REG - Southern Energy Corp - FOURTH QUARTER AND YEAR END 2024 RESULTS
Tue 07:00
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RNS Number : 5155G Southern Energy Corp. 29 April 2025
SOUTHERN ENERGY CORP. ANNOUNCES FOURTH QUARTER AND YEAR END 2024 FINANCIAL AND
OPERATING RESULTS
Calgary, Alberta - April 29, 2025 - Southern Energy Corp. ("Southern" or the
"Company") (TSXV:SOU) (AIM:SOUC), an established producer with natural gas and
light oil assets in Mississippi, announces its fourth quarter and year end
December 31, 2024 financial and operating results. Selected financial and
operational information is outlined below and should be read in conjunction
with the Company's audited consolidated financial statements and related
management's discussion and analysis (the "MD&A") for the three and twelve
months ended December 31, 2024, as well as the Company's annual information
form for the year ended December 31, 2024, (the "AIF"), all of which are
available on the Company's website at www.southernenergycorp.com
(https://url.avanan.click/v2/___http:/www.southernenergycorp.com___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDphOm86ZTkzNjY5ZDk3N2YyOWViMmVlYmIzNGZiZGZmYWM0OGU6NjozZGViOjAyYzc0NzgyYzgwNjkwMzU4YmJiYTUzNzRkNWIwMjc3M2ZjODUzYmQwZGQ5NmQ1MTYzM2RkNWMwODY1MGU4MjQ6cDpUOk4)
and have been filed under the Company's profile on SEDAR+ at www.sedarplus.ca
(https://url.avanan.click/v2/___http:/www.sedarplus.ca___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDphOm86ZTkzNjY5ZDk3N2YyOWViMmVlYmIzNGZiZGZmYWM0OGU6NjpiZmFkOmNjYTY0NTM5OWQ3YmUwNzUwZWQ5YzJiZDA4ODdkODNmNzAxYTE5ZGEwMTVkNzRkMTE1M2JiMjhhZDQ1YWJkMTk6cDpUOk4)
.
All figures referred to in this news release are denominated in U.S. dollars,
unless otherwise noted.
FOUTH QUARTER AND YEAR END 2024 HIGHLIGHTS
· Average production of 13,556 1 Mcfe/d (2,259 boe/d) (96% natural
gas) during Q4 2024 and 15,264 2 Mcfe/d (2,544 boe/d) (96% natural gas) for
the year ended December 31, 2024, a decrease of 19% and 6% from the same
periods in 2023, respectively
· Petroleum and natural gas sales of $3.9 million during Q4 2024 and
$16.1 million for the year ended December 31, 2024, a decrease of 23% and 17%
from the same periods in 2023, respectively, largely due to a significant
depreciation in commodity prices and initial decline from the new wells
drilled
· Average realized natural gas and oil prices for Q4 2024 of $2.78/Mcf
and $68.59/bbl, compared to $2.95/Mcf and $76.97/bbl in Q4 2023. Southern
achieved an average premium of $0.22/Mcf (approximately 10% above the NYMEX HH
benchmark) throughout 2024
· Generated $0.4 million of Adjusted Funds Flow from Operations 3 in
Q4 2024 ($0.00 per share basic and diluted), excluding $1.1 million of
one-time transaction costs, and generated $4.1 million for the year ended
December 31, 2024 ($0.02 per share basic and diluted), excluding $1.3 million
of one-time transaction costs
· Net loss of $3.7 million ($0.02 per share basic and diluted) and
$11.5 million ($0.07 per share basic and diluted) for the three and twelve
months ended December 31, 2024, respectively
· Reduced Net Debt(3) for the year ended December 31, 2024 by $2.7
million from December 31, 2023
· On October 30, 2024, entered into the eighth amendment to the
Company's senior secured term loan (the "Credit Facility"), which included an
extension to the pause of monthly repayment of principal to December 31, 2024
and a condition that Southern would repay a portion of the outstanding
principal at January 31, 2025
· Monetized excess inventory equipment in 2024 for net proceeds of $3.4
million
SUBSEQUENT EVENTS
· Effective January 31, 2025, Southern entered into the ninth amendment
to the Credit Facility which included an extension to the pause of monthly
repayment of principal to January 31, 2025 and reduced the repayment required
from the eighth amendment to $1.45 million at January 31, 2025, which the
Company paid (see "Liquidity and Capital Resources - Credit Facility" in the
December 31, 2024 MD&A for full details of the amendment)
· Effective February 28, 2025, Southern entered into the tenth
amendment to the Credit Facility, which amended the monthly repayment of the
principal amount outstanding calculation beginning on February 28, 2025, to
the aggregate principal amount then outstanding on all loans multiplied by 60%
multiplied by the fraction 1 / A, where A equals the sum of the number of
whole or partial calendar months remaining to the maturity date plus 24 months
(see "Liquidity and Capital Resources - Credit Facility" in the December 31,
