NEWSAUGUST 10, 2006 - 11:00 ET
Southern Pacific Signs Letter of Intent to Acquire Oil Sands Assets and Announces a Private Placement
CALGARY, ALBERTA--(CCNMatthews - Aug. 10, 2006) - Southern Pacific Resource Corp. ("Southern Pacific") (TSX VENTURE:STP) is pleased to report that it has signed a binding letter of intent, dated August 7, 2006, with Bounty Developments Ltd.; an Alberta based private company, ("Bounty") to acquire 80% of Bounty's interest in its Leismer South Oil Sands Assets. Bounty and Southern Pacific will become joint venture partners for the development of the Leismer South Oil Sands Assets. Southern Pacific will acquire the interest in the project for total consideration of $7,500,000. The consideration to be paid includes a cash payment of $4,500,000 and the issuance of 6,000,000 Southern Pacific shares with a deemed value of $3,000,000 ("The Proposed Transaction"). Southern Pacific and Bounty deal at arm's length with each other.
The Leismer South Project consists of 11 contiguous sections of 100% owned lands in Townships 75 - 76, which is approximately 120 kms south of Fort McMurray, representing 7,040 acres; the leases on these lands are valid for 15 years. The productive zone is the McMurray Formation, comprised primarily of fluvial and estuarine channel sandstones which form the main reservoir deposits. The Leismer region is active with "SAGD" (steam assisted gravity drainage) projects in various stages of development.
The first stage of the project is to offset existing oil sand pay on the land by drilling a number of vertical test wells, and shooting seismic (3D and 2D ). The objective is to delineate the size and number of oil sands for future SAGD development.
Degolyer and MacNaughton has been engaged to prepare to provide a NI 51-101 compliant report on the prospects, additional information will be released related to the prospects upon completion of the report.
New Management
Southern Pacific is also pleased to announce that Mr. Arun Dey, has agreed to join the company as President and a Director, upon completion of the Proposed Transaction. Mr. Dey is currently the President and is the founder of Dako Energy Inc. a private company involved in oil & gas exploration, production development, oil sands development, and mergers and acquisitions in the energy industry. Prior to his involvement with Dako Energy, Mr. Dey was employed by Alberta Energy Company Ltd. (now EnCana Corporation) for 18 years. Mr. Dey held numerous engineering, project management and management positions during the 18-years of his employment with Alberta Energy Company Ltd. Prior to taking early retirement from EnCana Corporation in September 2002, Mr. Dey held the position of President of the South American business unit for the Midstream Division of Alberta Energy Company Ltd. Mr. Dey is a 1971 chemical engineering graduate from Heriot-Watt University, Edinburgh, U.K. Mr. Dey is a registered professional engineer with APEGGA and a member of the Canadian Institute of Mining, Metallurgy and Petroleum. Mr. Dey is a director of Cold Creek Capital Inc. (CCC.P-TSX-V)
As well, the Company is pleased to announce that Mr. Jon Clark has agreed to join the Board of Directors, upon completion of the Proposed Transaction. Mr. Clark has a Masters in Science in Geology from the University of Oklahoma and a B.A. in Geology from Colorado College. He has been a professional geologist working in Alberta for 17 years. Mr. Clark is presently Exploration Manager at Bounty Developments and has significant experience in the Canadian energy industry, with a particular interest in oil sands exploration and development.
Mr. Dave Antony and Mr. Tibor Fekete will remain on the Board of Directors of the Company; as well Mr. Antony will remain as CFO until such time as a suitable replacement is found.
Private Placement
Southern Pacific is also announcing that it intends to complete a brokered private placement. The private placement is expected to consist of up to 30,000,000 units to be offered at $0.50 per unit. Each unit will consist of one common share of Southern Pacific and one half common share purchase warrant. Each warrant will entitle the holder thereof to purchase one common share at any time for a period of 12 months following the closing date at a price of $0.75 per common share. The proceeds of the private placement will be used for completion of evaluation and development drilling, seismic, and for general working capital purposes. Southern Pacific will pay a commission of cash and options in relation to this placement. The private placement will close concurrently with the closing of the acquisition.
In addition, Southern Pacific is granting 3,100,000 options at a price of $0.50 per common share for directors, management, and key personnel in connection with the completion of the Proposed Transaction.
Approvals and Conditions
The Proposed Transaction is subject to both shareholder approval and regulatory acceptance under the policies of the TSX Venture Exchange.
In connection with the transaction, Southern Pacific will pay an arm's length finder's fee of 400,000 common shares of Southern Pacific at a deemed value at the transaction price. The finder's fee is payable upon the closing of the Proposed Transaction. The finder's fee is subject to TSX-Venture Exchange acceptance.
Cautionary Statements
Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to, TSX Venture Exchange acceptance. The Proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Combination will be completed as proposed, or at all.
Investors are cautioned that any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Southern Pacific should be considered highly speculative. The Southern Pacific common shares will remain halted on the TSX Venture Exchange pending receipt of certain documentation by the TSX Venture Exchange. Prior to the commencement of trading an additional press release will be issued providing detailed information from the Degolyer and MacNaughton report on the prospects.
The TSX Venture Exchange has in no way passed on the merits of the Proposed Transaction and has neither approved of disapproved the contents of this press release.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.