STP 2010 outlook

In December 2008 STP had a SP of C$ 0.06. Today during the last trading days of the year 2009 we now have a STP SP hovering round and about C$1. Now that represents a procentual gain of and in excess of 1500% within that very same time frame.

Quite significant indeed and now in retroperspect what made this all possible in fact spells Senlac. With the Senlac aquisition STP management transformed the company overnight from the earlier pure exploration play it was to in fact a real production, cash-flow generating company. Thats significant and as a shareholder we sure need to thank our lucky star for the excellent management represented by Mr Lutes and his team making this cleaver move in what only can be described now as in fact stroke of foresight, proffessionalism and indeed genious.

All along however we still have the huge potential upside in STP represented by the fact that with McKay in production circa end of 2011 only some 10.5 of STP total of 269 sections of land has been developed.

From a pure TA perspectiv it's worth while noting that once we breake the C$1.12 SP resistance there is not much resistance left untill the C$2 level. I'm not saying we'll get there immediately but read the below and realise that the fundamentals sure will support this development and even more once information of how the development of STPs other potential production sites developes starting with this winters core holes drilling activities.

Expect to read updated and revised analysis in conjunction to this within some months. That is after news related to STPs progress and future land development starts reaching the market.

quote from Canacord Adams latest STP analysus:

"the evaluation of Senlac and McKay on a risked and unrisked basis for a range of discount rates. To convert from unrisked to risked we have applied a number of factors that acknowledge at least some of the uncertainties associated with our estimates. These uncertainties relate to execution timing, the accuracy of the assumptions we have used in our model and unknowns about the terms of access and quantity of capital
available to Southern Pacific as it executes its business plan.

This analysis results in an unrisked net present value of $560 million, or $2.47 per share."

"Southern Pacific is an undervalued junior oil sand developer, in our view. We are initiating research coverage with a BUY recommendation and a 12-month target price of $1.50 which is based on 1.1 times our estimate of corporate value using a discount factor of 15% to the forecast after-tax cash flows from the Senlac and McKay River properties."

Then one needs to recall the fact that not included in the above is

"In addition to this company is now planning for this winter core hole exploration at two new areas and where both of them each may represent an addition 12.000 bpd capacity opportunity. "

"Already contingent resource and potential project areas has been identified at Long Lake as well as at Hangingstone as well as there also might be potential in the south west regions of McKay that are not includedn in the next 12.000 bpd production project.

"With McKay only som 10.5 of STP total 269 sections potential developed.".