Southern Pacific Resource Corp STPJF

RE: Tar Sands'''' Profitability Questionable

[pricecheckon2]

Thanks for the post on economics. As it turns out there IS RELEVANCE to STP and every other non-conventinal oil entity out there. The most RELEVANT piece in this analysis was that the very best of the mining assets (i.e Syncrude, Suncor, CNRL etc.) have marginal rates of returns. Note that thes are all mining assets which have MUCH lower full cycle costs of production than thermal processes will ever have. Secondly STP is a thermal producer if and when the technology is ever developed to the point that their assets can be produced economically which isn't today. Why do I say this...simple take a look at the amount of "contingent" resources as opposed to proven or even possible. By definition it means that while there are reserves there the economic viability of these assets are ZERO by today's standards of technology and current oil prices. Yes ZERO economic value even at the $US70/Bbl price decks that people think are so key. Finally to round out my point, even the slightest hiccup in the oil sands biz will cause a rapid and painful reversal of fortunes for ALL oil sands firms. Watch out for changes in royalties, currency valuations on the Canadian dollar or even a shift in another juridiction to attract the huge amounts of foreign capital elsewhere (i.e. SYNOPEC's decision to abandon Canada for greener/cheaper pastures). Given that capital always flows to the highest rate of return the fringe players like STP and other thermal prospecting companies will simply be abandoned. When the tide turns these little guys will be left out of the limelight, at least for awhile. While I am very much a supporter of STP and a long shareholder I do not dream at night worrying about how much oil China is going to use as production from these assets is years if not decades away. A lot of things can happen in 10 years. Invest wisely....understand your company's ability to produce and act accordingly.