STP

Quarterly Results Dec 31, 2010
Lots of very good stuff in this report indeed. So much in the pipe for this play and the way management progresses with the company is quite impressive.

Shorter term these items sure are of interest:

"The Phase H well pairs encountered high quality reservoir with the total contacted net pay per well exceeding the wells that were drilled to the north in Phase G. The three wells in Phase G achieved over 1,400 bbl/day each of peak oil production and have produced over 500 thousand barrels ("Mbbl") apiece since being placed on production in June 2009. Eighteen months after startup all three Phase G wells are stil l producing at rates greater than 750 bbl/day, with expected ultimate recovery of over 1.2 millon barrels ("MMbbl") per well pair. The two Phase H well pairs are expected to add similar amounts of heavy crude to STP-Senlac by April 2011"

and then also:

"Southern Pacific has also finalized it preliminary testing program for its newly acquired STP-Red Earth project. Plans are to start up the 1,000 bbl/day pilot project in April 2011 and commence cyclic steam injection on the existing two horizontal wells and one existing vertical well. Different wellbore configurations and injection schemes will be tested on the pilot project, with the intent to obtain as much technical knowledge of the reservoir and recovery methods as possible over the planned five month testing program. At the completion of the pilot testing program, results will be interpreted and a go forward development plan will be prepared."

As we all know longer term objective with Red Earth as stated from earlier communication from the comapany is to get Red Earth in to a 10.000 bpd production site. That sure then would be a nice add on as this project seems to be entierly under the radar as far as analysts are concerned. No one even mention this kind of production estimate as an option as they seem 100% fucused now on McKay phase one.

Then there are the results of this winters core hole drilling program that will be relased sometimes during this coming spring and then the application for McKay phase 2 submitted in September.

Then first production at McKay phase 1 Q1 next year.

Potential upsides are Read Earth and size of McKay Phase2 opportunity.

Given an oil price now at or about 100 per barrel future earnings for STP are bound to improve even without any production incrementals going forward. Given both short term and indeed longer term, production will increase (already by April we could have as much as a close to 100% production increase), well then the outlook looks even brighter.

http://shpacific.com/en/news/stp-2011-02-08.pdf