REG - Southern Energy Corp - INITIAL RESULTS FROM FIRST GWINVILLE WELL

Southern EnergyAnnouncement

09/06/2022 07:00

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RNS Number : 2914O  Southern Energy Corp.  09 June 2022

SOUTHERN ENERGY CORP. ANNOUNCES INITIAL RESULTS OF 7.7 MMCF/D FROM FIRST
GWINVILLE SELMA CHALK HORIZONTAL WELL

 

Successful Initial Results from Generation 3 Well Design

 

Calgary, Alberta - June 8, 2022 - Southern Energy Corp. ("Southern" or the
"Company") (TSXV:SOU) (AIM:SOUC) is excited to announce successful early
flowback results from the first well of the three-well horizontal padsite
located in the Gwinville Field.

Highlights

·    Well GH 19-3 #2 is flowing at an initial level of 7.7 MMcf/d (1,280
boe/d), at a highly restricted flowing pressure, exceeding the Company's
modeled type curve

·    Additional volumes from GH 19-3 #2 have increased the Company's
production approximately 60% to 3,175 boe/d, materially increasing gas sales
as no test volumes are flared

·    The Company remains largely unhedged, resulting in gas from GH 19-3
#2 being sold at current NYMEX gas prices

·    Initial results indicate that flowback performance using the
Generation 3 completion design is far superior to any previous Selma Chalk
wells in the area

·    Flowback results are expected from two recently completed Gwinville
wells shortly

 

The GH 19-3 #2 well was opened to flowback following the stimulation
operation.  After approximately one week of clean-up, the well is flowing at
7.7 MMcf/d (1,280 boe/d) at a highly restricted flowing pressure of 1,100
psig.  Production from the well is flowing directly to sales creating
significant additional cash flow for the Company.  The well continues to
produce over 2,000 bbl/d of load fluid, with approximately 24% recovered to
date.  Throughout the first week of production, as more load fluid is
recovered, the well's gas rate has consistently increased day over day.

 

Southern's Generation 3 completion design increased the stage count by over
275% and the proppant concentration by over 40% as compared to the most recent
Selma Chalk horizontal wells completed in Mississippi between 2013 - 2015, and
initial flowback performance suggests that the increased completion intensity
is having a very positive result.

 

With the additional volumes from the new well, Southern's current WI sales
production has increased approximately 60% to 3,175 boe/d (96% gas).  The
additional natural gas production from the new well is unhedged and being sold
at current NYMEX gas prices.

 

Stimulation operations on the GH 19-3 #3 and #4 wells have also been
completed, and both wells will begin flowback/clean-up shortly.

 

Ian Atkinson, President and CEO of Southern, commented:

"This is a transformational moment for our company; not only are we adding
material production, reserves, and cash flow at a time when gas prices are
near 14-year highs, but we are solidifying and executing our operational
strategy to deliver multi-year redevelopment from our assets and highlighting
the significant opportunity and optionality we have in providing equity growth
for shareholders.

"We are extremely excited by these initial results from our Generation 3
completion design on these Gwinville Selma Chalk horizontal wells. The
flowback results from the GH 19-3 #2 well are evidence of how our team has
successfully used modern technology to revitalize these significantly
under-developed conventional assets in the Gulf Coast area.

"While still premature to make accurate type curve predictions for these and
future Gwinville wells, we can say at this point, that the early flowback
performance is far superior to any of the previous Selma Chalk wells in the
area.  Our operations team has done an excellent job of safely managing the
stimulations on the three-well pad, and we expect costs to come in-line with
AFE estimates."

Share Issues

As at June 7, 2022, the Company is pleased to announce that 5.3 million
warrants issued on April 22, 2021 ("2021 Warrants"), representing
approximately 31% of outstanding 2021 Warrants, have been exercised for total
proceeds of CAD$1.7 million to the Company. There are 11.8 million remaining
2021 Warrants outstanding that expire on April 30, 2023 for total proceeds of
CAD$3.8 million to the Company.  In addition, as of June 7, 2022, there have
been 2,923 conversions of the outstanding 8% convertible unsecured
subordinated debentures issued on June 14, 2019 and January 15, 2021 (the
"Convertible Debentures") for 3.6 million new common shares, representing
approximately 35% of the 8,389 Convertible Debentures issued.

