CALGARY, ALBERTA--(Marketwire - Jan. 4, 2012) - Southern Pacific Resource Corp. ("Southern Pacific" or the "Company") (TSX:STP) is pleased to announce that it has increased its proved plus probable (2P) reserves by 30% to 234 million barrels of bitumen and the 2P net present value (discounted at 10%) of these reserves by $0.6 billion to $1.7 billion. The increases are a result of the filing of the STP-McKay Phase 2 expansion application on November 10, 2011. The filing of this application permitted GLJ Petroleum Consultants Ltd., the Company's independent reserves evaluator, to prepare Proven plus Probable production forecasts using the combined Phase 1 and Phase 2 design capacity of 36,000 bbl/d. Phase 1 of Southern Pacific's STP-McKay Thermal Project, a 12,000 bbl/d steam assisted gravity drainage ("SAGD") project located 45 km northwest of Fort McMurray, was approved in October 2010 and is in the final stages of construction.

Prior to filing the Phase 2 application, all reserves were required to be forecast using only the approved Phase 1 capacity of 12,000 bbl/d. The expanded capacity from Phase 2 allowed not only an acceleration of the previously booked reserves, but also made room for an additional 53 MMbbl of previously allocated best estimate contingent resources to be reassigned to the Probable category.

"This report confirms the significant value in our assets at McKay," said Byron Lutes, President and CEO. "Our goal is to unlock the potential in order to turn this reserve value into cash flow as quickly as possible. We are excited to be one of the only SAGD projects expected to commence production in 2012."

In addition to McKay, Southern Pacific had its STP-Senlac project reserves mechanically updated, using the same price forecast and effective date of November 30, 2011. The following table summarizes the entire Company's latest reserves and contingent resource estimates.

(Reserves effective November 30, 2011. Contingent resources at McKay updated effective November 30, 2011. Contingent resources on other lands reflect GLJ's June 30, 2011 report, with the exception of Red Earth, which was completed by Sproule & Associates effective December 31, 2009. Please refer to Southern Pacific's Annual Information Form for further details on contingent resources.)

STP-McKay Phase 1 Operational Update

Work continues on schedule and on budget for the construction of Phase 1 of the STP-McKay Thermal Project. Costs incurred to December 31, 2011 total approximately $366 million of the total forecasted budget of $440 million. Several major milestones have been completed on the project including:

• Major cogeneration components delivered and installed
• Major boiler components delivered and installed
• 95% of piling and foundation work completed
• Drilling and completion of the initial 12 SAGD well pairs completed
• 80% of the water treatment and boiler facilities delivered and installed
• 80% of piperack modules delivered and installed
• All nine 10,000 bbl tanks erected
• Completion of the 84 person operations camp and field office

Over the past six months, Southern Pacific has assembled the operations team that will run the project. The total staff complement is expected to be 46 people. The Company is on track with its hiring program, having hired 67% of the operations staff to date. Most of the operations team, including all of the management, have extensive experience in SAGD operations, including involvement in four separate SAGD facility start-ups. At the beginning of January, all of the operations staff relocated from their temporary office in Calgary to the new operations facilities on site. From there, they will continue to develop all necessary start up and operating procedures to ensure a smooth transition from construction to operation.

The Company's target for first steam remains within the second quarter of calendar 2012. The timing will be tightened up as the remaining modules arrive on site. First oil production is expected to occur three to four months from first steam.

Senlac Operational Update

Phase J, consisting of three SAGD well pairs, has been drilled, completed and tied-in at the STP-Senlac Thermal Project. Circulation steam on the first well pair commenced in mid December, and first oil arrived in late December. It is expected that only two well pairs will be required to fill the plant back to its design capacity of 5,000 bbl/d. The third will be brought on at a later date, when required. The Company is expecting a strong first quarter of calendar 2012 based on a production ramp up from Phase J and a favourable pricing environment.

Red Earth Update

Southern Pacific continues to explore the potential of its STP-Red Earth Thermal Project in the Peace River oil sands. Testing on the 1,000 bbl/d pilot project occurred over the last half of 2011 on three existing wellbores drilled prior to Southern Pacific taking ownership. Southern Pacific used these existing wellbores to test three different configurations of Cyclic Steam Stimulation (CSS). The purpose of the tests was to gain relatively low-cost knowledge on the reservoir performance under different CSS scenarios. One cycle of steam was injected into all three wellbores and each of the wells was then placed on production. The results were mixed. After running integrity and inspection tests on the wells, Southern Pacific determined that all three wells suffered from poor cement bonds on the intermediate casing strings. It was further determined that the wells were not drilled using industry standard thermal drilling practices. This meant isolation and placement of steam, followed by recovery of production from only the zone of interest (the Bluesky), will be difficult, if not impossible from these wells.

This was the first test on the pilot project since Southern Pacific acquired the asset in late 2010 for $14 million. The above ground facilities ran well. The well that had the best cement integrity generated a cumulative steam oil ratio of 4.4 on its first steam cycle. This is encouraging for a CSS project, especially given the identified cement bond issues. In total, Southern Pacific produced approximately 3,800 bbl of oil from the three wellbores over the 4.5 month period (not all wells were producing over this entire period) which indicates that the bitumen within this project mobilizes readily with steam. Based on the information gathered to date, the Company continues to believe the reservoir has the potential to deliver commercial production rates. Southern Pacific's technical team is reviewing the results and will be making recommendations to further test the Red Earth project in 2012. This will most likely involve plans to drill new CSS wells utilizing improved thermal drilling practices and continue to use the existing facilities to generate steam and process oil. Independent estimates of 2.1 billion barrels of discovered bitumen resources on the Company's Red Earth acreage make this a project well worth pursuing.

About Southern Pacific

Southern Pacific Resource Corp. is engaged in the exploration, development and production of in-situ thermal heavy oil and bitumen production in the Athabasca oil sands of Alberta and in Senlac, Saskatchewan. Southern Pacific trades on the TSX under the symbol "STP."