2024 MD&A for full details of the amendment)
· Effective March 31, 2025, Southern entered into the eleventh
amendment to the Credit Facility. This amendment amended the asset coverage
ratio down to 1.5x from 1.75x in 2025 and reduced Tranche B capacity to $5.0
million (see "Liquidity and Capital Resources - Credit Facility" in the
December 31, 2024 MD&A for full details of the amendment)
· On April 8, 2025, Southern closed an equity financing raising
aggregate gross proceeds of $5.0 million through the issuance of a total of
102,482,673 new units (see "Shareholders' Equity - Share Capital" in the
December 31, 2024 MD&A for full details)
· On April 8, 2025, Southern converted the remaining convertible
debentures in the amount of $3.1 million into 62,759,286 new units and issued
1,627,170 new units for all accrued and unpaid interest (see "Liquidity and
Capital Resources - Debenture Financing" in the December 31, 2024 MD&A for
full details of the conversion)
Ian Atkinson, President and Chief Executive Officer of Southern, commented:
"Southern had a quiet year in the field in 2024 due to low natural gas
pricing, which ended the year as the second-lowest in the past 24 years. The
focus for Southern was balance sheet preservation, led by the monetization of
excess inventory equipment for $3.4 million, reducing our abandonment
liabilities by divesting non-core, non-producing wellbores during Q3 2024 and
working with our credit lender to amend the Credit Facility to support the
Company. We ended the year having reduced net debt and substantially decreased
the burden of short term liabilities on our balance sheet, which in light of
the operating environment was a positive achievement.
"Despite the market challenges, Southern has leveraged the strategic locations
of its assets and sales points, achieving a $0.22/Mcf premium (~10% basis
premium) over Henry Hub benchmark pricing in 2024. This premium has increased
in Q1 2025 to $0.50/Mcf (~14%). Additionally, our financial hedge of 5,000
MMBtu/d at $3.40/MMBtu, which was initiated in Q2 2024, provided stable cash
flows, enabling us to navigate ongoing volatility. Importantly, we have
remained steadfast in sensible capital allocation in the field and have been
disciplined to allow us future flexibility as commodity prices improve.
"As we enter 2025, market fundamentals continue to strengthen. Feed gas demand
from LNG export facilities at Plaquemines and Corpus Christi are growing
quickly with feed gas flows to Golden Pass LNG facility expected later this
year. Domestic consumption is rising-driven by gas-fired electricity
generation supporting data centers and transportation electrification as well
as renewed growth in pipeline exports to Mexico. These dynamics are expected
to tighten the U.S. natural gas balance in the coming quarters.
"Longer-term, the structural case for U.S. natural gas pricing remains intact
as the U.S. has become the world's largest exporter of LNG in the past few
years at the same time as production growth in the U.S has slowed with
upstream producers focusing on fiscal conservatism ahead of growth.
"We remain focused on leveraging our strategic position and disciplined
operations to deliver sustainable growth and enhance long-term shareholder
value by using the net proceeds from the recently closed equity financing to
re-ignite our growth plan. As we navigate the year with a strengthened
financial position and several exciting operational growth catalysts coming
up, we look forward to keeping the market updated and thank our shareholders
for the support in the year."
Financial Highlights
Three months ended December 31, Year ended
December 31,
(000s, except $ per share) 2024 2023 2024 2023
Petroleum and natural gas sales $ 3,917 $ 5,098 $ 16,080 $ 19,313
Net loss (3,715) (39,563) (11,520) (46,817)
Net loss per share
Basic (0.02) (0.26) (0.07) (0.33)
Fully diluted (0.02) (0.26) (0.07) (0.33)
Adjusted Funds Flow from Operations ((1)) (725) 777 2,759 3,227
Adjusted Funds Flow from Operations per Share ((1))
Basic (0.00) 0.01 0.02 0.02
Fully diluted (0.00) 0.01 0.02 0.02
Capital expenditures and acquisitions 68 3,212 884 45,130
Weighted average shares outstanding
Basic 167,250 154,140 166,871 142,747
Fully diluted 167,250 154,140 166,871 142,747
As at period end
Common shares outstanding 169,386 165,718 169,386 165,718
Total assets 53,801 67,305 53,801 67,305
Non-current liabilities 8,366 21,613 8,366 21,613
Net debt ((1)) $ (23,954) $ (26,667) $ (23,954) $ (26,667)
Note:
((1) ) See "Reader Advisories - Specified Financial
Measures".
