STP

The below is what I wrote in conjunction to Canacord Adams most recent STP analysis as per November 2009:

"Another way of putting this new C$1.50 SP target from Canacord Adams in perspective would be to say: 6.000 bpd for 15 years Senlac + 12.000 bpd from McKay 30 years production - indicates a SP target of C$1.50

Now with McKay only som 10.5 of STP total 269 sections will be developed. Im not saying STP future SP potential with this is 269/10.5 or some 25 times the SP target of C$1.50.

First of all we need also figure in the 6K bpd Senlac in this ratio, secondly I guess we´re all convinced not 100% of STP s land is explorable or at least explorable with a profit.

So how big the real potential upside might be for this plays remains to be seen but already after this winther core drillings progtram we might have a significantely better idea.

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.

So thats the potential relative the company specifics but then there is also the general PO issue and the potential for higher oil prices in the future that for sure will be important as well. Let´s therefore for now just settle with the fact that there is a significant futute potential upside also from the C$1.50 Canacord target. "

Then after Friday 26th of mars 2010 news it now seems STP has focused all their efforts of developing the McKay area and at this point not really putting that much emphesis on the other regions right now like eg Hangingston, Longlake, McKenzie etc.

As part of this they have bought the rights to 100% of the land as well as done extensive drilling at McKay.

This does makes a whole lot of sence for STP having as a priority developing this piece of land as AOS land that is part of the very same bitument trend as STPs land at McKay and that now PetroChina bought some months ago then becomes even more valuable.

Now we have already at McKay only identified a 35,000 bpd opportunity and still according to the recent conf call with management there are even more opportinities to develope this land further e.g. south of McKay South as welll as both at McKay East and McKay north.

So there might be a big upside developing this parcel given how intertweined it in fact is with PetroChinas land.

Then it also makes a whole lot of sence developing the McKay area also given the fact that the company there has really a clear view on how to develope infratructure and the economies of scale reusing the same infrastructure for all these now three idintified projects in the area.

Hopfully there will be a decision facilitating getting an approval for a larger than 12.000 bpd production in the future and that would then allow STP to possibly integrate these diffetent projects in a good way.

Now we need to realise that at the time Canacord made their assesment as per November 09 and their target SP including only Senlac and one 12.000 bpd project at McKay then STP only owned some 80% of the McKay Land.

So only here and given STP today owns 100% there is an upside.

Then we now need to Canacords analysis not only add 20% to the first 12.000 project we need to add further two new 100% 12.000 bpd projects.

Let´s not forgett the fact that Canacord in their November 09 analysis incuding Senlac 6.000 bpd+ one 12.000 bpd project at McKay based their target of a SP of C$1.50 on an average oil price of $70.

Today we have an upside also here as we´re today talking of not $70 dollar per barrel oil but in fact $80 and as most indications now points to a future average oil price of well over $100 in conjunction to the challenges related to Peak Oil and the by IEA estimated supply chrunch by 2012 there is even more upside here in the future.

Interestingly enough and in the most recent Canaccord Adams sensetive analysis page 12 the following is stated:

"Southern Pacific’s contingent valuation is very sensitive to changes in the assumptions used for commodity prices. The long-term crude oil price assumption used to derive our contingent asset valuation is US$70/b for West Texas Intermediate crude oil."

and then the conclution based on this assumtion is:

"Our target price of $1.50 is based on 1.1 times our estimate of net assetand contingent asset value for Senlac and McKay."

However when in the very same sensetive analysis on page 12 an oil price of $90 is applied then they conclude a STP SP is equivilent of C$ 2.15.

Conclution : only based on these assumtion and based on what has been communicated frm STP this recent weeks and in conjuction to the latest PR dates 25th of mars 2010 we now can calculate a new target SP for STP of close to C$3.5.

If we where to exclude the Senlac 6.000 bpd production we can with McKay alone justify a SP of C$3, at an average oil price astimate of $70 per barrel.

The same analysis however but based on an average future oil price coming years of $100 and above as per agreement of most senior oil analysts of course a significantely higher valuation.

Then we also need to add to this these facts:

- possible new opportunities South of McKay South and McKay East as well as at Mckay Nort as indicated by Mr Lutes on Friday the 26th conf call.

We also need to realise STP with this recent core hole drilling has developed only some 25% of it land and that they have earlier identified possible future 12.000 opportunies (needs to be verified by further core holes drilling) at Hangingstone, Longlake and now at the recent conf call they also emphasised that MacKenzy indeed looks very, very promesing.

Seems to me now the big boys e.g. like Canacord are accumulating extensively (yesterdays volumes indicates something like this is going on prior to getting their new analysis out and starting to recommend this play to their key clients.