 

It is noted that the above exercises include additional conversions since the
time of the Company's previous total voting rights update on June 1, 2022,
amounting to the issue of a further 468,750 new common shares since that time.
These new common shares have been admitted to trading on AIM under the block
admission announced on May 6, 2022. As of June 7, 2022, following the
aforementioned share issues, the Company had a total of 86,903,733 common
shares in issue. This figure may be used by shareholders in the Company as the
denominator for the calculations by which they will determine if they are
required to notify their interest in, or a change in their interest in, the
share capital of the Company.

 

For further information about Southern, please visit our website at
www.southernenergycorp.com (http://www.southernenergycorp.com) or contact:

 Southern Energy Corp.

 Ian Atkinson (President and CEO)                           +1 587 287 5401

 Calvin Yau (VP Finance and CFO)                            +1 587 287 5402

 Strand Hanson Limited - Nominated & Financial Adviser      +44 (0) 20 7409 3494

 James Spinney / James Bellman

 Hannam & Partners - Joint Broker                           +44 (0) 20 7907 8500

 Sam Merlin / Ernest Bell

 Canaccord Genuity - Joint Broker                           +44 (0) 20 7523 8000

 Henry Fitzgerald-O'Connor / James Asensio

 Camarco

 James Crothers, Hugo Liddy, Billy Clegg                    +44 (0) 20 3757 4980

 

 

 

 

About Southern Energy Corp.

Southern Energy Corp. is a natural gas exploration and production company.
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.

Qualified Person's Statement

Gary McMurren, Vice President Engineering, who has over 22 years of relevant
experience in the oil industry and has approved the technical information
contained in this announcement. Mr. McMurren is registered as a Profession
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.

READER ADVISORY

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.

Throughout this press release, "crude oil" or "oil" refers to light and medium
crude oil product types as defined by National Instrument 51-101 - Standards
of Disclosure for Oil and Gas Activities ("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.

References in this press release to production test rates, initial test
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 for Southern.
A pressure transient analysis or well‐test interpretation has not been
carried out in respect of all wells.  Accordingly, the Company cautions that
the test results should be considered to be preliminary.

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

MMBtu                  million British thermal units

MMBtu/d              million British thermal units per day

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" or similar words suggesting future outcomes or statements
regarding an outlook. 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, future commodities pricing,
expectations regarding the Company's hedging strategy, expectations regarding
production from the Company's drilling operations in Gwinville and the timing
thereof, ability to achieve production estimates set out herein, future
production levels and planned capital expenditures.

The forward-looking statements contained in this press release are based on
certain key expectations and assumptions made by Southern, including 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 facilities and pipelines, the geological
characteristics of Southern's properties, the characteristics of the Company's
assets, the successful application of drilling, completion and seismic
technology, Southern's ability to secure financing on acceptable terms,
prevailing weather conditions, prevailing legislation affecting the oil and
gas industry, commodity prices, royalty regimes and exchange rates, 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 and the Company's
ability to source and complete asset acquisitions.

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
services, negative effects of the current COVID-19 pandemic, commodity price
and exchange rate fluctuations, geo-political risks, political and economic
instability abroad, wars (including Russia's military actions in Ukraine),
hostilities, civil insurrections, inflationary risks including potential
increases to operating and capital costs,  changes in legislation impacting
the oil and gas industry, 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. Ongoing
military actions between Russia and the Ukraine have the potential to threaten
the supply of oil and gas from the region. The long-term impacts of the
actions between these nations remains uncertain. These and other risks are set
out in more detail in Southern's most recent management's discussion and
analysis and annual information form.

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. Any financial outlook or future
oriented financial information in this press release, as defined by applicable
securities legislation, has been approved by management of Southern. Readers
are cautioned that any such future-oriented financial information contained
herein should not be used for purposes other than those for which it is
disclosed herein. The Company and its management believe that the prospective
financial information 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 activities or results.

Neither 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.

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of
the European Union (Withdrawal) Act 2018.

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