Operations Update
With the closing of the successful equity financing on April 8, 2025, the
Company is preparing to execute the first of three completion operations on
our previously drilled but uncompleted horizontal wells in the Gwinville
Field. The Lower Selma Chalk completion is expected to cost approximately $2.5
million gross, with operations anticipated before the end of the second
quarter in 2025. Timing for the second and third horizontal completions (one
Lower Selma Chalk and one City Bank) will depend on the results of the first
completion operation, but the Company expects to have all three wells
completed before the end of the year.
Planning of the drilling operations in the Mechanicsburg Field continue and
drilling is expected to commence in the third quarter of 2025 subject to rig
availability.
2024 Year End Reserves Update
The Company is pleased to announce selected highlights of Southern's year end
independent oil and gas reserves evaluation as of December 31, 2024.
Estimates of the Company's reserves and related estimates of net present value
of future net revenues as at December 31, 2024, are based upon reports (the
"NSAI Report") prepared by Southern's independent qualified reserves
evaluator, Netherland, Sewell and Associates, Inc. ("NSAI"). All currency
amounts are in United States dollars (unless otherwise stated) and comparisons
refer to December 31, 2023.
Reserve Highlights:
The NSAI Report states:
• PDP reserves of 6.2 MMboe,
• 1P reserves of 12.7 MMboe,
• 2P reserves of 27.9 MMboe, and
• a PDP reserve life index of nine years and 39 years for 2P reserves
based on the 2025 PDP production forecast.
Before-tax net present value ("NPV") of reserves, discounted at 10% ("NPV10"),
is $33.0 million on a PDP basis, $58.2 million on a 1P basis and $110.1
million on a 2P basis evaluated using the average forecast pricing of four
independent reserve evaluators as at January 1, 2025.
In addition to the summary information disclosed in this press release, more
detailed information regarding Southern's oil and gas reserves can be found in
the AIF, which is available on the Company website and has been filed on
SEDAR+ (www.sedarplus.ca
(https://url.avanan.click/v2/___http:/www.sedarplus.ca___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDphOm86ODVhMmIyOGJkNjIxNTU0MmM0MmY5YjI2NzM0OGZlYmY6NjpmNGMxOmVhNDY2ZWNmNjZkNGVhNWZkZmUyYjc1NmIwZDNkZGM4MWExMjZiYjQ1NDQwMThhNTViOWQ1N2JjZjdjNzU2MGQ6cDpUOk4)
).
2024 Independent Qualified Reserve Evaluation
The following tables highlight the findings of the NSAI Report, which has been
prepared in accordance with definitions, standards and procedures contained in
National Instrument 51-101 - Standards of Disclosure for Oil and Gas
Activities("NI 51-101") and the most recent publication of the Canadian Oil
and Gas Evaluation Handbook ("COGEH"). All evaluations and summaries of future
net revenue are stated prior to the provision for interest, debt service
charges or general and administrative expenses and after deduction of
royalties, operating costs, estimated well abandonment and reclamation costs,
and estimated future capital expenditures. The NSAI Report was based on the
average forecast pricing of the following four independent external reserves
evaluators: GLJ Ltd, Sproule Associates Limited, McDaniel & Associates
Consultants Ltd and Deloitte. Additional reserves information as required
under NI 51-101 is included in Southern's AIF, which has been filed on SEDAR+.
The numbers in the tables below may not sum due to rounding.
Summary of Reserves Volumes as at December 31, 2024
The Company's reserve volumes and undiscounted future development capital
costs are summarized below as at December 31, 2024:
SUMMARY OF RESERVE VOLUMES ((1)) Light and Medium Oil (Mbbls) Condensate (Mbbls) NGL (Mbbsl) Conventional Natural Total Mboe FDC Costs ($M)
Gas (MMcf)
Proved Developed Producing 12 165 32 35,938 6,198 -
Proved Developed Non-Producing 44 58 1 8,774 1,565 8,169
Proved Undeveloped - 361 107 26,783 4,932 47,455
Total Proved 56 583 139 71,494 12,695 55,625
Probable 16 247 18 89,524 15,201 105,904
Total Proved Plus Probable 72 830 157 161,018 27,896 161,529
(1) Gross working interest reserves before royalty deductions.
