REG - Southern Energy Corp - OPERATIONAL UPDATE
02/03/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220302:nRSB2845Da&default-theme=true
RNS Number : 2845D Southern Energy Corp. 02 March 2022
SOUTHERN ENERGY CORP. ANNOUNCES A 73% INCREASE IN 2P RESERVES AT YEAR END
2021, UPDATE ON GWINVILLE DRILLING PROGRAM AND NON-CORE ASSET DISPOSITION
Calgary, Alberta - March 2, 2022 - Southern Energy Corp. ("Southern" or the
"Company") (TSXV:SOU) (AIM:SOUC) is pleased to announce selected highlights of
Southern's year end independent oil and gas reserves evaluation as of December
31, 2021 (the "NSAI Report"), and provide an update on the Company's three
well drilling program at the Gwinville field and a non-core asset cash
disposition.
The NSAI Report was 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, 2020. The Company anticipates announcing its fourth
quarter and audited year end 2021 financial results and filing an annual
information form ("AIF") for the year ended December 31, 2021, in April 2022.
Highlights:
• Relative to year-end 2020, the NSAI Report states
• an increase in proved developed producing ("PDP") reserves by 9%
to 5.7 MMboe,
• consistent total proved ("1P") reserves at 10.5 MMboe and
• an increase in total proved plus probable ("2P") reserves by
73% to 20.2 MMboe in 2021;
• a PDP reserve life index ("RLI") of 9 years and 15 year RLI for
2P reserves
• Additional drilling locations identified at Gwinville, based on
previous Selma Chalk horizontal drilling successes, which could add material
levels of production;
• Before-tax net present value ("NPV") of reserves, discounted at
10% ("NPV10"), is $32.4 million on a PDP basis, $53.5 million on a 1P basis
and $88.3 million on a 2P basis evaluated using the average forecast pricing
of four independent reserve evaluators as at January 2022
• Material progression of before tax NPV-10 per share to
CAD$0.53/share, CAD$0.88/share, and CAD$1.45/share for PDP, 1P, and 2P
categories;
• The ongoing three well drilling program at Gwinville proceeding
on schedule and on budget, with completion operations expected to begin in
early April 2022
• Disposition of two non-core oil properties for $1.3 million, net
of closing adjustments
• Aggregate production from the two properties was approximately
40 boe/d((1))
In addition to the summary information disclosed in this press release, more
detailed
information regarding Southern's oil and gas reserves will be included in the
Company's AIF to be filed on SEDAR (www.sedar.com (http://www.sedar.com)
).
Ian Atkinson, President and Chief Executive Officer of Southern commented:
"We are delighted to report our 2021 year-end reserves report which highlights
the quality of our asset base, our unique operational expertise and the
capability for significant reserves growth potential in our assets as we
progress our organic growth program.
"We are particularly excited by the additional probable drilling locations
identified at Gwinville, which are based on results from previous Selma Chalk
horizontal drilling successes and does not incorporate our new well completion
design. Identification of these drilling locations demonstrates how our
strategy of applying modern completion techniques can bring new life, and
production, to high quality, mid-life assets.
"The NSAI report demonstrates that we have substantially extended the running
room and future development potential of our asset which will complement our
strategy to generate long term sustainable free funds flow and organic growth
in development of our existing asset base."
2021 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 NI51-101 will be included in Southern's
AIF, which will be filed on SEDAR in April 2022. The numbers in the tables
below may not add due to rounding.
