CALGARY - Southern Pacific Resource Corp. shares popped Monday as a favourable early resource estimate by an independent engineering firm increased the possibility that the junior oilsands developer (TSXV:STP) will become a takeover target.

McDaniel and Associates of Calgary has determined that Southern Pacific Resource Corp.'s (TSXV:STP) oilsands leases contain 4.5 times more petroleum than an estimate issued by the Vancouver-based junior's management in June.

In Monday trading on the Toronto Stock Exchange, the company's shares soared nearly 31 per cent, or 14 cents, to 59 cents.

McDaniel found the leases contain an estimated 3.6 billion barrels of "discovered petroleum initially in place," or PIIP, Southern Pacific announced Monday. That compares with management's June 26 estimate of 793 million barrels.

This type of resource estimate includes the quantities of bitumen, the tarry substance from which crude oil is derived, that have been discovered with recent exploration and historical drilling.

However, Southern Pacific cautions the PIIP estimate doesn't meet the stringent criteria for reserves than can be commercially recoverable using accepted technology, such as steam-assisted gravity drainage (SAGD).

Southern Pacific said its management had used a conservative estimate because its lands had not previously been evaluated by independent engineers.

The McDaniel report "should be read in the context of a company that's still in the mode of defining its resource base," said Canaccord Adams analyst Richard Wyman.

He said there are still many tests that need to be done to find out which of Southern Pacific's properties are commercially viable.

"These oilsands projects need a certain threshold to flick the light switch on," Wyman said, adding that there the company's McKay property appears to have the most promise with 1.1 billion barrels initially in place.

"The other ones, I think, are still a little early in their lives to know whether there's sufficient resources to have critical mass to go forward."

Southern Pacific's Hangingstone property has an estimated 742.5 million barrels initially in place, followed by Leismer with 729.8 million, Kirby with 547 million and Long Lake with 466.5 million.

The company doesn't have enough money to develop the lands since it has already spent about $90 million on the properties, but only has a market capitalization of $55 million, Wyman said.

"That's usually a point when other players are savvy in the business would like to take over," he said.

"There's quite a number of these early-stage oilsands companies that are undercapitalized and have significant resource opportunities. In this current capital market, they haven't performed particularly well."

Southern Pacific will be able to do a bit more drilling this winter, but will need quite a bit more financing to fully define the resource on all of its land, Wyman said.

"It has some money, but it certainly doesn't have enough to get to a fully operational production setting."

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