The following table outlines the changes in Southern's reserves and reserve
life index as at December 31, 2024 compared to December 31, 2023:
CHANGE IN RESERVES AND RESERVE LIFE INDEX((1)) 2024 2023 % Change
Reserves (Mboe)
Proved Developed Producing 6,198 7,496 (17%)
Total Proved 12,695 14,078 (10%)
Total Proved Plus Probable 27,896 29,635 (6%)
PDP as % of 2P 22% 25% (12%)
1P as % of 2P 46% 48% (4%)
Reserve Life Index (years)
Proved Developed Producing 8.6 7.8 10%
Total Proved 17.5 14.7 19%
Total Proved Plus Probable 38.5 30.9 25%
(1) The Reserve Life Index as at December 31, 2024 is calculated
as gross working interest reserves divided by the projected annual PDP
production forecast for 2025. See "Reader advisories - Oil and Gas
Advisories"
Net Present Value of Future Net Revenue as at December 31, 2024
The following table summarizes the NPV of the Company's reserves (before-tax)
as at December 31, 2024. The reserves value on a $/boe basis, discounted at
10% per year, is also summarized for each category.
NET PRESENT VALUE BEFORE-TAX 0% (M$) 10% (M$) 20% (M$) Unit Value((1)) Before Income Tax, Discounted at 10%/year ($/boe)
Proved Developed Producing 56,364 32,981 24,175 6.80
Proved Developed Non-Producing 21,436 9,389 6,026 7.79
Proved Undeveloped 49,241 15,875 4,280 4.00
Total Proved 127,041 58,246 34,480 5.81
Probable 194,939 51,816 15,000 4.29
Total Proved Plus Probable 321,980 110,062 49,480 4.98
(1) Unit values are based on net reserves. Net reserves are the
Company's working interest reserves after deduction of royalties
Forecast Prices Used in Estimates
The following table outlines the forecasted future prices used by NSAI in
their evaluation of the Company's reserves at December 31, 2024, which are
based on a four-consultant average price forecast. The forecast cost and price
assumptions assume increases in wellhead selling prices and consider inflation
with respect to future operating and capital costs.
FUTURE COMMODITY PRICE FORECAST WTI Cushing NYMEX
Oklahoma Henry Hub
US$/bbl US$/MMBtu
2025 71.19 3.30
2026 73.20 3.76
2027 74.54 3.93
2028 76.28 4.01
2029 77.81 4.10
2030 79.37 4.17
2031 80.96 4.25
2032 82.57 4.34
2033 84.22 4.43
2034 85.91 4.52
Thereafter + 2.0%/year + 2.0%/year
Reserves Reconciliation
The following table sets out the reconciliation of Southern's gross reserves
based on forecast prices and costs by principal product type as at December
31, 2024 relative to December 31, 2023.
RESERVES((1)) RECONCILIATION PDP (Mboe) 1P (Mboe) Probable (Mboe) 2P (Mboe)
December 31, 2023 7,496 14,078 15,556 29,635
Discoveries - - - -
Extensions - - - -
Infill Drilling - - - -
Improved Recovery - - - -
Technical Revisions((2)) (266) (357) (336) (694)
Acquisitions - - - -
Dispositions - - - -
Economic Factors (101) (95) (19) (114)
Production (931) (931) - (931)
December 31, 2024 6,198 12,695 15,201 27,896
(1) Gross working interest reserves before royalty deductions
(2) Technical revisions also include reserves associated with
changes in operating costs and commodity price offsets
Convertible Debenture Conversion
Further to the April 8, 2025 press release, in accordance with the Company's
third supplemental indenture dated effective April 7, 2025, Southern completed
its previously announced conversion of its outstanding convertible unsecured
subordinated debentures (the "Debentures"), in an amount equal to US$3.1
million representing 102.5 per cent settlement of the principal amount of the
Debentures effective April 7, 2025 (inclusive of all accrued and unpaid
interest) into an aggregate 64,386,456 Units at a conversion price of $0.07
per Unit. Each Unit is comprised of one (1) Common Share and one (1) Common
Share purchase warrant (each, a "Warrant"), with each Warrant being
exercisable for one (1) Common Share at an exercise price of $0.09 per Common
Share exercisable for three years from the issuance date.