Summary of Reserves Volumes as at December 31, 2021
The Company's reserve volumes and undiscounted future development capital
costs are summarized below as at December 31, 2021:
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 117 211 78 31,804 5,707 -
Proved Developed Non-Producing 55 68 1 9,724 1,745 8,240
Proved Undeveloped - 312 136 15,476 3,027 19,845
Total Proved 172 591 215 57,004 10,479 28,085
Probable 61 169 18 56,711 9,699 50,809
Total Proved Plus Probable 233 761 233 113,715 20,178 78,894
(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, 2021 compared to December 31, 2020:
CHANGE IN RESERVES AND RESERVE LIFE INDEX((1)) 2021 2020 % Change
Reserves (mboe)
Proved Developed Producing 5,707 5,237 9%
Total Proved 10,479 10,438 0%
Total Proved Plus Probable 20,178 11,690 73%
PDP as % of 2P 28% 45% (37%)
1P as % of 2P 52% 89% (42%)
Reserve Life Index (years)
Proved Developed Producing 8.5 7.0 21%
Total Proved 15.6 14.0 12%
Total Proved Plus Probable 30.0 15.6 92%
(1) The Reserve Life Index ("RLI") as at December 31, 2021 is
calculated as gross working interest reserves divided by the projected annual
PDP production for 2022. See "Reader advisories - Oil and Gas Advisories"
Southern's total 2P reserves increased by 73% to 20.2 MMboe resulting in a 2P
reserve life index of 30.0 years on projected annual PDP production for
2022. Southern's 2021 recompletion program resulted in an 9% increase in PDP
reserves to 5.7 MMboe.
Net Present Value of Future Net Revenue as at December 31, 2021
The following table summarizes the net present value of the Company's reserves
(before-tax) as at December 31, 2021. 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 ($/boe)
Proved Developed Producing 51,635 32,437 24,461 7.22
Proved Developed Non-Producing 17,008 6,644 3,684 4.96
Proved Undeveloped 32,544 14,463 6,759 5.86
Total Proved 101,187 53,544 34,904 6.45
Probable 102,089 34,712 14,766 4.49
Total Proved Plus Probable 203,276 88,256 49,670 5.50
(1) Unit values are based on net reserves. Net reserves are the
Company's working interest reserves after deduction of royalties
Forecast Prices Used in Estimates
The following table outlines the forecasted future prices used by NSAI in
their evaluation of the Company's reserves at December 31, 2021, which are
based on a four-consultant average price forecast. The forecast cost and
price assumptions assume increases in wellhead selling prices and consider
inflation with respect to future operating and capital costs.
FUTURE COMMODITY PRICE FORECAST WTI Cushing NYMEX
Oklahoma Henry Hub
US$/bbl US$/MMBtu
2022 71.88 3.89
2023 67.91 3.47
2024 65.42 3.23
2025 66.72 3.29
2026 68.05 3.35
2027 69.42 3.43
2028 70.81 3.49
2029 72.22 3.57
2030 73.67 3.63
2031 75.14 3.71
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, 2021 relative to December 31, 2020. The majority of 2P reserves increases,
year-on-year, came from recognition of the Gwinville Selma Chalk horizontal
drilling locations for positive revisions.
RESERVES((1)) RECONCILIATION PDP (Mboe) 1P (Mboe) Probable (Mboe) 2P (Mboe)
December 31, 2020 5,237 10,438 1,252 11,690
Discoveries - - - -
Extensions - - - -
Infill Drilling - - 8,399 8,399
Improved Recovery - - - -
Technical Revisions((2)) 982 564 19 583
Acquisitions - - - -
Dispositions (49) (49) - (49)
Economic Factors 303 292 29 321
Production((3)) (766) (766) - (766)
December 31, 2021 5,707 10,479 9,699 20,178
(1) Gross working interest reserves before royalty deductions
(2) Technical revisions also include reserves associated with changes in
operating costs and commodity price offsets
(3) Produced volumes for the year ended December 31, 2021 are internally
estimated
Operations Update
Energy Drilling Rig #15 spud the first well on the Gwinville three-well
padsite on January 28, 2022. Surface casing has been run on all three wells,
and we are currently drilling the third and final intermediate section prior
to initiating the horizontal laterals. Southern anticipates that drilling
operations will conclude in late March, with completion operations to follow
in early April 2022.
In Q1 2022, Southern entered into a hedge contract through December 31, 2022,
on 2,000 MMBtu/d of natural gas production at a fixed price of $4.61/MMBtu.
