Southern Pacific Resource Corp. announced an operational update highlighted by continued positive results from its inflow control devices (ICD) recently installed into the 2P1 and 1P5 well pairs at its STP-McKay Thermal Project. Total Corporate Production: Total corporate production, which includes bitumen production from STP-McKay Phase 1 and heavy oil production from STP-Senlac, averaged 4,271 bbl/d ("barrels of oil per day") for the month of February.

The production was split between STP-McKay (2,187 bbl/d) and STP-Senlac (2,084 bbl/d), representing a 12% increase from the prior month. STP-McKay Thermal Project: In January, a series of ICDs were installed into the 2P1 well pair at STP-McKay. 2P1 was subsequently placed back into steam assisted gravity drainage (SAGD) operation on January 21, 2014.

The ICDs are designed to improve horizontal wellbore conformance by restricting vapour flow in 'hot spots' and encouraging liquid flow from other sections. Early results suggest this process has the potential to generate meaningful improvements in both production and the steam-to-oil ratio (SOR). In February, the 2P1 well pair averaged 695 bbl/d, an increase of 87% compared to 371 bbl/d in December, prior to the ICD installation.

The SOR also improved to 2.8 in February from an average SOR of 4.1 over the previous six months. The well pair is currently testing in the field at bitumen rates between 700 bbl/d to 900 bbl/d with corresponding SORs of 2.8 to 2.1. These results make 2P1 the best producing well to date at STP-McKay and demonstrate a successful proof of concept of ICDs as a tool to accelerate SAGD conformance. The Company recently installed a second ICD configuration on 1P5, with the well pair returning to production on February 14, 2014.

Initial response to the ICD installation has been strong with the 1P5 well pair already producing at over twice the fluid production rates in the months prior to the ICD installation. Downhole temperatures indicate that the ICDs are performing as expected, but the well pair requires more time to warm up now that the hotter sections are being restricted by the ICDs. This well pair was less conformed prior to ICD installation than 2P1, thus the Company expects the well pair will take longer to develop its peak rates than the 2P1 well pair.

Based on success of the ICDs, the Company has begun planning to implement these configurations into other well pairs at STP-McKay. The entire ICD installation is estimated to cost approximately $1 million per well pair and will be implemented over the next several months.