TIDMSOUC
RNS Number : 5038I
Southern Energy Corp.
19 April 2022
SOUTHERN ENERGY CORP. ANNOUNCES FOURTH QUARTER AND YEAR 2021
FINANCIAL AND OPERATING RESULTS
Calgary, Alberta - April 19, 2022 - Southern Energy Corp.
("Southern" or the "Company") (TSXV:SOU) (AIM:SOUC) today announces
the release of its fourth quarter and year ended December 31, 2021,
financial and operating results.
Southern is an established producer with natural gas and light
oil assets in Mississippi characterized by a stable, low-decline
production base, a significant low-risk drilling inventory and
strategic access to the best commodity pricing in North America.
Selected financial and operational information is outlined below
and should be read in conjunction with the Company's consolidated
financial statements (the "Financial Statements") and related
management's discussion and analysis (the "MD&A") for the three
months and year ended December 31, 2021 and annual information form
("AIF") for the year ended December 31, 2021, which are available
on the Company's website at www.southernenergycorp.com and have
been filed on SEDAR.
All figures referred to in this news release are denominated in
U.S. dollars, unless otherwise noted.
FOURTH QUARTER AND YEAR 2021 HIGHLIGHTS
-- $1.4 million of adjusted funds flow from operations1 in Q4
2021 and $4.8 million for the full year of 2021, excluding $2.0
million of one-time expenses related to the listing of the common
shares of the Company (the "Common Shares") on the AIM market of
the London Stock Exchange plc (the "AIM"), an increase of 88% and
81% from the same periods in 2020, respectively
-- Q4 2021 average production of 12,753 Mcfe/d2 (2,126 boe/d)
(91% natural gas), resulting in average production for the year of
12,592 Mcfe/d(3) (2,099 boe/d) (92% natural gas), a 6% and 2%
decrease from the same periods in 2020, respectively, demonstrating
the long life, low decline profile of Southern's base assets
-- Petroleum and natural gas sales of $7.2 million in Q4 2021
and $19.9 million for full year 2021, an increase of 107% and 91%
from the same periods in 2020, respectively
-- Annual net earnings of $10.1 million in 2021 ($0.24 per share
- basic) compared to a net loss of $7.8 million in 2020
-- Net Debt(1) reduced by $8.7 million in Q4 2021 and $16.6
million for the full year of 2021 to $6.4 million as at December
31, 2021
-- Average realized oil and natural gas prices for Q4 2021 of
$74.18/bbl and $5.55/Mcf, respectively, reflecting the benefit of
strategic access to premium-priced US sales hubs
-- Completed a series of low-cost well recompletions and
workovers beginning in Q3 and carrying into early Q4 2021
o Work program had an overall cost of approximately $0.8 million
and added approximately 1,250 Mcfe/d(4) (208 boe/d) of production
(approximately 80% natural gas)
o Production adds from work program helped to achieve low
corporate decline rate of 2% in 2021
-- Admission of Southern's entire issued share capital to trading on the AIM in August 2021
-- Successful completion of an equity offering with both new and
existing investors in November 2021 to raise aggregate gross
proceeds of $10.0 million
-- Disposal of the Company's remaining assets from its non-core
Black Warrior Basin cash generating unit ("CGU") in December 2021
for net proceeds of $0.6 million
SUBSEQUENT EVENTS
-- On February 1, 2022, Southern disposed of all its properties
in the Smackover CGU for net proceeds of $0.8 million
-- On April 8, 2022, Southern agreed a second amendment (the
"Second Amendment") to its senior secured term loan of up to $8.5
million (the "New Facility") which, combined with the first
amendment (the "First Amendment") effective December 30, 2021,
resulted in: (a) an increase of Tranche B to $4.5 million ($4.0
million available to borrow); (b) an extension of the availability
to June 30, 2022; and (c) the exclusion of transaction costs
related to the Company's August 2021 AIM admission from the
calculation of EBITDAX (as such term is defined in the Financial
Statements)
Operational Update
Southern has completed the drilling operations on the three well
horizontal padsite in Gwinville. Site preparation for the
completion operations has begun and the Company anticipates initial
production from the wells in May 2022. Flowback from the
completions is planned to be directly into the Gwinville gathering
system to sales, with no flaring required.
