Southern Pacific Announces First Steam at STP-McKay

CALGARY, ALBERTA--(Marketwire - July 3, 2012) - Southern Pacific ("STP" or the "Company") (TSX:STP) is pleased to announce that steam began circulating through the steam assisted gravity drainage ("SAGD") wellbores at the STP-McKay Thermal Project on July 1. First steam is not only an important milestone in the McKay project development, it is an historic event for Southern Pacific as it represents the completion of the construction, commissioning and start-up of the Company's first major project undertaking. Steam will now be circulated through the SAGD wellbores for a period of three to four months, after which bitumen production is scheduled to begin.

Southern Pacific discovered the STP-McKay Thermal Project through exploration during the winter of 2007/08. In May 2009, the Company submitted an application for a 12,000 barrel per day (bbl/d) facility to Alberta's regulatory bodies, which was subsequently approved in October 2010. Southern Pacific then began construction of the project in December 2010. After 18 months of construction, Phase 1 of the project has now commenced operation. Southern Pacific has also filed an application for expansions at STP-McKay totalling an additional 24,000 bbl/d, split between an expansion in Phase 1 and a new facility at Phase 2. The application is well advanced and approval is expected in late 2013.

Although final invoices are still being received, Southern Pacific now projects the final capital cost for Phase 1 to be $468 million, four percent over the original budget of $450 million. This includes an additional $15 million of scope changes designed to improve reliability and decrease operating costs. Based on the incurred capital to the end of the first calendar quarter of 2012, Southern Pacific had been forecasting to finish the project slightly under budget. However, increased industry activity in the second quarter affected the module fabrication costs and delivery schedules, which resulted in increased construction costs in order to meet the project schedule. Now that first steam has commenced, cleanup of the site and demobilization of crews and equipment will be occurring over the next several weeks.

Southern Pacific is very pleased with the execution of the STP-McKay project. The Company wishes to extend its appreciation for the tremendous efforts of the staff and contractors who have logged over 1.2 million hours on the project site, and a similar number of hours in various fabrication shops and offices around North America. The site itself is proud to report a safety record of only one minor loss time accident(s) during the entire drilling and construction period, well below the industry average.

Southern Pacific is also pleased to announce the promotion of Mike O'Krancy to Vice President, Projects. Mike has been with Southern Pacific for almost two years in the capacity of Manager, Projects and was in charge of the successful construction of the STP-McKay Thermal Project.

An updated corporate presentation is available on Southern Pacific's website (www.shpacific.com).

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."