REG - Southern Energy Corp - Fourth Quarter and Year End 2025 Results
28/04/2026 07:00
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RNS Number : 1107C Southern Energy Corp. 28 April 2026
SOUTHERN ENERGY CORP. ANNOUNCES FOURTH QUARTER AND YEAR END 2025 FINANCIAL AND
OPERATING RESULTS
Calgary, Alberta - April 28, 2026 - 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, 2025 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, 2025, as well as the Company's annual information
form for the year ended December 31, 2025, (the "AIF"), all of which are
available on the Company's website at www.southernenergycorp.com
(https://protect.checkpoint.com/v2/r01/___http:/www.southernenergycorp.com___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDpjOm86Y2M0YWVlZGMyZDJhMzhmYjYyN2VmODQ1MmQyNmRlN2E6NzpjMDExOjczOTAwOWRlNjk1NDE1NjA1ZTUxZTNiMmMxNjkyZjJlMGNhNmI5YTI5YTllMTdlMDE2Nzk3MDY5NmRhNWRmNjU6cDpUOk4)
and have been filed under the Company's profile on SEDAR+ at www.sedarplus.ca
(https://protect.checkpoint.com/v2/r01/___http:/www.sedarplus.ca___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDpjOm86Y2M0YWVlZGMyZDJhMzhmYjYyN2VmODQ1MmQyNmRlN2E6NzozNzA3OjZhZGQ0M2QyYWZlYTFkYTBmMjYyYmU2ZWJjMDRmMDJhMTJmOThiMjcwZDQwOWIxMDFjYzNiMGM0M2UzMWEwZDc6cDpUOk4)
.
All figures referred to in this news release are denominated in U.S. dollars,
unless otherwise noted.
FEBRUARY FINANCING
· On February 12, 2026, the Company completed a financing and royalty
transaction with certain arm's-length investors pursuant to which it issued
the 2026 Debentures (as defined below) and common shares in the capital of the
Company ("Common Shares") and granted a 6% gross overriding royalty ("GORR")
on its existing and future developed production (collectively, the "February
Financing"). The Company issued 17,000 $1,000 face value senior secured
convertible debentures (the "2026 Debentures") for gross proceeds of $17.0
million, 30.0 million new Common Shares at a price of CAD$0.07 ($0.05) per
Common Share for gross proceeds of CAD$2.1 million ($1.5 million) and received
$5.0 million of proceeds from the sale of the gross overriding royalty. The
February Financing generated aggregate net proceeds of approximately $22.0
million, which were used in part to repay and retire the Company's senior
credit facility (the "Credit Facility"), with the remainder intended to fund
development capital and general corporate purposes. The 2026 Debentures mature
on December 31, 2028, and bear interest at 7% per annum.
· On a pro-forma basis, following the February Financing, Southern
exited Q1 2026 with no senior bank debt, extended maturities to December 31,
2028, and materially reduced its annual cash interest (15% to 7%) burden.
FOURTH QUARTER AND YEAR END 2025 HIGHLIGHTS
· Petroleum and natural gas sales of $4.6 million during Q4 2025 and
$18.0 million for the year ended December 31, 2025, an increase of 17% and 12%
from the same periods in 2024, respectively
· Generated $0.7 million of Adjusted Funds Flow from Operations 1
(#_ftn1) in Q4 2025 ($0.00 per share basic and diluted), and generated $3.0
million for the year ended December 31, 2025 ($0.01 per share basic and
diluted) reflecting improved realized pricing and cost discipline despite
lower production
· Average production of 11,600 2 (#_ftn2) Mcfe/d (1,933 boe/d) (93%
natural gas) during Q4 2025 and 12,039 3 (#_ftn3) Mcfe/d (2,007 boe/d) (96%
natural gas) for the year ended December 31, 2025, a decrease of 14% and 21%
from the same periods in 2024, respectively, primarily due to the voluntary
shut-in of approximately 400 boe/d of production in May 2025 from the
Mechanicsburg and Greens Creek Fields due to an ongoing transportation dispute
with a third party pipeline operator
· Average realized natural gas and oil prices for Q4 2025 of $3.93/Mcf
and $57.40/bbl, compared to $2.78/Mcf and $68.59/bbl in Q4 2024. Southern
achieved an average premium of $0.41/Mcf (approximately 12% above the NYMEX HH
benchmark) throughout 2025
· Net loss of $3.7 million ($0.01 per share basic and diluted) and $7.5