1 See "Specified Financial Measures" under "Reader Advisory"
below".
2 Comprised of 160 bbl/d light and medium crude oil, 21 bbl/d
NGLs and 11,667 Mcf/d conventional natural gas
3 Comprised of 150 bbl/d light and medium crude oil, 23 bbl/d
NGLs and 11,554 Mcf/d conventional natural gas
4 Comprised of 39 bbl/d light and medium crude oil, 2 bbl/d NGLs
and 1,000 Mcf/d conventional natural gas
Financial Highlights
Three months ended Year ended
December 31, December 31,
(000s, except $ per share) 2021 2020 2021 2020
--------------------------------------------------- --------- ---------- --------- ---------
Petroleum and natural gas sales $ 7,151 $ 3,461 $ 19,942 $ 10,431
Net earnings (loss) 3,311 2,951 10,093 (7,813)
Net earnings (loss) per share
Basic 0.06 0.11 0.24 (0.28)
Fully diluted 0.05 0.08 0.19 (0.28)
Adjusted funds flow from operations (1) 1,349 758 2,783 2,656
Adjusted funds flow from operations per share (1)
Basic 0.02 0.03 0.07 0.10
Fully diluted 0.02 0.02 0.05 0.10
Capital expenditures 1,755 92 2,562 179
Weighted average shares outstanding
Basic 58,087 27,596 42,545 27,596
Fully diluted 73,895 38,083 55,047 27,596
As at period end
Basic common shares outstanding 78,122 27,596 78,122 27,596
Total assets 46,212 30,354 46,212 30,354
Non-current liabilities 12,609 10,138 12,609 10,138
Net debt (1) $ 6,431 $ 23,064 $ 6,431 $ 23,064
--------------------------------------------------- --------- ---------- --------- ---------
Notes:
(1) See "Reader Advisories - Specified Financial Measures".
Outlook
Pending successful drilling results from the current three well
program, Southern will evaluate the commencement of a continual
drilling program in Gwinville through our low-risk drilling
inventory to further our business plan to provide strong, long term
profitable growth and competitive financial returns in a safe and
responsible manner.
To further support the Gwinville drilling program, effective
December 30, 2021, Southern entered into the First Amendment to the
New Facility and then on April 8, 2022, Southern entered into a
Second Amendment to the New Facility. The First and Second
Amendments resulted in: (a) an increase of Tranche B to $4.5
million ($4.0 million available to borrow); (b) an extension of the
availability to June 30, 2022; and (c) the exclusion of transaction
costs related to the August 2021 AIM admission from the calculation
of EBITDAX (as such term is defined in the Financial
Statements).
In addition, and as part of its risk management and
sustainability strategy, Southern has entered into fixed price and
costless collar hedges to mitigate the effects of market volatility
while retaining the ability to participate in potential natural gas
price appreciation during 2022. Southern currently has hedged 4,000
MMBtu/d of natural gas production for Q1 2022 through a costless
collar with a floor of $3.50/MMBtu and ceiling of $5.10/MMBtu. On
January 28, 2022, Southern entered into a fixed price hedge on
production of 2,000 MMBtu/d of natural gas at a price of
$4.61/MMBtu from March 1, 2022 through December 31, 2022. Combined
with the existing fixed price hedge that Southern has in place, the
Company has 6,000 MMBtu/d of natural gas production hedged at an
average price of $3.60/MMBtu from April 1, 2022 to December 31,
2022. These hedge volumes equate to approximately 52% of current
production. On April 4, 2022, Southern entered into a costless
collar with a floor of $3.50/MMBtu and a ceiling of $20.00/MMBtu
for 2,000 MMBtu/d of natural gas from November 1, 2022 through
March 31, 2023. While the resulting realized losses on commodity
contracts had an impact on cash flow from operating activities as
gas prices rallied in the second half of 2021, Southern expects the
impact will moderate in 2022 as some of these older natural gas
hedges expire. A complete list of the fixed price and costless
collar contracts can be found within Southern's fourth quarter
MD&A.