Outlook
As part of its risk management strategy, Southern continuously monitors NYMEX
prices and basis differentials to mitigate some of the volatility of natural
gas prices. The Company took advantage of the contango in the natural gas
future strip in early 2024 by entering into a fixed price swap contract of
5,000 MMBtu/d for the period of May 2024 - December 2026 at a price of
$3.40/MMBtu. This contract resulted in realized derivative gains of $1.3
million in 2024.
Southern thanks all of its stakeholders for their ongoing support and looks
forward to providing future updates on operational activities while continuing
to enhance shareholder value.
Corporate Presentation
A new corporate presentation dated April 2025 is now available on the Company
website at www.southernenergycorp.com
(https://url.avanan.click/v2/___http:/www.southernenergycorp.com___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDphOm86MzA2NjE2OWIxMDBjM2FjM2I3ZjZhZDA1OGM0NTUwODU6NjpkYzc5OmExY2U1YzQxYTI4YWQ0NjQ0MWZhZThlYTdkZDdlNzlkNDI1NDQ5MjllNjk0M2QyOGFmNWQzZWIxZTRkMTJkNTQ6cDpU)
.
Qualified Person's Statement
Gary McMurren, Chief Operating Officer, who has over 24 years of relevant
experience in the oil industry, has approved the technical information
contained in this announcement. Mr. McMurren is registered as a Professional
Engineer with the Association of Professional Engineers and Geoscientists of
Alberta and received a Bachelor of Science degree in Chemical Engineering
(with distinction) from the University of Alberta.
For further information about Southern, please visit our website at
www.southernenergycorp.com
(https://url.avanan.click/v2/___http:/www.southernenergycorp.com___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDphOm86MzA2NjE2OWIxMDBjM2FjM2I3ZjZhZDA1OGM0NTUwODU6NjpkYzc5OmExY2U1YzQxYTI4YWQ0NjQ0MWZhZThlYTdkZDdlNzlkNDI1NDQ5MjllNjk0M2QyOGFmNWQzZWIxZTRkMTJkNTQ6cDpU)
or contact:
Southern Energy Corp.
Ian Atkinson (President and CEO) +1 587 287 5401
Calvin Yau (CFO) +1 587 287 5402
Strand Hanson Limited - Nominated & Financial Adviser +44 (0) 20 7409 3494
James Bellman / Rob Patrick / Edward Foulkes
Tennyson Securities - Broker +44 (0) 20 7186 9033
Peter Krens / Jason Woollard
Camarco +44 (0) 20 3757 4980
Owen Roberts / Sam Morris / Tomisin Ibikunle
About Southern Energy Corp.
Southern Energy Corp. is a natural gas exploration and production company
characterized by a stable, low-decline production base, a significant low-risk
drilling inventory and strategic access to premium commodity pricing in North
America. Southern has a primary focus on acquiring and developing conventional
natural gas and light oil resources in the southeast Gulf States of
Mississippi, Louisiana, and East Texas. Our management team has a long and
successful history working together and have created significant shareholder
value through accretive acquisitions, optimization of existing oil and natural
gas fields and the utilization of re-development strategies utilizing
horizontal drilling and multi-staged fracture completion techniques.
READER ADVISORIES
MCFE Disclosure. Natural gas liquids volumes are recorded in barrels of oil
(bbl) and are converted to a thousand cubic feet equivalent (Mcfe) using a
ratio of six (6) thousand cubic feet to one (1) barrel of oil (bbl). Natural
gas volumes recorded in thousand cubic feet (Mcf) are converted to barrels of
oil equivalent (boe) using the ratio of six (6) thousand cubic feet to one (1)
barrel of oil (bbl). Mcfe and boe may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 mcf:1 bbl or a Mcfe conversion ratio of
1 bbl:6 Mcf is based in an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead. In addition, given that the value ratio based on the current price
of oil as compared with natural gas is significantly different from the energy
equivalent of six to one, utilizing a boe conversion ratio of 6 Mcf:1 bbl or a
Mcfe conversion ratio of 1 bbl:6 Mcf may be misleading as an indication of
value.
Unit Cost Calculation. For the purpose of calculating unit costs, natural gas
volumes have been converted to a boe using six thousand cubic feet equal to
one barrel unless otherwise stated. A boe conversion ratio of 6:1 is based
upon an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead. This
conversion conforms with NI 51-101. Boe may be misleading, particularly if
used in isolation.
Product Types. Throughout this press release, "crude oil" or "oil" refers to
light and medium crude oil product types as defined by NI 51-101. References
to "NGLs" throughout this press release comprise pentane, butane, propane, and
ethane, being all NGLs as defined by NI 51-101. References to "natural gas"
throughout this press release refers to conventional natural gas as defined by
NI 51-101.
