $US 13.50/bbl, NYMEX = $US 6.43mcfRefer to slide 2 for cautionary statements about forward-looking information.
20 STP-McKay Phase 1: Solid Reserve Value Even conservative GLJ 1P forecast with SOR average of 3.2 delivers strong cash flow and valueAll of the current reserves forecasts are capped by current design capacity of 12,000 bbl/dBy definition: 1P forecast must have a high degree of certainty on being recovered.1P2P3P20 yr. avg. Bitumen Rate (bbl/d)8,70010,40011,00020 yr. avg. SOR (bbl/bbl)188.8.131.52Reserves (MMbbl)112168185bt NPV10% ($ million)$503$834$980Forecasts as per GLJ & Associates effective June 30, 2011
21 STP-McKay Phase 2: High Quality Resource Base Total of 43 coreholes (31 drilled this past winter) on Phase 2 project areaHigh quality bitumen pay encountered on all wells:No lean zonesNo shale barriersContinuous and exploitable McMurray and Wabiskaw oil sands deposits17-22 m exploitable pay thickness, average of 19 m
22 STP-McKay: Phases 1 and 2 Layout (circa 2014) Well padsPhase 1Phase 2Continuous pay fairwaySTP-McKay Phase 2 is being designed to add 24,000 bbl/d of bitumen processing capacity, bringing the total to 36,000 bbl/dRefer to slide 2 for cautionary statements about forward-looking information.
23 STP-McKay Phase 2: Construction Strategy Phase 2A+Pre-build for Phase 2BPhase 2B Highlighted in redSouthern Pacific plans to stagger the construction of Phase 2 in two integrated 12,000 bbl/d piecesProvides maximum flexibility both operationally and financiallyExpect Phase 2 application to be submitted by mid-November 2011
24 STP-McKay Phase 2: Post Application Value Change Upon successful application submission for Phase 2 expansion, management expects a significant revision to the 2P reserve category2P reserves production profile will be accelerated and is estimated to increase before tax NPV10% by more than $450 million including expansion capitalSTP believes years is the optimal project life to maximize value of the facility capital investmentPhase 1 & 2 design capacity2P forecast will be capped at 36,000 bbl/d upon submission of expansion applicationReserves accelerated and additional contingent resources can be reclassified to reserves25 years50 yearsPhase 1 design capacity2P forecast is currently capped by approved design of 12,000 bbl/d
25 Wabiskaw Bitumen: Additional Resource at McKay Wabiskaw zone lies directly above McMurray over most of McKay Phase 1 and 2Approximately 200 mmbbl of OBIP (management est.)Recovery mechanism planned:Combination of cyclic steam stimulation (CSS) and conductive heating from SAGD in McMurrayModeling has demonstrated up to 50% recovery (budgeting 25% until tested)Benefits:Additional recoverySteam source available from SAGD operationsLow incremental costTimingCSS well drilled; will be an observation well until further Wabiskaw technical work is completedProduction could start 2-3 years after SAGD start upClearwater Shale (Caprock)Wabiskaw Bitumen (CSS)Wabiskaw ShaleMcMurray Bitumen (SAGD)Refer to slide 2 for cautionary statements about forward-looking information.
26 STP-McKay: Full Bitumen Exploitation Plan McMurray BitumenWabiskaw BitumenClearwater Shale CaprockConduction and cyclic steamSAGD injectorSAGD producerInfill horizontal well
27 Southern Pacific’s Existing Project Growth Plan Forecast represents real projects that are on production, being constructed or in the application processTiming of STP-McKay Phase 2 represents two stages of growth, designed for optimal operating and financing flexibilityRefer to slide 2 for cautionary statements about forward-looking information.
28 Simple model assumes cash sweep to pay down debt is first priority Corporate Cash Flow - Base Case Model (STP-Senlac and STP-McKay Phase 1 and 2)Simple model assumes cash sweep to pay down debt is first priorityAssumptions:WTI = $US 90/bbl flatFX $US/$CDNHeavy Differential = $US 13.50/bbl, NYMEX = $US 6.43mcfAssumes Phase 2 constructed at $38,000 per design bbl/dAssumes future phases funded with cash flow and debt, no additional equity issuedRefer to slide 2 for cautionary statements about forward-looking information.