Gary McMurren, Vice President of Engineering commented:
"The team is very excited about revitalizing the Gwinville Field with modern
horizontal drilling and multistage fracture technology and this first padsite
will be a great measure of how effective these optimized wellbore designs are
at maximizing gas delivery from Selma Chalk horizontals.
"Following the completion operations, we will immediately be flowing the wells
back through our company-owned, high pressure gathering system to sales,
thereby eliminating any flaring emissions and lost revenue. By the end of Q2
2022 we should have a good idea of how the initial well rates match our type
curve expectations."
Non-Core Asset Disposition
Recently, in two separate transactions, Southern disposed of two small,
non-core oil properties located outside of the Company's focused asset base in
central Mississippi. Total working-interest production from the assets was
approximately 40 boe/d for a consideration of $1.3 million net of closing
adjustments. The implied sale metrics of approximately $32,500/boepd and 3x
fourth quarter 2021 annualized cash flow are strong considering the limited
upside potential from the assets.
Ian Atkinson commented:
"Divesting these small interests is consistent with our core strategy to focus
on high working interest, operated assets with re-development opportunities
for our shareholders."
Change in Reporting Currency
Southern is electing to change its reporting currency from Canadian dollars to
U.S. dollars since the majority of its natural gas and crude oil properties
are in the U.S. The change in reporting currency is a voluntary change which
is accounted for retrospectively. All prior periods will be restated to U.S.
dollars.
A new corporate presentation dated March 2022 is now available on the Company
website at www.southernenergycorp.com (http://www.southernenergycorp.com) .
Warrant Exercise and Admission to Trading on AIM and Total Voting Rights
Southern has issued 20,000 new common shares in the Company ("Common Shares")
to satisfy an exercise of warrants over Common Shares at an exercise price of
CAD0.32 per Common Share.
Application has been made to the London Stock Exchange plc for the admission
to trading on AIM of the 20,000 new Common Shares, which is expected to occur
at 8.00 a.m. on or around 7 March 2022 ("Admission"). On Admission, the new
Common Shares will rank pari passu with the existing Common Shares.
On Admission, the issued share capital of the Company will be 78,171,858
Common Shares and this figure may be used by shareholders as a denominator for
the calculations by which they will determine if they are required to notify
their interest in or change to their interest in the Company. There are no
Common Shares held in treasury and each Common Share entitles the holder to a
single vote at general meetings of the Company. Accordingly, on Admission, the
total number of voting rights in the Company will be 78,171,858.
For further information, please 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, Billy Clegg, Daniel Sherwen +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.
Disclosure of Oil and Gas Information
AIF. Southern's Statement of Reserves Data and Other Oil and Gas Information
on Form 51-101F1 dated effective as at December 31, 2021, which will include
further disclosure of Southern's oil and gas reserves and other oil and gas
information in accordance with NI 51-101 and COGEH forming the basis of this
press release, will be included in the AIF which will be available on SEDAR at
www.sedar.com in April 2022.
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.
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, such as development capital.
"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. These terms have been calculated by management and do not
have a standardized meaning and may not be comparable to similar measures
presented by other companies, 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 measures to compare Southern'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.
