REG - Southern Energy Corp - Q1 2025 FINANCIAL AND OPERATING RESULTS

Southern EnergyAnnouncement

27/05/2025 07:00

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RNS Number : 1438K  Southern Energy Corp.  27 May 2025

SOUTHERN ENERGY CORP. ANNOUNCES FIRST QUARTER 2025 FINANCIAL AND OPERATING RESULTS

 

Calgary, Alberta - May 27, 2025 - 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, 2025. Selected
financial and operational information is outlined below and should be read in
conjunction with the Company's unaudited consolidated financial statements and
related management's discussion and analysis (the "MD&A") for the three
months ended March 31, 2025, which are available on the Company's website at
www.southernenergycorp.com
(https://url.avanan.click/v2/___http:/www.southernenergycorp.com___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDphOm86ZTkzNjY5ZDk3N2YyOWViMmVlYmIzNGZiZGZmYWM0OGU6NjozZGViOjAyYzc0NzgyYzgwNjkwMzU4YmJiYTUzNzRkNWIwMjc3M2ZjODUzYmQwZGQ5NmQ1MTYzM2RkNWMwODY1MGU4MjQ6cDpUOk4)
and have been filed under the Company's profile on SEDAR+ at www.sedarplus.ca
(https://url.avanan.click/v2/___http:/www.sedarplus.ca___.YXAzOnNvdXRoZXJuZW5lcmd5Y29ycDphOm86ZTkzNjY5ZDk3N2YyOWViMmVlYmIzNGZiZGZmYWM0OGU6NjpiZmFkOmNjYTY0NTM5OWQ3YmUwNzUwZWQ5YzJiZDA4ODdkODNmNzAxYTE5ZGEwMTVkNzRkMTE1M2JiMjhhZDQ1YWJkMTk6cDpUOk4)
.

All figures referred to in this news release are denominated in U.S. dollars,
unless otherwise noted.

FIRST QUARTER 2025 HIGHLIGHTS

·    Petroleum and natural gas sales of $5.1 million during Q1 2025, an
increase of 7% from the same period in 2024, largely due to the increase in
natural gas pricing

·    Average realized natural gas and oil prices for Q1 2025 of $4.14/Mcf
and $71.19/bbl, compared to $2.53/Mcf and $74.86/bbl in Q1 2024. Southern
achieved an average premium of $0.49/Mcf (approximately 13%) above the NYMEX
HH benchmark in Q1 2025

·    Average production of 12,808 1  (#_ftn1) Mcfe/d (2,135 boe/d) (96%
natural gas) during Q1 2025, a decrease of 29% from the same period in 2024

·    Generated $0.9 million of Adjusted Funds Flow from Operations 2 
(#_ftn2) in Q1 2025 ($0.00 per share basic and diluted), excluding $0.3
million of one-time transaction costs

·    Net loss of $3.9 million ($0.02 per share basic and diluted),
compared to a net loss of $3.1 million in Q1 2024

·    Entered into various amendments to the Company's senior secured term
loan which included an extension to the pausing of monthly repayments of
principal to January 31, 2025 and a reduction of the repayment required from
the eighth amendment to $1.45 million as at January 31, 2025, which the
Company paid. Amended the monthly repayment of the principal amount
outstanding calculation beginning on February 28, 2025 and amended the asset
coverage ratio down to 1.5x in 2025 as well as reducing the Tranche B capacity
to $5.0 million (see "Liquidity and Capital Resources - Credit Facility" in
the March 31, 2025 MD&A for full details of the amendment)

SUBSEQUENT EVENTS

·   On April 8, 2025, Southern closed an equity financing raising
aggregate gross proceeds of $5.0 million (approximately £3.9 million, C$7.2
million) through the issuance of a total of 102,482,673 new units (see
"Shareholders' Equity - Share Capital" in the March 31, 2025 MD&A for full
details)

·    On April 8, 2025, Southern converted the remaining convertible
debentures in the amount of $3.1 million into 62,759,286 new units and issued
1,627,170 new units for all accrued and unpaid interest (see "Liquidity and
Capital Resources - Debenture Financing" in the March 31, 2025 MD&A for
full details of the conversion)

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

"Southern entered 2025 with renewed momentum, benefiting from both improved
market conditions and the completion of our $5.0 million financing in April
2025. Natural gas prices showed early signs of recovery in the quarter,
supported by strengthening demand fundamentals, from a colder than expected
winter and tightening supply.

Robust natural gas pricing in Q1 2025 enabled Southern to achieve a $0.49/Mcf
(13%) premium to the Henry Hub benchmark price. We remain encouraged by the
macro outlook with strong demand forecasts, tied to lower storage levels
compared to last year. Feed gas demand from U.S. LNG export facilities
continues to rise, with the Golden Pass terminal and pipeline expected to
begin receiving gas this year. Domestic consumption is also strengthening, led
by growing power demand from data centers and widespread electrification of
the economy. Combined with continued capital discipline across the upstream
sector, we believe these dynamics will support a tighter U.S. natural gas
balance throughout the year, which we aim to capitalise on.

With the recent financing complete and natural gas prices firming, we are
excited to resume field operations, beginning with the first of three drilled
but uncompleted wells in our Gwinville area. We have secured key services and
will shortly commence operations on the 13-13 #2 Lower Selma Chalk horizontal
well, with first production expected in June.