Reserves and Future Net Revenue Disclosure. All reserves values, future net
revenue and ancillary information contained in this press release are derived
from the NSAI Report unless otherwise noted. All reserve references in this
press release are "Company gross reserves". Company gross reserves are the
Company's total working interest reserves before the deduction of any
royalties payable by the Company. Estimates of reserves and future net revenue
for individual properties may not reflect the same level of confidence as
estimates of reserves and future net revenue for all properties, due to the
effect of aggregation. There is no assurance that the forecast price and cost
assumptions applied by NSAI in evaluating Southern's reserves will be attained
and variances could be material. All reserves assigned in the NSAI Report are
located in the State of Mississippi and presented on a consolidated basis.
All evaluations and summaries of future net revenue are stated prior to the
provision for interest, debt service charges or general and administrative
expenses and after deduction of royalties, operating costs, estimated well
abandonment and reclamation costs and estimated future capital expenditures.
It should not be assumed that the estimates of future net revenues presented
in the tables below represent the fair market value of the reserves. The
recovery and reserve estimates of Southern's crude oil, natural gas liquids
and natural gas reserves provided herein are estimates only and there is no
guarantee that the estimated reserves will be recovered. Actual crude oil,
natural gas and natural gas liquids reserves may be greater than or less than
the estimates provided herein. There are numerous uncertainties inherent in
estimating quantities of crude oil, reserves and the future cash flows
attributed to such reserves. The reserve and associated cash flow information
set forth herein are estimates only.
Proved reserves are those reserves that can be estimated with a high degree of
certainty to be recoverable. It is likely that the actual remaining quantities
recovered will exceed the estimated proved reserves. Probable reserves are
those additional reserves that are less certain to be recovered than proved
reserves. It is equally likely that the actual remaining quantities recovered
will be greater or less than the sum of the estimated proved plus probable
reserves. Proved developed producing reserves are those reserves that are
expected to be recovered from completion intervals open at the time of the
estimate. These reserves may be currently producing or, if shut-in, they must
have previously been on production, and the date of resumption of production
must be known with reasonable certainty. Undeveloped reserves are those
reserves expected to be recovered from known accumulations where a significant
expenditure (e.g., when compared to the cost of drilling a well) is required
to render them capable of production. They must fully meet the requirements of
the reserves category (proved, probable, possible) to which they are assigned.
Certain terms used in this press release but not defined are defined in NI
51-101, CSA Staff Notice 51-324 - Revised Glossary to NI 51-101, Revised
Glossary to NI 51-101, Standards of Disclosure for Oil and Gas Activities
("CSA Staff Notice 51‐324") and/or the COGEH and, unless the context
otherwise requires, shall have the same meanings herein as in NI 51-101, CSA
Staff Notice 51-324 and the COGEH, as the case may be.
Oil and gas metrics. This press release contains metrics commonly used in the
oil and natural gas industry which have been prepared by management, such as
"reserves life index" and "development capital". These terms do not have a
standardized meaning and the Company's calculation of such metrics may not be
comparable to the calculation method used or presented by other companies for
the same or similar metrics, and therefore should not be used to make such
comparisons. Management uses these oil and gas metrics for its own performance
measurements and to provide shareholders with metrics to compare the Company's
operations over time. Readers are cautioned that the information provided by
these metrics, or that can be derived from the metrics presented in this press
release, should not be relied upon for investment or other purposes. "Reserve
life index" is calculated as total company interest reserves divided by
expected annual PDP production, for the year indicated. "Development capital"
means the aggregate exploration and development costs incurred in the
financial year on reserves that are categorized as development. Development
capital presented herein excludes land and capitalized administration costs
but includes the cost of acquisitions and capital associated with acquisitions
where reserve additions are attributed to the acquisitions.
Abbreviations. Please see below for a list of abbreviations used in this press
release.
