REG - Southern Energy Corp - OPERATIONAL UPDATE

Southern EnergyAnnouncement

17/10/2023 07:00

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RNS Number : 3017Q  Southern Energy Corp.  17 October 2023

SOUTHERN ENERGY CORP. PROVIDES OPERATIONAL UPDATE

 

Calgary, Alberta - October 17, 2023 - Southern Energy Corp. ("Southern" or the
"Company") (TSXV:SOU) (AIM:SOUC)(OTCQX:SOUTF), an established producer with
natural gas and light oil assets in Mississippi, is pleased to provide an
update on field operations and production, as well as recent financial hedging
contracts that have been executed.

 

Operations Update

 

Production for the third quarter averaged 2,814 boe/d (95% natural gas),
representing a 6% increase over the prior quarter and largely reflecting the
impact of the synergistic Gwinville acquisition (the "Transaction") completed
in June 2023.  Current production is approximately 2,900 boe/d.

 

At Gwinville, Southern has completed the process of installing the necessary
pipeline infrastructure to consolidate the two gathering systems, allowing the
Company to run just one central compressor station compared to the five that
were running before the Transaction. These synergies will not only remove
costly rental compression and allow monetization of spare owned compressors
but will also eliminate the need for approximately 250 Mcf/d of fuel gas and
associated emissions which can instead be added directly into sales volumes.
Additionally, the Company has recently initiated workover operations on two
shut-in wells on the acquired lands to re-establish production.  The wells
were previously producing at a combined rate of approximately 800 Mcf/d.

 

In September, the Company attempted to mechanically remediate the casing on
the 18-10 #3 Upper Selma Chalk horizontal well without success.
Subsequently, the heel section of the lateral (10 of 48 stages, 1,060 feet
total lateral length, and 740 feet of effective lateral length) was turned
over to production and the well is currently flowing at a restricted rate of
1.2 MMcf/d.  The Company is considering alternative casing remediation
methods for possible execution in Q1 2024.

 

In light of the recent recovery in U.S. natural gas prices above $3/MMBtu, the
Company is also in the process of re-bidding completion services in connection
with the four high quality uncompleted horizontal wells at Gwinville.

 

Ian Atkinson, President and Chief Executive Officer of Southern, commented:

 

"We are excited with the progress we have made with the Gwinville acquisition
integration, realizing quick and incremental value for shareholders through
operating cost reductions and now through the start of work to increase
production on the asset. At the time of pausing our capital program in Q1
2023, in response to the price of gas reaching $2.00/MMBtu, we had made a
significant investment including four drilled uncompleted horizontal wells
("DUCs"), incremental Company owned field compression, wellhead facilities,
Company owned water disposal capacity, and well casing for future drilling.
This pre-investment positions Southern to expedite our corporate growth in
light of the recent improvements in the price of U.S. natural gas and the
anticipated drop in the cost of services. We look forward to updating the
market further as we make key operational decisions in light of resurgent US
natural gas prices."

 

Recent Financial Hedging Initiatives

 

With the recent natural gas price recovery, Southern has taken the opportunity
to add further hedges, both in the near term and through the 2024 and 2025
calendar years, to protect future cash flows and ensure balance sheet
resiliency through the commodity price cycle. Natural gas prices have been
under pressure through the beginning of 2023, with the Q2 2023 Henry Hub price
averaging $2.10/MMBtu, improving to $2.55/MMBtu in Q3 2023, and is currently
at approximately $3.20/MMBtu. The Company's hedge contracts, listed below,
will ensure a strong natural gas price floor, allowing Southern the ability to
execute and capitalize on its organic operational plans over the coming years.

 

 Natural Gas                 Volume         Pricing
 Fixed Price Swap
 Oct 1, 2023 - Dec 31, 2023  2,000 MMBtu/d                NYMEX - HH $3.095/MMBtu
 Oct 1, 2023 - Dec 31, 2023  1,000 MMBtu/d                NYMEX - HH $3.050/MMBtu
 Jan 1, 2024 - Dec 31, 2025  1,000 MMBtu/d  NYMEX - HH $3.880/MMBtu
 Apr 1, 2024 - Oct 31, 2024  1,500 MMBtu/d  NYMEX - HH $3.208/MMBtu
 Apr 1, 2024 - Oct 31, 2024  1,500 MMBtu/d  NYMEX - HH $3.420/MMBtu
 Apr 1, 2025 - Oct 31, 2025  1,500 MMBtu/d  NYMEX - HH $3.420/MMBtu

 

 Costless Collar
 Sep 1, 2023 - Mar 31, 2024  2,000 MMBtu/d  NYMEX - HH $3.00 - $3.98/MMBtu
 Jan 1, 2024 - Mar 31, 2024  1,000 MMBtu/d  NYMEX - HH $3.00 - $4.60/MMBtu
 Nov 1, 2024 - Mar 31, 2025  1,000 MMBtu/d  NYMEX - HH $3.50 - $5.20/MMBtu

 

Southern thanks all of its stakeholders for their ongoing support and looks
forward to providing future updates on operational activities and continuing
to create shareholder value.

 

Qualified Person's Statement

 

Gary McMurren, Chief Operating Officer, who has over 23 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 Spinney / James Bellman

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

 Henry Fitzgerald-O'Connor / James Asensio
 Stifel Nicolaus Europe Limited - Joint Broker              +44 (0) 20 7710 7600

 Callum Stewart / Ashton Clanfield

 Tennyson Securities - Joint Broker                         +44 (0) 20 7186 9033

 Peter Krens / Pav Sanghera

 Camarco                                                    +44 (0) 20 3757 4980

 Owen Roberts / Billy Clegg / Hugo Liddy

 

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 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.

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.

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

MMcf                     million cubic feet

MMcf/d                 million 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

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", "budget", "continue", "evaluate", "forecast", "may",
"will", "can", "target" "potential", "result", "could", "should" 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, oil and natural gas production levels,
anticipated operational activities and results including, but not limited to,
capital expenditures, drilling and completion plans and casing remediation
activities, expectations regarding commodity prices, the performance
characteristics of the Company's oil and natural gas properties, successful
integration of the assets acquired through the Transaction and corresponding
cost reductions, the Company's hedging strategy, the ability of the Company to
achieve drilling success consistent with management's expectations, the
Company's expectations regarding completion of wellbores and DUCs and timing
thereof, the sources of funding for the Company's activities, the effect of
market conditions on the Company's performance, future organic and inorganic
growth and acquisition opportunities within the resource market, and
costs/debt reducing activities.

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, including the assets acquired
pursuant to the Transaction, the successful integration of recently acquired
assets into the Company's operations, 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 COVID-19 and variant strains of
the virus, commodity price and exchange rate fluctuations, geo-political
risks, political and economic instability abroad, wars (including the
Russo-Ukrainian War), 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. The Russo-Ukrainian War is particularly noteworthy, as this
conflict has the potential to disrupt the global supply of oil and gas, and
its full impact remains uncertain. These and other risks are set out in more
detail in Southern's management's discussion and analysis for the period ended
June 30, 2023, and annual information form for the year ended December 31,
2022, 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 prospective results of operations,
cash flows and balance sheet resiliency, 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.

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.

 

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