Canadian oil sands junior Southern Pacific Resource has called off a strategic review launched last year without settling on an alternative to improve the company's business prospects.
The review, overseen by RBC Capital Markets, came about after the company realised that the original 12 well pairs drilled at the STP-McKay steam-assisted gravity drainage project "were unlikely to fill the process facility to its design capacity" of 12,000 barrels per day.
STP-McKay was built for $470 million and started producing in November 2012.
Production ramp-up has stalled, however, due to to unforeseen underground formation issues. Output in July this year averaged averaged 2064 bpd.
The project will require additional wells and more workovers on the existing pairs, TSX-listed Southern Pacific said. It was looking for a partner or a buyer to help finance the needed work.
"However, it was determined by the company’s board of directors that none of the proposals received were acceptable and it was further concluded that the current best alternative for all stakeholders is to continue with the development of the company’s existing assets, initially focused on increasing production rates at STP-McKay," the statement said.
The review went on longer than expected "in order to fully explore the proposals", the company said in a statement.
In March, the Southern Pacific completed the addition of a new first lien debt facility, replacing the then existing facility, which the company said improved its liquidity.
At the end of June, the company had estimated working capital of $34 million.
Following the conclusion of the strategic review, Southern Pacific laid off employees and also announced the resignation of vice-president of projects Mike O’Krancy. Chief operating office Ron Clarke has also retired.
"The immediate development plan will be to continue with workovers aimed at improving productivity from the SAGD well pairs at STP-McKay," the company said.
Southern Pacific shares were trading at 7.5 Canadian cents on Friday. That is down more than 30% from its Wednesday close of 12 cents.