1P total proved
2P proved plus probable
bbl barrels
bbl/d barrels per day
bcf/d billion cubic feet per day
boe barrels of oil
boe/d barrels of oil per day
Mcf thousand cubic feet
Mcf/d thousand cubic feet per day
MMcf million cubic feet
MMcf/d million cubic feet per day
Mcfe thousand cubic feet
equivalent
Mcfe/d thousand cubic feet equivalent per
day
MMboe million barrels of oil
MMBtu million British thermal units
MMBtu/d million British thermal units per day
NI 51-101 National Instrument 51-101 Standards of
Disclosure for Oil and Gas Activities
NYMEX New York Mercantile Exchange
PDP proved developed producing
Forward Looking Statements. Certain information included in this press release
constitutes forward-looking information under applicable securities
legislation. Forward-looking information typically contains statements with
words such as "anticipate", "believe", "expect", "plan", "intend", "estimate",
"propose", "project", "continue", "evaluate", "forecast", "may", "will",
"can", "target" "potential", "result", "could", "should" or similar words
suggesting future outcomes or statements regarding an outlook (including
negatives and variations thereof). Forward-looking information in this press
release may include, but is not limited to statements concerning the Company's
asset base including the development of the Company's assets, positioning, oil
and natural gas production levels, the Company's anticipated operational
results, Southern's growth strategy and the expectation that it will continue
to enhance shareholder value, forecasted natural gas pricing, Southern's
ability to re-initiate growth in deploying the net proceeds from the equity
financing on capital expenditures, drilling and completion plans and casing
remediation activities, expectations regarding commodity prices and service
costs, expectations regarding increased demand for gas (including demand
stemming from artificial intelligence data centers, vehicle electrification
and certain export facilities) performance characteristics of the Company's
oil and natural gas properties, the Company's expectation to continue actively
reducing and optimizing operating costs, general and administrative expenses
and maintenance capital to maximize netbacks, the Company's hedging strategy
and execution thereof, the ability of the Company to achieve drilling success
consistent with management's expectations, the Company's expectations
regarding completion of the three remaining DUCs and the drilling operations
in the Mechanicsburg Field (including the timing thereof and anticipated costs
and funding), the effect of market conditions on the Company's performance and
expectations regarding the use of proceeds from all sources including the
senior term loan. Statements relating to "reserves" and "recovery" are also
deemed to be forward-looking statements, as they involve the implied
assessment, based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated and that the reserves
can be profitably produced in the future.
The forward-looking statements contained in this press release are based on
certain key expectations and assumptions made by Southern, including, but not
limited to, the timing of and success of future drilling, development and
completion activities, the performance of existing wells, the performance of
new wells, the availability and performance of drilling rigs, facilities and
pipelines, the geological characteristics of Southern's properties, the
characteristics of the Company's assets, the successful integration of
acquired assets into the Company's operations, the Company's ability to comply
with ongoing obligations under the senior term loan and other sources of
financing, the successful application of drilling, completion and seismic
technology, the benefits of current commodity pricing hedging arrangements,
Southern's ability to enter into future derivative contracts on acceptable
terms, Southern's ability to secure financing on acceptable terms, prevailing
weather conditions, prevailing legislation, as well as regulatory and
licensing requirements, affecting the oil and gas industry, the Company's
ability to obtain all requisite permits and licences, prevailing commodity
prices, price volatility, price differentials and the actual prices received
for the Company's products, royalty regimes and exchange rates, the impact of
inflation on costs, the application of regulatory and licensing requirements,
the Company's ability to obtain all requisite permits and licences, the
availability of capital, labour and services, the creditworthiness of industry
partners, the Company's ability to source and complete asset acquisitions, and
the Company's ability to execute its plans and strategies.
Although Southern believes that the expectations and assumptions on which the
forward-looking statements are based are reasonable, undue reliance should not
be placed on the forward-looking statements because Southern can give no
assurance that they will prove to be correct. Since forward-looking statements
address future events and conditions, by their very nature they involve
inherent risks and uncertainties. Actual results could differ materially from
those currently anticipated due to a number of factors and risks. These
include, but are not limited to, risks associated with the oil and gas
industry in general (e.g., operational risks in development, exploration and
production, the uncertainty of reserve estimates, the uncertainty of estimates
and projections relating to production, costs and expenses, regulatory risks,
and health, safety and environmental risks), constraint in the availability of
labour, supplies, or services, the impact of pandemics, commodity price and
exchange rate fluctuations, geo-political risks, political and economic
instability, the imposition or expansion of tariffs imposed by domestic and
foreign governments or the imposition of other restrictive trade measures,
retaliatory or countermeasures implemented by such governments, including the
introduction of regulatory barriers to trade and the potential effect on the
demand and/or market price for the Company's products and/or otherwise
adversely affects the Company, wars (including the Russo-Ukrainian war and the
Israel-Hamas conflict), hostilities, civil insurrections, inflationary risks
including potential increases to operating and capital costs, changes in
legislation impacting the oil and gas industry, including but not limited to
tax laws, royalties and environmental regulations (including greenhouse gas
emission reduction requirements and other decarbonization or social policies
and including uncertainty with respect to the interpretation of omnibus Bill
C-59 and the related amendments to the Competition Act (Canada)), the
Company's ability to meet its financial obligations and covenants, adverse
weather or break-up conditions, and uncertainties resulting from potential
delays or changes in plans with respect to exploration or development projects
or capital expenditures. These and other risks are set out in more detail in
Southern's MD&A for the period ended December 31, 2024 and AIF for the
year ended December 31, 2024, which are available on the Company's website at
www.southernenergycorp.com and filed under the Company's profile on SEDAR+ at
www.sedarplus.ca.
