Southern Pacific Resource rules out sale, to stick with oil sands project

Thu Aug 21, 2014 1:27pm EDT
 
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CALGARY, Alberta Aug 21 (Reuters) - Southern Pacific Resource Corp said on Thursday it had ruled out an outright sale following a strategic review of its business and would carry on trying to boost production at its struggling thermal oil sands project in Alberta.

The Canadian oil producer, whose market capitalization is C$48 million (US$44 million), also plans to cut staff numbers. No one from Southern Pacific was immediately available for comment on the size of the cuts from the 117-strong workforce.

Southern Pacific announced a strategic review of its business nine months ago after concluding that its STP-McKay Thermal Project was unlikely to reach expected capacity of 12,000 barrels per day.

Southern Pacific, which also produces heavy oil in Saskatchewan, said at the time it would examine all options, including an outright sale.

On Thursday, the company said that though it had received proposals, the board of directors concluded that "none of the proposals received were acceptable."

Output at STP-McKay averaged 2,064 bpd in July. Southern Pacific is now adding well pairs to up steam capacity at the project. Thermal projects use steam to liquefy bitumen so it can be pumped to the surface.

"The current best alternative for all stakeholders is to continue with the development of the company's existing assets, initially focused on increasing production rates at STP-McKay," Southern Pacific said.

"With the strategic process completed, Southern Pacific has reduced its number of employees to reflect a narrower focus."

Shares in Southern Pacific fell 4.5 cents on the Toronto Stock Exchange to C$0.075. Shares have fallen 81 percent in the last year. (Reporting by Nia Williams; Editing by Leslie Adler)