Southern Pacific Resource to skip C$5.18 million 6% debentures payment

By Caroline Salls

Pittsburgh, Dec. 30 – Southern Pacific Resource Corp. elected not to make the C$5.18 million cash interest payment due Dec. 31 on its 6% convertible unsecured subordinated debentures due June 30, 2016, according to a company news release.

A total of C$172.5 million of the debentures were issued in January 2011.

The company said it has a 30-day cure period to make the interest payment before an event of default will occur. During this period, Southern Pacific said it plans to continue to work with its stakeholders and advisers to consider the next step in its strategic review and capital restructuring process.

Southern Pacific said its board of directors has been engaged in a strategic review process with financial adviser RBC Capital Markets geared toward implementing a strategy to address the company’s liquidity and financing requirements and improve its capital structure.

Strategic and financial alternatives under consideration are focused on relieving the financial burden of the current debt structure and obtaining additional financing necessary to fund ongoing operations and to drill additional wells at STP-McKay and Senlac, the release said.

The alternatives under consideration and review include the sale of all or a portion of Southern Pacific’s assets, a recapitalization, debt and capital restructuring through statutory or other procedures or a combination of these alternatives.

According to the release, the recent drop in oil prices and limited growth in production levels were primary considerations in not making the Dec. 31 interest payment.

The company said production rates at both STP-McKay and STP-Senlac were near to expected forecasts for November, but continued production improvements have not yet materialized at STP-McKay in December from the workovers completed on some well pairs in October.

Southern Pacific said significant uncertainty exists as to its ability to access additional financing and operate as a going concern under its current debt structure.

Southern Pacific is a Calgary, Alta., energy exploration, development and production company.

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