The Company's long-term strategy remains consistent into 2022,
with an unwavering commitment to environmental, social and
governance ("ESG") principles that support the continued
development and consolidation of prolific reservoirs that are
outside of the more expensive shale basins. Cost savings and
financial discipline will remain a priority through the continued
enhancement of operations and the ongoing evaluation of
opportunities to reduce operating and capital costs.
Southern thanks all of its stakeholders for their ongoing
support and looks forward to providing future updates on
operational activities supported by the Company's recently enhanced
financial flexibility and wider exposure to new pools of capital
following the quotation of its common shares on AIM.
Ian Atkinson, President and CEO of Southern, commented :
"We are pleased to be reporting our Q4 and Full Year Results for
2021, which are demonstrative of the significant progress achieved
this year and of the quality of our asset base and strategy. In
particular, we are pleased to report substantially increased
earnings of $10.1 million in a year which saw Southern Energy
Corp's shares admitted to trading on AIM and the raising of
additional equity funding from both Canada and the UK to support
our ongoing drilling campaign at Gwinville .
"The team at Southern have worked relentlessly this year,
driving substantial value for the Company as well as providing
robust foundations for expansion. With the results of our Gwinville
wells expected in May, we look forward to updating shareholders on
operational developments and continue striving towards our
substantial growth ambitions for 2022 and beyond.
"I would like to thank all of the Southern Energy Corp staff for
their work, and our shareholders for their continued support.
Warrant Vesting Threshold Amendment
It is intended that, following publication of these results, an
amendment will be adopted by the Board to the acceleration
provisions of the 7,240,000 performance-based Common Share purchase
warrants issued in 2018 ("Performance Warrants"). Pursuant to such
amendment, the Performance Warrants vest and become exercisable as
to one-third upon the 20-day volume weighted average trading price
of the Common Shares (the "Market Price") equaling or exceeding
CAD$1.20, an additional one-third upon the Market Price equaling or
exceeding CAD$1.35 and a final one-third upon the Market Price
equaling or exceeding CAD$1.50. In addition, in the event the
Market Price equals or exceeds CAD$1.65, each Performance Warrant
shall be exercisable for 1.5 Common Shares, provided that, at the
time of exercise in respect of the additional 0.5 of a Common Share
per Performance Warrant, the Common Shares are listed on the
facilities of a recognized stock exchange (other than the TSXV) or
the Common Shares are acquired for cash or for the securities of a
company listed on a recognized stock exchange (other than the
TSXV). These acceleration thresholds were previously set at
CAD$1.20, CAD$1.60, CAD$2.00, and CAD$3.20, respectively, prior to
the amendments that will be adopted by the Board. A further update
will be provided in the event that the amendment to the Performance
Warrants described above is not completed.
For further information about Southern, please visit our website
at www.southernenergycorp.com or contact :
Southern Energy Corp.
Ian Atkinson (President and CEO) +1 587 287 5401
Calvin Yau (VP Finance and CFO) +1 587 287 5402
+44 (0) 20 7409
Strand Hanson Limited - Nominated & Financial 3494
Adviser
James Spinney / James Bellman
+44 (0) 20 7907
Hannam & Partners - Joint Broker 8500
Sam Merlin / Ernest Bell
Canaccord Genuity - Joint Broker +44 (0) 20 7523
Henry Fitzgerald-O'Connor / James Asensio 8000
Camarco +44 (0) 20 3757
James Crothers, Hugo Liddy, Billy Clegg 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.
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.
Abbreviations . Please see below for a list of abbreviations
used in this press release.