The forward-looking information contained in this press release is made as of
the date hereof and Southern undertakes no obligation to update publicly or
revise any forward-looking information, whether as a result of new
information, future events or otherwise, unless required by applicable
securities laws. The forward-looking information contained in this press
release is expressly qualified by this cautionary statement.
Future Oriented Financial Information. This press release contains
future-oriented financial information and financial outlook information
(collectively, "FOFI") about Southern's capital expenditures, general and
administrative expenses, inorganic growth, hedging, natural gas pricing,
netbacks, royalty rates and prospective results of operations and production,
all of which are subject to the same assumptions, risk factors, limitations,
and qualifications as set forth in the above paragraphs. FOFI contained in
this document was approved by management as of the date of this document and
was provided for the purpose of providing further information about Southern's
future business operations. Southern and its management believe that FOFI has
been prepared on a reasonable basis, reflecting management's best estimates
and judgments, and represent, to the best of management's knowledge and
opinion, the Company's expected course of action. However, because this
information is highly subjective, it should not be relied on as necessarily
indicative of future results. Southern disclaims any intention or obligation
to update or revise any FOFI contained in this document, whether as a result
of new information, future events or otherwise, unless required pursuant to
applicable law. Readers are cautioned that the FOFI contained in this document
should not be used for purposes other than for which it is disclosed herein.
Changes in forecast commodity prices, differences in the timing of capital
expenditures, and variances in average production estimates can have a
significant impact on the key performance measures included in Southern's
guidance. The Company's actual results may differ materially from these
estimates.
Specified Financial Measures. This press release provides various financial
measures that do not have a standardized meaning prescribed by International
Financial Reporting Standards ("IFRS"), including non-IFRS financial measures,
non-IFRS financial ratios and capital management measures. These specified
financial measures may not be comparable to similar measures presented by
other issuers. Southern's method of calculating these measures may differ from
other companies and accordingly, they may not be comparable to measures used
by other companies. Adjusted Funds Flow from Operations, adjusted working
capital and net debt are not recognized measures under IFRS. Readers are
cautioned that these specified financial measures should not be construed as
alternatives to other measures of financial performance calculated in
accordance with IFRS. These specified financial measures provide additional
information that management believes is meaningful in describing the Company's
operational performance, liquidity and capacity to fund capital expenditures
and other activities. Please see below for a brief overview of all specified
financial measures used in this release and refer to the Company's MD&A
for additional information relating to specified financial measures, which is
available on the Company's website at www.southernenergycorp.com and filed
under the Company's profile on SEDAR+ at www.sedarplus.ca.
"Adjusted Funds Flow from Operations" (non-IFRS financial measure) is
calculated based on cash flow from operative activities before changes in
non-cash working capital and cash decommissioning expenditures. Management
uses adjusted funds flow from operations as a key measure to assess the
ability of the Company to finance operating activities, capital expenditures
and debt repayments.
"Adjusted Funds Flow from Operations per Share" (non-IFRS financial measure)
is calculated by dividing Adjusted Funds Flow from Operations by the number of
Southern shares issued and outstanding.
"Net Debt" (capital management measure) is monitored by management, along with
adjusted working capital, as part of its capital structure in order to fund
current operations and future growth of the Company. Net debt is defined as
long-term debt plus adjusted working capital surplus or deficit. Adjusted
working capital is calculated as current assets less current liabilities,
removing current derivative assets/liabilities, the current portion of bank
debt, and the current portion of lease liabilities.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
1 Comprised of 87 bbl/d light and medium crude oil, 13 bbl/d NGLs and 12,956
Mcf/d conventional natural gas
2 Comprised of 94 bbl/d light and medium crude oil, 10 bbl/d NGLs and 14,640
Mcf/d conventional natural gas
3 See "Reader Advisories - Specified Financial Measures"
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