Abbreviations
bbls barrels
Mbbls thousand barrels
bbls/d barrels per day
$M thousands of US dollars
boe barrels of oil equivalent
Mboe thousand barrels of oil equivalent
MMboe million barrels of oil equivalent
boe/d barrels of oil equivalent per day
GJ gigajoule
Mcf thousand cubic feet
Mcf/d thousand cubic feet per day
MMcf/d million cubic feet per day
MMBtu million British Thermal Units
WTI West Texas Intermediate, the reference price paid in U.S. dollars at Cushing,
Oklahoma for the crude oil standard grade
Forward Looking Information
This press release contains certain forward-looking information (collectively
referred to herein as "forward-looking statements") within the meaning of
applicable Canadian securities laws. Forward-looking statements are often, but
not always, identified by the use of words such as "guidance", "outlook",
"anticipate", "target", "plan", "continue", "intend", "consider", "estimate",
"expect", "may", "will", "should", "could" or similar words suggesting future
outcomes. More particularly, this press release contains statements
concerning: Southern's business strategy, objectives, strength and focus;
future consolidation activity and organic growth; future intentions with
respect to return of capital; oil and natural gas production levels, decline
rates, free funds flow; anticipated operational results for 2022 including,
but not limited to, estimated or anticipated production levels, capital
expenditures and drilling plans; expectations regarding commodity prices; the
performance characteristics of the Company's oil and natural gas properties;
the ability of the Company to achieve drilling success consistent with
management's expectations; the source of funding for the Company's activities
including development costs. Statements relating to "reserves" 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 document are based on certain
key expectations and assumptions made by Southern, including those relating
to: the business plan of Southern; the timing of and success of future
drilling, development and completion activities; the geological
characteristics of Southern's properties; prevailing commodity prices, price
volatility, price differentials and the actual prices received for the
Company's products; the availability and performance of drilling rigs,
facilities, pipelines and other oilfield services; the timing of past
operations and activities in the planned areas of focus; the drilling,
completion and tie-in of wells being completed as planned; the performance of
new and existing wells; the application of existing drilling and fracturing
techniques; prevailing weather and break-up conditions; royalty regimes and
exchange rates; the application of regulatory and licensing requirements; the
continued availability of capital and skilled personnel; the ability to
maintain or grow the banking facilities; the accuracy of Southern's geological
interpretation of its drilling and land opportunities, including the ability
of seismic activity to enhance such interpretation; and Southern's ability to
execute its plans and strategies.
Although management considers these assumptions to be reasonable based on
information currently available, undue reliance should not be placed on the
forward-looking statements because Southern can give no assurances that they
may prove to be correct. By their very nature, forward-looking statements are
subject to certain risks and uncertainties (both general and specific) that
could cause actual events or outcomes to differ materially from those
anticipated or implied by such forward-looking statements. These risks and
uncertainties include, but are not limited to: incorrect assessments of the
value of benefits to be obtained from exploration and development programs;
risks associated with the oil and gas industry in general (e.g. operational
risks in development, exploration and production; and delays or changes in
plans with respect to exploration or development projects or capital
expenditures); commodity prices; increased operating and capital costs due to
inflationary pressures; the uncertainty of estimates and projections relating
to production, cash generation, costs and expenses; health, safety, litigation
and environmental risks; access to capital; and the COVID-19 pandemic. Due to
the nature of the oil and natural gas industry, drilling plans and operational
activities may be delayed or modified to react to market conditions, results
of past operations, regulatory approvals or availability of services causing
results to be delayed. Please refer to the annual information form for the
year ended December 31, 2020, the management's discussion and analysis for the
period ended September 30, 2021 (the "MD&A") and other continuous
disclosure documents for additional risk factors relating to Southern, which
can be accessed either on Southern's website at www.southernenergycorp.com or
under the Company's profile on www.sedar.com.
The forward-looking statements contained in this press release are made as of
the date hereof and the Company does not undertake any obligation to update
publicly or to revise any of the included forward-looking statements, except
as required by applicable law. The forward-looking statements contained herein
are expressly qualified by this cautionary statement.
This press release contains future-oriented financial information and
financial outlook information (collectively, "FOFI") about Southern's
prospective results of operations and free funds flow, 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.
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 (as amended).
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END UPDUPUQUWUPPGRGRecent news on Southern Energy
See all newsREG - Southern Energy Corp - FOURTH QUARTER AND YEAR END 2024 RESULTS
AnnouncementREG - Southern Energy Corp - LISTING OF WARRANTS
AnnouncementREG - AIM - AIM Notice - 09/04/2025
AnnouncementREG - Southern Energy Corp - COMPLETION OF EQUITY FINANCING
AnnouncementREG - Southern Energy Corp - AMENDMENT TO OUTSTANDING CONVERTIBLE DEBENTURES
Announcement