million ($0.03 per share basic and diluted) for the three and twelve months
ended December 31, 2025, respectively
· Reduced Net Debt 4 (#_ftn4) for the year ended December 31, 2025 by
$4.1 million from December 31, 2024, prior to the transformational February
Financing that fully retired the higher cost Credit Facility
· On April 8, 2025, Southern closed an equity financing raising
aggregate gross proceeds of $5.0 million (approximately £3.9 million, CAD$7.2
million) through the issuance of a total of 102,482,673 units comprised of one
common share and one common share purchase warrant (the "Units") (see
"Shareholders' Equity - Share Capital" in the December 31, 2025 MD&A for
full details)
· On April 8, 2025, Southern converted the remaining convertible
debentures (the "Debentures") in the amount of $3.1 million into 62,759,286
Units and issued 1,627,170 Units for all accrued and unpaid interest (see
"Liquidity and Capital Resources - Debenture Financing" in the December 31,
2025 MD&A for full details)
· In June 2025, Southern successfully completed the second of its four
high quality drilled uncompleted horizontal wells ("DUCs") from the Q1 2023
drilling program - the GH Lower Selma Chalk ("LSC") 13-13 #2 wellbore. The
operation was completed safely and under budget.
Ian Atkinson, President and Chief Executive Officer of Southern, commented:
"2025 marked a year of resilience and progress for Southern, as we navigated a
challenging commodity environment while continuing to strengthen our financial
position and demonstrate the quality of our asset base. We delivered growth in
revenues and funds flow, achieved a consistent premium to NYMEX pricing of
approximately 12%, and reduced Net Debt through disciplined capital
management. These results highlight the strategic advantage of our Gulf Coast
positioning and our focus on operational execution.
Subsequent to year-end, we completed a transformative financing that de-risked
the balance sheet and represents a true inflection point for the Company. The
transaction generated approximately $22 million in net proceeds, enabled the
full repayment of our higher-cost senior Credit Facility, materially improved
liquidity, and aligned long-term capital with asset level performance. With a
simplified and more flexible capital structure, lower cost of capital and
aligned funding tied to asset performance, we are now well positioned to
accelerate development and unlock the value of our resource base.
With materially lower leverage, no bank debt maturities, and development
capital now fully funded, Southern enters 2026 positioned to convert its
extensive proved developed producing ("PDP") and undeveloped reserve base into
sustainable free cash flow.
Looking forward, the outlook for natural gas continues to strengthen,
underpinned by growing LNG export capacity, increasing power demand and the
emerging impact of data center-driven energy consumption. With premium market
exposure, a strengthened balance sheet and a clear development runway,
Southern is entering 2026 with strong momentum and a focus on executing
high-return opportunities to drive meaningful, long-term value for
shareholders."
Financial Highlights
Three months ended Year ended
December 31, December 31,
(000s, except $ per share) 2025 2024 2025 2024
Petroleum and natural gas sales $ 4,594 $ 3,917 $ 18,044 $ 16,080
Net loss (3,680) (3,715) (7,508) (11,520)
Net loss per share
Basic (0.01) (0.02) (0.03) (0.07)
Fully diluted (0.01) (0.02) (0.03) (0.07)
Adjusted funds flow from operations ((1)) 709 (725) 2,960 2,759
Adjusted funds flow from operations per share ((1))
Basic 0.00 (0.00) 0.01 0.02
Fully diluted 0.00 (0.00) 0.01 0.02
Capital expenditures and acquisitions 41 68 2,849 884
Weighted average shares outstanding
Basic 336,255 167,250 291,452 166,871
Fully diluted 336,255 167,250 291,452 166,871
As at period end
Common shares outstanding 336,255 169,386 336,255 169,386
Total assets 49,404 53,801 49,404 53,801
Non-current liabilities 7,771 8,366 7,771 8,366
Net debt ((1)) $ (19,857) $ (23,954) $ (19,857) $ (23,954)
Note:
((1) ) See "Reader Advisories - Specified Financial Measures".