Southern remains committed to creating long-term shareholder value through
disciplined capital deployment, operational efficiency, and strategic
advantages of our asset base. With improving market tailwinds and a clear path
to near-term production growth, we are optimistic about the opportunities that
lie ahead in 2025"

 

Financial Highlights

                                                      Three months ended March 31,
 (000s, except $ per share)                           2025                          2024
 Petroleum and natural gas sales                         $         5,121               $         4,794
 Net loss                                                     (3,879)                       (3,121)
 Net loss per share
    Basic                                                       (0.02)                        (0.02)
    Fully diluted                                               (0.02)                        (0.02)
 Adjusted funds flow from operations ((1))            629                                    2,162
 Adjusted funds flow from operations per share ((1))
    Basic                                                        0.00                          0.01
    Fully diluted                                                0.00                          0.01
 Capital expenditures and acquisitions                            183                           269
 Weighted average shares outstanding
    Basic                                                  169,386                       166,480
    Fully diluted                                     169,386                       166,480
 As at period end
 Basic common shares outstanding                           169,386                       166,497
 Total assets                                                51,237                        61,865
 Non-current liabilities                              8,915                         24,341
 Net debt ((1))                                        $     (24,145)                $     (25,274)

Note:

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

 

Operations Update

 

The Company continues to progress its plans to complete its first Gwinville
drilled and uncompleted ("DUC") well and has finalized procuring key services.
Field operations are scheduled to commence on the 13-13 #2 Lower Selma Chalk
horizontal well in the next few weeks, and Southern expects first production
from the well in June 2025. Timing for the second and third horizontal
completions (one Lower Selma Chalk and one City Bank) will depend on the
results of the first completion operation, but the Company expects to have all
three wells completed before the end of the year.

 

The Company has also advised that it has recently elected to voluntarily
shut-in approximately 400 boepd of production from the Mechanicsburg and
Greens Creek Fields due to an ongoing transportation dispute with a third
party pipeline operator. On April 29, 2025, Southern was pleased to receive
confirmation that the pipelines subject to the dispute are regulated by the
Federal Energy Regulatory Commission ("FERC") and the third party submitted
the initial filing to the regulator which includes setting maximum allowable
transportation rates, subject to FERC review and approval. Southern will work
closely with FERC staff to expedite the rate determination process and, in
parallel, will continue to engage with the pipeline operator to pursue an
agreement on an equitable fee structure that would allow the resumption of gas
flows from these assets while the regulatory process continues.

 

Outlook

 

Southern has taken decisive steps to strengthen its financial position,
including the successful completion of the equity financing in April 2025,
along with the conversion of the convertible debentures, and the restructuring
of financial covenants with support from its lender, effective from Q1 2025.
These strategic actions, combined with the fixed-price swap contract of 5,000
MMBtu/d at $3.40/MMBtu through December 2026, provide the necessary financial
stability to execute the capital program with confidence.

 

Southern will continue to monitor NYMEX prices and the basis differential
prices and is prepared to hedge

additional volumes in a tactical manner going forward.

 

We appreciate the continued support of our stakeholders and look forward to
providing further updates on our operational progress as we work to drive
long-term shareholder value.

 

Qualified Person's Statement

 

Gary McMurren, Chief Operating Officer, who has over 24 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 Bellman / Rob Patrick / Edward Foulkes

  Tennyson Securities - Broker                                +44 (0) 20 7186 9033
  Peter Krens / Jason Woollard

  Camarco                                                     +44 (0) 20 3757 4980
  Owen Roberts / Fergus Young / Tomisin Ibikunle

 

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.

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" 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.

Abbreviations. Please see below for a list of abbreviations used in this press
release.

1P                           total proved

2P                           proved plus probable

bbl                          barrels

bbl/d                      barrels per day
bcf/d                    billion cubic feet 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

MMboe                 million barrels of oil

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

PDP                        proved developed producing

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, forecasted natural gas pricing, Southern's
ability to re-initiate growth in deploying the net proceeds from the equity
financing on capital expenditures, drilling and completion plans and casing
remediation activities, expectations regarding commodity prices and service
costs, expectations regarding increased demand for gas (including demand
stemming from artificial intelligence data centers, vehicle electrification
and certain export facilities) performance characteristics of the Company's
oil and natural gas properties, the Company's expectation to continue actively
reducing and optimizing operating costs, general and administrative expenses
and maintenance capital to maximize netbacks, the Company's hedging strategy
and execution thereof, the ability of the Company to achieve drilling success
consistent with management's expectations, the Company's expectations
regarding completion of the three remaining DUCs and the drilling operations
in the Mechanicsburg Field (including the timing thereof and anticipated costs
and funding), 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, 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 successful integration of
acquired assets into the Company's operations, the Company's ability to comply
with ongoing obligations under the senior term loan and other sources of
financing, 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 pandemics, commodity price and
exchange rate fluctuations, 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 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)), 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 MD&A for the period ended December 31, 2024 and AIF for the
year ended December 31, 2024, 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, inorganic growth, hedging, natural gas pricing,
netbacks, royalty rates 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
guidance. 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.

"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, 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) Comprised of 81 bbl/d light and medium crude oil, 5 bbl/d NGLs
and 12,292 Mcf/d conventional natural gas

 2  (#_ftnref2) See "Reader Advisories - Specified Financial Measures"

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