TIDMSOUC
RNS Number : 8486W
Southern Energy Corp.
23 August 2022
SOUTHERN ENERGY CORP. ANNOUNCES SECOND QUARTER 2022 FINANCIAL
AND OPERATING RESULTS, SECOND HALF 2022 CAPITAL BUDGET, POSITIVE
GWINVILLE WELL UPDATE AND EXPANDED CREDIT FACILITY
Calgary, Alberta - August 23 , 2022 - Southern Energy Corp.
("Southern" or the "Company") (TSXV:SOU) (AIM:SOUC), the
established producer with natural gas and light oil assets in
Mississippi, today announces the release of its second quarter
financial and operating results for the three and six months ended
June 30, 2022. 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 and six months ended June 30, 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.
SECOND QUARTER 2022 HIGHLIGHTS
-- $3.6 million of adjusted funds flow from operations[1] in Q2
2022, an increase of 490% from the same period in 2021
-- Net earnings of $2.8 million in Q2 2022 ($0.03 earnings per
share - basic and diluted) compared to net earnings of $3.1 million
in the same period of 2021 (which included a one-time gain of $4.5
million on debt retirement)
-- Petroleum and natural gas sales of $10.3 million in Q2 2022,
an increase of 176% from the same period in 2021
-- Q2 2022 average production of 14,169 Mcfe/d[2] (2,362 boe/d)
(95% natural gas), which included only a partial month of June from
the three new Gwinville wells, an increase of 14% from the same
period in 2021
-- Completed and successfully brought online all three wells
from the initial Gwinville appraisal program
-- Exited Q2 2022 with Net Debt(1) of $12.8 million, and Net
Debt to annualized Adjusted Funds Flow from Operations(1) of
0.9x
-- Average realized oil and natural gas prices for Q2 2022 of
$109.01/bbl and $7.53/Mcf, respectively, reflecting the benefit of
strategic access to premium-priced US sales hubs
SUBSEQUENT EVENTS
-- On July 7, 2022, the Company completed a bought deal
prospectus offering and placing raising aggregate gross proceeds of
$31.0 million, and leaving Southern with approximately $33.2
million of cash as at July 31, 2022
-- Initiated planning and procurement for a multi-well program
to follow-up on the successful appraisal program at Gwinville
-- On August 19, 2022, Southern entered into a non-binding term
sheet with its current lender in respect of its senior secured term
loan (the "Credit Facility") to increase the total Credit Facility
to $35 million (details of which are provided within the MD&A
and Financial Statements)
-- The combination of the recent equity financing and credit
facility expansion, uniquely positions Southern to execute a
meaningful growth strategy
Ian Atkinson, President and CEO of Southern, commented:
"We are pleased with the success of our recent equity financing,
which allows us to accelerate the organic growth strategy portion
of our goal to reach 25,000 boe/d. The success of these first three
wells at Gwinville have already increased our corporate production
by over 100%. We are truly excited by our ability to begin a
long-term development drilling program to unlock shareholder value
due to the significant reserves, production and cashflow growth in
Gwinville and our other assets. Cashflow generated from this
development will support our fundamental strategy of both organic
and inorganic growth of natural gas weighted assets in the Gulf
Coast area of the United States."
[1] See "Specified Financial Measures" under "Reader Advisory"
below
[2] Comprised of 100 bbl/d light and medium crude oil, 13 bbl/d
NGLs and 13,491 Mcf/d conventional natural gas
Financial Highlights
Three months ended June 30, Six months ended June 30,
(000s, except $ per share) 2022 2021 2022 2021
--------------------------------------------------- -------------- -------------- ------------- -------------
Petroleum and natural gas sales $ 10,311 $ 3,736 $ 16,236 $ 7,593
Net earnings 2,838 3,099 984 2,468
Net earnings per share
Basic 0.03 0.08 0.01 0.07
Fully diluted 0.03 0.06 0.01 0.06
Adjusted funds flow from operations (1) 3,590 608 5,824 1,619
Adjusted funds flow from operations per share (1)
Basic 0.04 0.02 0.07 0.05
Fully diluted 0.04 0.01 0.06 0.04
Capital expenditures 10,104 36 16,976 93
Weighted average shares outstanding
Basic 83,302 39,044 80,742 33,352
Fully diluted 101,011 54,943 91,796 45,235
As at period end
Basic common shares outstanding 89,537 44,674 89,537 44,674
Total assets 58,347 29,254 58,347 29,254
Non-current liabilities 10,013 13,486 10,013 13,486
Net debt (1) $ 12,814 $ 14,292 $ 12,814 $ 14,292
--------------------------------------------------- -------------- -------------- ------------- -------------
Notes:
(1) See "Reader Advisories - Specified Financial Measures".
Capital Budget
Based on the success of the initial three well appraisal program
at Gwinville, Southern's Board of Directors has approved an
accelerated capital budget of US$34.4 million for the balance of
2022, which will allow the Company to commence a long-term drilling
program beginning in Q4 2022 in the Gwinville field. Major services
and equipment have been secured for the development program to
optimize capital and operational efficiencies. The approved
drilling program will target multi-zone horizontal potential in the
Upper Selma, Lower Selma and City Bank formations with a further
five horizontal wells, as well as pad construction, in-field
pipelines and water disposal well conversions that will help
service the next few years of Gwinville development. Management
expects to have the first pad of three horizontal wells on stream
prior to year-end but with limited production.