Operations Update
In late Q1 2026, Southern conducted a low-cost acid treatment on its second
Gwinville LSC DUC horizontal well, the GH LSC 14-06 #4. This test was designed
to evaluate whether future wells in the naturally fractured Selma Chalk could
be developed using an openhole, multi-lateral design, eliminating the need for
high-cost hydraulic fracture stimulation.
A 50-stage acid treatment was performed on the GH LSC 14-06 #4 lateral using
approximately 2,000 gallons of 7.5% HCl per stage to access the reservoir
behind the production casing cement. Total cost for the treatment was
approximately $700,000, including well equipping, tie-in, and tubing
installation.
The well has been producing for 22 days and has averaged approximately 500
Mcf/d over that initial flowback. Southern will continue to monitor production
performance and decline trends to determine whether additional fracture
stimulation is warranted.
The cost to drill and complete a single 5,000-foot horizontal lateral with
multi-stage fracture stimulation is approximately $4.3 million. In contrast,
an openhole, unstimulated multi-lateral well is estimated to cost $2.5 - 3.0
million, depending on the number of laterals and total openhole length,
representing a cost reduction of more than 40%.
While unstimulated laterals may deliver lower initial production rates than
stimulated wells, the objective of this evaluation is to determine whether the
materially lower costs and reduced decline rates associated with a
multi-lateral design can deliver superior overall economics. Although early
production results are encouraging, the well remains in the evaluation phase
and commercial repeatability has not yet been established.
With the recent rise in oil pricing, Southern also added perforations to a
producing oil well ("Adcox #3 Well") in its Magee field which has yielded
excellent results. The Adcox #3 Well has been producing at > 80 bbl/d of
oil since April 1 and successfully paid out the capital expenditure in
approximately two days.
Southern has initiated the regulatory, surface and mineral land processes to
permit the drilling of its first Cotton Valley test well in the Williamsburg
Field. It is expected that this well will spud as early as June 2026. More
information on the location, timing and capital allocation of this well will
be provided in the coming weeks.
Southern will continue to monitor regional natural gas prices over the coming
months before deciding when to complete the remaining Gwinville City Bank DUC
well. Because the City Bank reservoir is not suitable for a low-cost acid
treatment, the well will require a multi-stage hydraulic fracture stimulation
for completion.
Southern continues to work with Federal Energy Regulatory Commission ("FERC")
staff to resolve the ongoing transportation dispute that resulted in the
shut-in of approximately 400 boe/d of production from the Mechanicsburg and
Greens Creek fields. On April 6, 2026, FERC issued an order ("FERC Order")
directing both parties to enter immediate settlement discussions before a
settlement judge. If those discussions are unsuccessful, the matter may
proceed to an evidentiary hearing. Based on the timelines outlined in the FERC
Order, a hearing outcome would likely occur in the second half of 2026.
2025 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, 2025.
Estimates of the Company's reserves and related estimates of net present value
of future net revenues as at December 31, 2025, 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, 2024.
Reserve Highlights:
The NSAI Report states:
• PDP reserves of 5.8 MMboe,
• Proved reserves ("1P") of 13.7 MMboe,
• Proved + Probable reserves ("2P") of 25.3 MMboe, and
• a PDP reserve life index of nine years and 38 years for 2P reserves
based on the 2026 PDP production forecast.
Before-tax net present value ("NPV") of reserves, discounted at 10% ("NPV10"),
is $29.6 million on a PDP basis, $58.0 million on a 1P basis and $103.7
million on a 2P basis evaluated using the average forecast pricing of four
independent reserve evaluators as at January 1, 2026.
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://protect.checkpoint.com/v2/r01/___http:/www.sedarplus.ca___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDpjOm86Y2M0YWVlZGMyZDJhMzhmYjYyN2VmODQ1MmQyNmRlN2E6NzpjZmIwOjFlMTNmNzhmZTEyMTFiODg4NDE3MGRmZmIxZjI0MTAwNDA4NmQ3YTQzNDM5NmY5ZDAzOGVlZDNhZDRkNTc1ZDQ6cDpUOk4)
).
