TIDMSOUC
RNS Number : 0077N
Southern Energy Corp.
27 May 2022
SOUTHERN ENERGY CORP. ANNOUNCES FIRST QUARTER 2022 FINANCIAL AND
OPERATING RESULTS
Calgary, Alberta - May 26, 2022 - Southern Energy Corp.
("Southern" or the "Company") (TSXV:SOU) (AIM:SOUC) today announces
the release of its first quarter financial and operating results
for the three months ended March 31, 2022.
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 unaudited
consolidated financial statements (the "Financial Statements") and
related management's discussion and analysis (the "MD&A") for
the three months ended March 31, 2022, 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.
FIRST QUARTER 2022 HIGHLIGHTS
-- $2.2 million of adjusted funds flow from operations[1] in Q1
2022, an increase of 121% from the same period in 2021
-- Petroleum and natural gas sales of $5.9 million in Q1 2022,
an increase of 54% from the same period in 2021
-- Q1 2022 average production of 11,515 Mcfe/d[2] (1,919 boe/d)
(92% natural gas), an 11% decrease from the same period in 2021
-- Rig released two (2.0 net) wells of the three well program at
Gwinville in Q1 2022 with the third well rig released in April
2022
-- Net loss of $1.9 million in Q1 2022 ($0.02 per share - basic
and diluted), with an unrealized loss on derivatives of $2.9
million, compared to a net loss of $0.6 million in Q1 2021
-- Exited Q1 2022 with Net Debt(1) of $10.7 million, and Net
Debt to Q1 2022 annualized Adjusted Funds Flow from Operations(1)
of 1.2x
-- Average realized oil and natural gas prices for Q1 2022 of
$95.20/bbl and $4.87/Mcf, respectively, reflecting the benefit of
strategic access to premium-priced US sales hubs
-- On February 1, 2022, Southern disposed of all of its assets
from its non-core Smackover cash generating unit for net proceeds
of $0.8 million
SUBSEQUENT EVENTS
-- On April 8, 2022, Southern entered into 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 admission to the AIM market of
the London Stock Exchange from the calculation of EBITDAX (as such
term is defined in the Financial Statements)
Operational Update
In May 2022, Southern commenced completion operations on the
three-well horizontal padsite in the Gwinville asset. The first
well to begin flowback following the stimulation was the GH 19-3 #3
well, which came on-line on May 25, 2022. The GH 19-3 #2 and GH
19-3 #4 wells are expected to be on-line shortly, and the Company
is looking forward to providing initial production results in the
coming weeks.
During Q1 2022, the Company experienced high third-party
pipeline operating pressures in the Mount Olive field which
negatively impacted production, but this situation has since been
resolved by optimizing compression needs in the field. Current May
2022 production estimates are back to expected levels of
approximately 11,820 Mcfe/d[3] (1,970 boe/d). Q1 2022 also reflects
the first quarter of the non-core oil dispositions which amount to
a loss of approximately 240 Mcfe/d[4] (40 boe/d).
Financial Highlights
Three months ended March 31,
(000s, except $ per share) 2022 2021
--------------------------------------------------- --------------- --------------
Petroleum and natural gas sales $ 5,925 $ 3,857
Net loss (1,855) (631)
Net loss per share
Basic (0.02) (0.02)
Fully diluted (0.02) (0.02)
Adjusted funds flow from operations (1) 2,234 1,011
Adjusted funds flow from operations per share (1)
Basic 0.03 0.04
Fully diluted 0.03 0.04
Capital expenditures 6,872 57
Weighted average shares outstanding
Basic 78,153 27,596
Fully diluted 78,153 27,596
As at period end
Basic common shares outstanding 78,200 27,596
Total assets 48,534 29,339
Non-current liabilities 11,777 10,033
Net debt (1) $ 10,745 $ 22,524
--------------------------------------------------- --------------- --------------
Notes:
(1) See "Reader Advisories - Specified Financial Measures".
Outlook
With the results of our three well drilling program at Gwinville
expected imminently, our focus remains on the delivery of these
results in an efficient and safe manner. Success with these three
wells may see Southern commencing a continual drilling program at
Gwinville, taking advantage of our low-risk drilling inventory.
These first three Gwinville horizontal wells could deliver
material production increases for the Company and, given the
current commodity prices and production not being hedged from these
wells, will deliver significant near-term cash flow.
As part of its risk management and sustainability strategy,
Southern has entered into some fixed price and costless collar
hedges which will cover its existing production wells to mitigate
the effects of market volatility while retaining the ability to
participate in potential natural gas price appreciation during
2022. 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. 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. A
complete list of the fixed price and costless collar contracts can
be found within Southern's first 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.
Ian Atkinson, President and CEO of Southern, commented :
"With the significantly increased commodity prices experienced
in Q1 2022, Southern has started the year very positively. Our
balance sheet is getting stronger and we are being rewarded for our
investment strategy in prior quarters with strong production
yielding significant cash flow.
In the immediate future, our focus remains on the three well
development program at Gwinville which, if successful, not only
means increased production from these wells, but speaks volumes as
to the potential for our operational strategy to deliver multi-year
growth from the wider Gwinville field, highlighting the significant
opportunity and optionality we have in providing transformational
production, reserves and cash flow growth for shareholders.
As always, I would like to thank the staff and shareholders of
Southern Energy Corp. for their continued hard work and support. We
look forward to providing further updates in due course."
[1] See "Specified Financial Measures" under "Reader Advisory"
below".
[2] Comprised of 139 bbl/d light and medium crude oil, 14 bbl/d
NGLs and 10,597 Mcf/d conventional natural gas
[3] Comprised of 113 bbl/d light and medium crude oil, 11 bbl/d
NGLs and 11,076 Mcf/d conventional natural gas
[4] Comprised of 35 bbl/d light and medium crude oil, 3 bbl/d
NGLs and 12 Mcf/d conventional natural gas
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 the Company's
hedging program, expectations regarding site preparation and
production from the Company's drilling operations in Gwinville and
the timing thereof, ability to achieve production estimates set out
herein, expectations regarding the use of proceeds from the
Company's credit facilities, as amended by the First Amendment and
the Second Amendment thereto, the availability and renewal of the
Credit Facility, the Company's financial hedging program including
the use and expected benefits 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, Southern's ability
to secure financing 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.
"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.
"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.
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