Southern Pacific Resource Corp STPJF

RE: RE: RE: RE: sp

[kavephish]

You are partially correct.  The "double discount" of the heavy oil is one reason the sp has decreased, but for all bitumen producers.  "Brent" crude is the world benchmark for light sweet oil.  WTI is the North American benchmark for NA light sweet oil.  It trades at a discount to Brent crude because it is also landlocked with a bottleneck at Cushing Oklahoma.  If more WTI could make it to the coast for export, the spread between Brent and WTI would narrow significantly.  Heavy oil from the tarsands is price quoted as "western Canadian Select" and is priced by the square meter.  As of March 20, the sq meter price of WCS was $484.  Now, $484 divided by the conversion of 6.289 barrels petroleum per sq m = just under $77 per bbl equivalent WCS.  Due to the massive increase in oilsands production, and the lack of equivalent increased capacity to ship it means that current supply demand economics dictates the WCS will trade at a discount to WTI as it too is landlocked.  WCS also requires more refining than WTI for certain products, adding to the discount. (hence the "double discount").  If any of the proposed pielines gets built, the price of WCS will skyrocket up to that of WTI, or maybe more if we ship it east to China and compete with Brent crude prices.  Also adding to the recent dip in SP is general market sentiment for energy producers.  Almost all the oil producers in western Canada (light and heavy) have taken a beating lately.  Big players and juniors alike have seen some profit taking recently.  There is no tangible reason why STP's SP has dropped 30 cents in the last little while.  Output has been the same, and netbacks haven't really changed much so it's just the market dicking around with the SP.  Nothing to worry about here as we have a ton of good news milestones coming up.  Steady as she goes lads!