REG - Southern Energy Corp - Q1 2026 FINANCIAL AND OPERATING RESULTS

Southern EnergyAnnouncement

26/05/2026 07:00

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RNS Number : 6565F  Southern Energy Corp.  26 May 2026

SOUTHERN ENERGY CORP. ANNOUNCES FIRST QUARTER 2026 FINANCIAL RESULTS AND
WILLIAMSBURG JOINT VENTURE AGREEMENT

 

Calgary, Alberta - May 26, 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 first quarter financial and
operating results for the three months ended March 31, 2026. Selected
financial and operational information is outlined below and should be read in
conjunction with the Company's unaudited condensed consolidated financial
statements and related management's discussion and analysis (the "MD&A")
for the three months ended March 31, 2026, 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.

FIRST QUARTER 2026 HIGHLIGHTS

·    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 new 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.

·    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 burden from 15% to 7%

·    Average realized natural gas and oil prices for Q1 2026 of $5.82/Mcf
and $66.99/bbl, compared to $4.14/Mcf and $71.19/bbl in Q1 2025. Southern
achieved an average premium of $0.78/Mcf (approximately 16% above the NYMEX
Henry Hub benchmark) in Q1 2026

·    Petroleum and natural gas sales of $5.5 million during Q1 2026, an
increase of 8% from the same period in 2025

·    Generated $1.4 million of Adjusted Funds Flow from Operations 1 
(#_ftn1) in Q1 2026 ($0.00 per share basic and diluted), an increase of 115%
from the same period in 2025

·    Average production of 10,167 2  (#_ftn2) Mcfe/d (1,695 boe/d) (96%
natural gas) during Q1 2026, a decrease of 21% from the same period in 2025,
primarily reflecting the voluntary shut-in of approximately 400 boe/d of
production from the Mechanicsburg and Greens Creek Fields in May 2025 due to
an ongoing transportation dispute with a third party pipeline operator

·    Net loss of $1.3 million ($0.00 per share basic and diluted),
compared to a net loss of $3.9 million in Q1 2025

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

"Southern delivered a strong start to 2026, supported by improved natural gas
pricing, premium Gulf Coast market exposure and the successful completion of
the refinancing transactions earlier this year, leaving the Company with no
senior bank debt. During the quarter, we continued to strengthen our financial
position, maintain disciplined capital allocation and execute on our strategy
of growing funds flow per share through high-return development opportunities.

The retirement of our senior Credit Facility and the establishment of a
simplified, more flexible capital structure have significantly enhanced our
liquidity profile and reduced financing costs. With the Company funded for
currently planned near-term development activity and no near-term bank debt
maturities, Southern is well positioned to responsibly advance its inventory
of Drilled Uncompleted Wells ("DUC") and oil and liquids-focused opportunities
while continuing to maximize the value of its existing asset base.

Our strategic Gulf Coast positioning continues to deliver a meaningful premium
to NYMEX pricing, achieving a 16% premium in Q1 2026, while our fixed-price
natural gas hedge program provides additional downside protection and cash
flow stability through 2026. As market fundamentals continue to improve,
driven by increasing LNG export demand, power generation requirements and
broader structural demand growth for natural gas, we believe Southern is well
positioned to improve free cash flow generation and long-term shareholder
value.

We remain focused on disciplined execution, operational efficiency and prudent
risk management as we continue building momentum throughout 2026."

 

Financial Highlights

                                                      Three months ended March 31,
 (000s, except $ per share)                           2026                          2025
 Petroleum and natural gas sales                         $         5,526               $         5,121
 Net loss                                                     (1,311)                       (3,879)
 Net loss per share
    Basic                                                       (0.00)                        (0.02)
    Fully diluted                                               (0.00)                        (0.02)
 Adjusted funds flow from operations ((1))            1,353                         629
 Adjusted funds flow from operations per share ((1))
    Basic                                                        0.00                          0.00
    Fully diluted                                                0.00                          0.00
 Capital expenditures and acquisitions                            925                           183
 Weighted average shares outstanding
    Basic                                             351,922                            169,386
    Fully diluted                                     351,922                       169,386
 As at period end
 Basic common shares outstanding                           366,255                       169,386
 Total assets                                                51,658                        51,237
 Non-current liabilities                              21,045                        8,915
 Net debt ((1))                                             15,894                       24,145

Note:

((1)         ) See "Reader Advisories - Specified Financial
Measures".

 

Operations Update

Southern is pleased to announce that it has executed a Joint Venture Wellbore
Participation Agreement (the "Agreement") in the Williamsburg area with a
strategic partner (the "Partner") to evaluate the Cotton Valley oil
prospect. The intent of the partnership for Southern is to reduce our capital
exposure on the first two wells and to test this significant resource
opportunity at multiple locations. Highlights of the proposed structure
include:

·      Minimum drilling commitment of two wells;

·      The Partner will pay $1.95 million of the drilling and
completion capital to earn a 50% working interest in each well; Southern will
pay the remaining 50% of the well cost to retain operatorship and the
remaining 50% working interest;

·      Earned working interest is effective immediately, and inclusive
of all potential productive zones in the wellbore; and

·      The Partner will retain a 5% working interest participation right
in each follow-up Cotton Valley well on the established drilling spacing units
following the two commitment wells.

Southern has secured a drilling rig for the operation and is expecting to spud
the first commitment well (Terrible Creek 21-2 #2) in late July. Well
permitting and lease construction is anticipated to begin in late May. The
Board of Southern has approved the capital spending of 50% of the gross drill
and completion costs of $3.9 million for the first commitment well. Following
the successful execution and results of the first commitment well, Southern
intends to drill the second commitment well likely in Q4 2026.

 

 

 

Outlook

Southern remains focused on disciplined capital allocation and maximizing
funds flow per share through targeted investment in high-return oil and
liquids-weighted opportunities across its existing asset base. Following
completion of the refinancing transactions earlier this year and the
retirement of the Company's Credit Facility, Southern is now positioned to
advance its operational development plans with increased financial flexibility
and liquidity. The Company expects development activity to increase during the
remainder of 2026, including plans to complete the final City Bank DUC at
Gwinville, further enhancing its production profile and operational
flexibility. Southern also continues to evaluate additional recompletion and
development opportunities across its existing asset base.

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 and enhanced cash flow stability. Combined with
stronger regional pricing and the Company's improved financial position,
Southern believes it is well positioned to execute a disciplined capital
program focused on sustainable growth and long-term shareholder value
creation.

Southern will continue to actively monitor NYMEX pricing and basis
differentials and remains prepared to opportunistically hedge additional
production volumes as market conditions evolve. The Company appreciates the
continued support of its stakeholders and looks forward to providing further
updates as it advances its operational and financial objectives throughout
2026.

 

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
(https://protect.checkpoint.com/v2/r01/___http:/www.southernenergycorp.com___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDpjOm86Y2M0YWVlZGMyZDJhMzhmYjYyN2VmODQ1MmQyNmRlN2E6Nzo4MmE3OjliMmYyOTE5NjFkNDM1Y2YxNTJmYTdjYzk4OTNiM2I4MTllMjFlZGVjZGFkZTdiY2QwODYwNzE4MjJhZTllMmY6cDpUOk4)
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, Standards of
Disclosure for Oil and Gas Activities ("CSA Staff Notice 51‐324") and/or the
Canadian Oil and Gas Evaluation Handbook ("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, 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 remaining DUC 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 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
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 Bill
C-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 March 31, 2026 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 46 bbl/d light and medium crude oil, 22 bbl/d of
condensate, nil bbl/d NGLs and 9,759 Mcf/d conventional natural gas

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