There had been vague rumours and some artwork circulating about a space game from Valve called SOB. ValveTime now reports on a fan Q&A session recorded on Gabe Newell's birthday, where Newell commented SOB publically for the first time.
"We kind of had an internal project that was called Stars of Blood, which was a space pirate game and it never saw the light of day."
Now, unfortunately there's still no news to report on Half-Life 3... but at least we now that they're not working on SOB.