2025 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, 2025
The Company's reserve volumes and undiscounted future development capital
costs are summarized below as at December 31, 2025:
SUMMARY OF RESERVE VOLUMES ((1)) Light and Medium Oil (Mbbls) NGL Conventional Natural Gas Total FDC Costs ($M)
(Mbbs) (MMcf) Mboe
Proved Developed Producing 41 186 33,443 5,801 -
Proved Developed Non-Producing 33 59 8,759 1,551 4,903
Proved Undeveloped - 505 34,923 6,325 58,882
Total Proved 74 749 77,124 13,677 63,785
Probable 18 213 68,446 11,638 75,793
Total Proved Plus Probable 92 962 145,571 25,315 139,578
(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, 2025 compared to December 31, 2024:
CHANGE IN RESERVES AND RESERVE LIFE INDEX((1)) 2025 2024 % Change
Reserves (Mboe)
Proved Developed Producing 5,801 6,198 (6%)
Total Proved 13,677 12,695 8%
Total Proved Plus Probable 25,315 27,896 (9%)
PDP as % of 2P 23% 22% 4%
1P as % of 2P 54% 46% 17%
Reserve Life Index (years)
Proved Developed Producing 8.8 8.6 2%
Total Proved 20.7 17.5 18%
Total Proved Plus Probable 38.3 38.5 (1%)
(1) The Reserve Life Index as at December 31, 2025 is calculated as
gross working interest reserves divided by the projected annual PDP production
forecast for 2026. See "Reader advisories - Oil and Gas Advisories"
Net Present Value of Future Net Revenue as at December 31, 2025
The following table summarizes the NPV of the Company's reserves (before-tax)
as at December 31, 2025. The reserves value on a $/boe basis, discounted at
10% per year, is also summarized for each category.
NET PRESENT VALUE BEFORE-TAX 0% 10% 20% Unit Value((1)) Before Income Tax, Discounted at 10%/year ($/boe)
(M$) (M$) (M$)
Proved Developed Producing 49,499 29,633 22,060 6.53
Proved Developed Non-Producing 18,788 8,471 5,331 7.09
Proved Undeveloped 68,948 19,869 5,711 3.92
Total Proved 137,234 57,973 33,102 5.37
Probable 160,035 45,731 17,143 4.94
Total Proved Plus Probable 297,269 103,704 50,245 5.17
(1) Unit values are based on net reserves. Net reserves are the
Company's working interest reserves after deduction of royalties
Forecast Prices Used in Estimates
The following table outlines the forecasted future prices used by NSAI in
their evaluation of the Company's reserves at December 31, 2025, which are
based on a four-consultant average price forecast. The forecast cost and price
assumptions assume increases in wellhead selling prices and consider inflation
with respect to future operating and capital costs.
FUTURE COMMODITY PRICE FORECAST WTI Cushing NYMEX
Oklahoma Henry Hub
US$/bbl US$/MMBtu
2026 59.44 3.78
2027 64.13 3.86
2028 69.62 3.93
2029 71.20 4.01
2030 72.62 4.10
2031 74.07 4.17
2032 75.55 4.25
2033 77.07 4.34
2034 78.60 4.43
2035 80.18 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, 2025 relative to December 31, 2024.
RESERVES((1)) RECONCILIATION PDP (Mboe) 1P (Mboe) Probable (Mboe) 2P (Mboe)
December 31, 2024 6,198 12,695 15,201 27,896
Discoveries - - - -
Extensions - - - -
Infill Drilling - - - -
Improved Recovery - - - -
Technical Revisions((2)) 396 1,775 (3,548) (1,774)
Acquisitions - - - -
Dispositions - - - -
Economic Factors (61) (60) (15) (75)
Production (732) (732) - (732)
December 31, 2025 5,801 13,677 11,638 25,315
(1) Gross working interest reserves before royalty deductions
(2) Technical revisions also include reserves associated with changes
in operating costs and commodity price offsets
Outlook
With the completion of the February Financing, Southern plans to advance
additional oil and liquids focused projects on its existing assets, as well as
completion of the final high-impact City Bank DUC at Gwinville. Southern's
near term focus is on disciplined capital deployment aimed at increasing funds
flow per share.
The Company continues to benefit from its fixed-price natural gas swap
covering 5,000 MMBtu/d at $3.40/MMBtu through December 2026, providing
meaningful downside protection. Supported by stronger regional pricing and an
improved financial position, Southern is well positioned to execute a
disciplined capital program focused on sustainable growth and long-term
shareholder value.