bbl barrels
bbl/d barrels per day
boe barrels of oil
boe/d barrels of oil per day
Mcf thousand cubic feet
Mcf/d thousand cubic feet per day
Mcfe thousand cubic feet equivalent
Mcfe/d thousand cubic feet equivalent per day
MMBtu million British thermal units
MMBtu/d million British thermal units per day
Forward Looking Statements . Certain information included in
this press release constitutes forward-looking information under
applicable securities legislation. Forward-looking information
typically contains statements with words such as "anticipate",
"believe", "expect", "plan", "intend", "estimate", "propose",
"project" or similar words suggesting future outcomes or statements
regarding an outlook. Forward-looking information in this press
release may include, but is not limited to, statements concerning
the Company's asset base including the development of the Company's
assets, future commodities pricing, the effect of market conditions
and the COVID-19 pandemic on the Company's performance, Southern's
planned ESG initiatives, expectations regarding Southern's well
recompletion and workover programs and the effects thereof on the
Company's financial position, expectations regarding the Company's
hedging program, expectations regarding site preparation and
production from the Company's drilling operations in Gwinville and
the timing thereof, expectations regarding the use of proceeds from
the Company's credit facilities, as amended by the First Amendment
and the Second Amendment thereto,, expected benefits from the
Company's AIM listing, the Company's financial hedging program
including the use of financial derivatives, future production
levels, acquisition opportunities, costs/debt reducing activities,
and planned capital expenditures.
The forward-looking statements contained in this press release
are based on certain key expectations and assumptions made by
Southern, including the timing of and success of future drilling,
development and completion activities, the performance of existing
wells, the performance of new wells, the availability and
performance of facilities and pipelines, the geological
characteristics of Southern's properties, the characteristics of
the Company's assets, the successful application of drilling,
completion and seismic technology, benefits of current commodity
pricing hedging arrangements, Southern's ability to enter into
future derivative contracts on acceptable terms, prevailing weather
conditions, prevailing legislation affecting the oil and gas
industry, commodity prices, royalty regimes and exchange rates, the
application of regulatory and licensing requirements, the Company's
ability to obtain all requisite permits and licences, the
availability of capital, labour and services, the creditworthiness
of industry partners and the Company's ability to source and
complete asset acquisitions.
Although Southern believes that the expectations and assumptions
on which the forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking
statements because Southern can give no assurance that they will
prove to be correct. Since forward-looking statements address
future events and conditions, by their very nature they involve
inherent risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of
factors and risks. These include, but are not limited to, risks
associated with the oil and gas industry in general (e.g.,
operational risks in development, exploration and production; the
uncertainty of reserve estimates; the uncertainty of estimates and
projections relating to production, costs and expenses, regulatory
risks, and health, safety and environmental risks), constraint in
the availability of services, negative effects of the current
COVID-19 pandemic, commodity price and exchange rate fluctuations,
geo-political risks, political and economic instability abroad,
wars (including Russia's military actions in Ukraine), hostilities,
civil insurrections, inflationary risks
including potential increases to operating and capital costs,
changes in legislation impacting the oil and gas industry, adverse
weather or break-up conditions and uncertainties resulting from
potential delays or changes in plans with respect to exploration or
development projects or capital expenditures. Ongoing military
actions between Russia and the Ukraine have the potential to
threaten the supply of oil and gas from the region. The long-term
impacts of the actions between these nations remains uncertain.
These and other risks are set out in more detail in Southern's
MD&A and AIF.
The forward-looking information contained in this press release
is made as of the date hereof and Southern undertakes no obligation
to update publicly or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
unless required by applicable securities laws. The forward-looking
information contained in this press release is expressly qualified
by this cautionary statement.
Future Oriented Financial Information . Any financial outlook or
future oriented financial information in this press release, as
defined by applicable securities legislation, has been approved by
management of Southern. Readers are cautioned that any such
future-oriented financial information contained herein should not
be used for purposes other than those for which it is disclosed
herein. The Company and its management believe that the prospective
financial information has been prepared on a reasonable basis,
reflecting management's best estimates and judgments, and
represent, to the best of management's knowledge and opinion, the
Company's expected course of action. However, because this
information is highly subjective, it should not be relied on as
necessarily indicative of future activities or results.
Specified Financial Measures. This press release provides
various financial measures that do not have a standardized meaning
prescribed by 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, operating netback, 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 on
SEDAR.
"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.
"Operating Netback" (non-IFRS financial measure) equals total
oil and natural gas sales less royalties, production taxes,
operating expenses, transportation costs and realized gain / (loss)
on derivatives. Management considers operating netback an important
measure to evaluate its operational performance, as it demonstrates
field level profitability relative to current commodity prices.
"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 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).
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END
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(END) Dow Jones Newswires
April 19, 2022 02:01 ET (06:01 GMT)
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