29 STP-McKay: Future Upside STP-McKay Thermal Project boundaryPotential Phase 3 Expansion area (environmental background work underway)100% working interest in 59 sectionsWill have full-time operations in this area inOther operators in area currently in application preparation or waiting for project approvalSTP’s Phase 2 expansion application will add 6.5 sections to existing project area to prepare for a possible Phase 3Phase 1Phase 2Under-explored, needs more work to determine potentialSouth McKay (contingent resources already assigned)
30 STP-Red Earth Thermal Project: Pilot Testing Underway Pilot Project6 miles135 sections (100% WI)Existing 1,000 bbl/d thermal project105 MMbbl of P50 contingent resourcePilot project started up in June 20113 wells currently being steamed and testedEvaluate through summer and make recommendations in fall1,000 bbl/d thermal facilityRefer to slide 2 for a definition of contingent resources.
31 STP’s Upside: Additional Oil Sands Leases Hangingstone29 coreholes2D seismic66 SectionsAnzac 14 coreholes2D seismic, ERT75 SectionsThese exploration blocks represent significant upside potential for future in-situ oil sands projectsElls15 coreholes2D seismic50 SectionsLeismer & Kirby 29 coreholes2D & 3D seismic51 SectionsRefer to slide 2 for cautionary statements about forward-looking information.
32 Summary of STP’s Recent Financing Activities $ million – equity financings$108.4 million in May 2010 (STP-McKay Phase 1)$ 52 million in October 2009 (STP-Senlac)Remaining in 4 offerings during (Land and Exploration)$ 173 million – convertible debentures6% annual interest rateConvertible to common equity at $2.15/share5.5 year term$US 275 million – 2nd lien term loan facility10.5% annual interest rate (LIBOR + 8.5%, LIBOR 2.0%)5 year termPayout cost: 12%-year 1, 2%-year 2, 1%-year 3, par thereafterAbility to pay back $US 50 million with no penalty after McKay Phase 1 is commercial$ 30 million – 1st lien secured bank facility (revolver)Undrawn – to be used for general corporate purposesBA discount rate % interest rateExpandable to $80 million after McKay Phase 1 is commercialDemonstrated financing abilityRefer to slide 2 for cautionary statements about forward-looking information.
33 Net Asset Value: Solidifying as Proven Assets Grow JanJuneUnrisked NAVTotal Proved Reserves2$254$726Probable Reserves2$660$383Best Estimate (P50) Contingent Resources2$970$1,768Stock Option Proceeds$30Working Capital$453$260Sub-total$2,367 million$3,167 millionLess: Long Term Debt3-$275-$261Total Net Asset Value$2,092 million$2,906 millionFully Diluted Shares Outstanding359Convertible Debentures480Total439 millionEstimated Pre-Tax NAV per Share$4.76$6.62Significant reclassification of reserves from Probable to Total Proved due to 2011 winter drilling program and increased confidence in reservoir quality and overall project value.Notes:1. Represents then current estimates of all data including reserves, resources, working capital, long term debt, and share balance.2. All reports completed by GLJ Petroleum Consultants Ltd., values reflect the ‘then relevant’ bt3. Long Term debt incorporating the McKay financing with the $275M US$ Term Loan converted to CDN $ at an f/x rate of $0.96.4. Assumes the convertible debenture would all be issued for shares given NAV is > strike price.
34 2011-2012: What’s next for STP? Execution of STP-McKay Thermal Project Construction on time and on budget will be primary focus of 20112012 will be focused on bringing production on linePreparation of STP-McKay Phase 2Expect to submit an application in the fall of 2011Development Plan for STP-Red EarthCurrently testing using existing pilot facilitiesDevelopment plan for growth in late fallMaintain STP-Senlac at high levels of productionPhase J (3 SAGD well pairs) currently drillingExamining de-bottlenecking optionsContinued exploration and acquisition opportunitiesDeveloping plays on all STP land blocksContinuing to seek accretive A&D opportunities
35 Contact InformationSuite 1700, th Ave. SWCalgary, AB T2P 2V7Phone:Fax:TSX:STPFor more information:Byron Lutes, President & CEORon Clarke, COOHoward Bolinger, CFO