Southern will continue to actively monitor NYMEX pricing and basis
differentials and remains prepared to opportunistically hedge additional
volumes as market conditions evolve. The Company appreciates the ongoing
support of its stakeholders and looks forward to providing further updates as
it progresses its operational and financial objectives.
Qualified Person's Statement
Gary McMurren, Chief Operating Officer, who has over 25 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
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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
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.
Short Term Results. References in this press release to current production
rates and other short-term production rates are useful in confirming the
presence of hydrocarbons, however such rates are not determinative of the
rates at which such wells will commence production and decline thereafter and
are not indicative of long-term performance or of ultimate recovery. While
encouraging, readers are cautioned not to place reliance on such rates in
calculating the aggregate production of Southern. The Company cautions that
such results should be considered to be preliminary.
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" or "natural gas liquids" 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. NI 51-101 includes
condensate within the product type of "natural gas liquids". The Company has
disclosed condensate as combined with and/or separately from other natural gas
liquids in this press release since the price of condensate as compared to
other natural gas liquids is currently significantly higher and the Company
believes that this crude oil and condensate presentation provides a more
accurate description of its operations and results.
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.
bbl barrels
bbl/d barrels per day
boe barrels of oil
boe/d barrels of oil per day
Mcf thousand cubic feet
Mcf/d thousand cubic feet per day
Mcfe thousand cubic feet equivalent
Mcfe/d thousand cubic feet equivalent per day
MMcfe million cubic feet equivalent
MMcfe/d million cubic feet equivalent per day
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
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, Southern's expectation that improved regional
pricing and a strengthened financial foundation will support execution of its
capital program, sustainable growth of the Company and long-term value
creation, forecasted natural gas pricing including growing LNG export capacity
and the emerging impact of data centre-driven energy consumption, Southern's
ability to re-initiate growth in deploying the net proceeds from the equity
financing on capital expenditures, drilling and completion plans including
spudding of the Cotton Valley well, expectations regarding commodity prices
and service costs, expectations regarding the performance characteristics of
the Company's oil and natural gas properties, the Company's hedging strategy
and execution thereof (including its intention to continue monitoring
commodity prices and basis differentials and to hedge additional volumes as
deemed appropriate), the ability of the Company to achieve drilling success
consistent with management's expectations, the Company's expectations
regarding completion of the two remaining DUCs and the drilling operations and
production volumes in the Mechanicsburg and Greens Creek fields (including the
timing thereof and anticipated costs and funding as well as the evaluation of
well performance, including the GH LSC 14-06 #4 well and regional natural gas
pricing to inform such decisions), the Company's expectations regarding the
resolution of regulatory disputes (including the anticipated timing thereof)
and impact of FERC rate determinations on shut-in production volumes, the
Company's ability to realize sustained pricing premiums due to its strategic
location in the Southeast U.S., 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 including lower decline rate from multi-lateral 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 Company's ability to comply with ongoing obligations
under the 6% GORR and 2026 Debentures, the Company's ability to continue as a
going concern, availability of alternative debt and equity financing
opportunities, 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 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
including the risk of an adverse result of the evidentiary hearing should the
FERC Order prove to be unsuccessful, 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, credit
risk, risk of default, impact of the newly granted GORR, 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, the U.S.-Iran conflict 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 BillC-59 and the
related amendments to the Competition Act (Canada)), risks related to 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 latest Management Discussion and Analysis for the period ended
December 31, 2025 and the Company's annual information form for the year ended
December 31, 2025, 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, hedging, natural gas pricing 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 outlook. 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 and are rounded to the nearest cent.
"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, the warrant liability, 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 (#_ftnref1) See "Reader Advisories - Specified Financial Measures"
2 (#_ftnref2) Comprised of 89 bbl/d light and medium crude oil, 39 bbl/d of
condensate, nil bbl/d NGLs and 10,832 Mcf/d conventional natural gas
3 (#_ftnref3) Comprised of 40 bbl/d light and medium crude oil, 43 bbl/d of
condensate, 3 bbl/d NGLs and 11,523 Mcf/d conventional natural gas
4 (#_ftnref4) See "Reader Advisories - Specified Financial Measures"
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