In the upcoming program the Company will drill at least one
Lower Selma Chalk horizontal well and one City Bank horizontal well
to prove the deliverability of these high remaining gas-in-place
reservoirs. Neither of these horizons have undeveloped reserves
booked despite having historic vertical and horizontal success from
the same era as the first-generation Selma Chalk wells. It is
management's expectation that proving success in these formations
will lead to material reserves additions for the Company. At
current gas pricing, and using the older Gen 2 type curve, these
Gwinville horizontal wells are expected to pay out in less than 12
months, allowing the Company to self fund further drilling
campaigns in its assets expected to follow in 2023.
Operations Update
Southern was successful in safely and efficiently executing the
three well appraisal program in the first half of 2022, marking the
first horizontal drilling activity in the Gwinville Field in
approximately 12 years. The primary goal of the appraisal program
was to reaffirm the remaining recoverable gas-in-place in the Selma
Chalk reservoir by proving the successful application of advanced
completion technology ("Gen 3" design). The three wells were
drilled, completed, equipped and tied-in within 20% of originally
budgeted estimates despite industry wide inflationary pressures
that were well in excess of that figure.
Highlights
-- Growth strategy to reach 25,000 boe/d is solidified with the
US$34.4 million capital budget being the catalyst for the Company
to commence a self-funded, long-term drilling program from Q4 2022
onwards at Gwinville field
-- Natural gas sales at the Transco Zone 4 hub realizing an
index price of > US$13 per MMbtu for August, reflecting
approximately US$5.00 per MMBtu premium to NYMEX. Futures contracts
suggests that a continuation of this positive basis differential is
forecasted for at least the next few years.
-- The three Gwinville Upper Selma Chalk wells have now
successfully achieved a combined IP30 gas rate of 14.1 MMcf/d
(2,350 boepd), adding significant unhedged production to the
Company during these strong market conditions, bringing total early
August Company production up to approximately 22.1 MMcfe/d ( 3, 680
boepd) (96% natural gas):
- GH 19-3 #2 well achieved a rate of 6.5 MMcf/d (1,083 boepd),
exceeding the older Generation 2 ("Gen 2") type curve IP30 forecast
of 5.7 MMcf/d (950 boepd)
- GH 19-3 #3 and GH 19-3 #4 wells achieved IP30 gas rates of 3.6
and 4.0 MMcf/d (600 boepd and 670 boepd), respectively, despite
only 50% of the horizontal lateral in both wells being in the
high-grade Upper Selma Chalk interval
- Estimated July 2022 revenue for the three well padsite of over $3.6 million.
The three Gwinville Upper Selma Chalk horizontal wells have
achieved an average IP30 gas rate (first 30 days of production
following recovery of 20% load fluid) of 4.7 MMcf/d. A subsequent,
comprehensive look-back analysis of the program, including a full
3D seismic re-interpretation, has significantly improved the
Company's ability to model the structural complexity of the
reservoir and identify the optimal drill path of future horizontal
laterals. Furthermore, the planned Q4 2022 drilling program will
utilize rotary steerable drilling technology which will also
optimize both directional steering precision and performance.
By implementing the appraisal program learnings, the Company is
highly confident that future Upper Selma Chalk wells can
successfully achieve > 80% lateral length within the high-grade
porosity interval. When the production results from the GH 19-3 #3
and GH 19-3 #4 wells are normalized to account for effective
lateral length, the rates closely mirror the GH 19-3 #2 well that
successfully stayed in the target interval for > 90% of the
horizontal lateral.
With the Gen 3 stimulation design that increased stage counts by
> 275% and proppant concentrations by > 40% compared to the
Gen 2 design of 8-10 years ago, the Company believes that the
ultimate recoverable gas from these three wells will be superior to
earlier wells. By optimizing the lateral length in the targeted
high-grade Upper Selma Chalk interval in future wells, the Company
expects to replicate the GH 19-3 #2 results. As the Company obtains
three and six month production histories, the Company will present
updated type curve forecasts that will assist in modelling future
production growth. With the successful results of the Gen 3
appraisal program, the Company expects to add material 1P and 2P
reserves to the Gwinville Field with the year end 2022 reserves
report, expected to be published during Q1 2023.
Outlook
Southern has secured the equipment and major services necessary
to begin the next phase of drilling at Gwinville in Q4 2022.
Southern intends to strategically and efficiently deploy cash from
the recent equity financing to capitalize on the strong natural gas
pricing in the Southeastern U.S. and robust economics at the
Gwinville field, to materially grow the Company organically over
the coming years.
Natural gas pricing has remained strong in the Southeastern U.S.
spot and forward basis markets highlighted by the recent August
2022 settlement price where a portion of Southern's natural gas is
selling for approximately US$5.00 per MMBtu premium to NYMEX. In
recent weeks, this region has had the highest priced natural gas
market in the U.S. and futures markets indicate premiums to NYMEX
extending out to 2026. At current pricing the Company's development
drilling at Gwinville is expected to payout in far less than 12
months. The Company continues to monitor these premium prices and
is prepared to hedge additional basis exposure at these elevated
basis premiums.
Calvin Yau, Chief Financial Officer of Southern, commented :
"The strength of natural gas spot and basis pricing premiums to
NYMEX in Southeastern U.S. has continued positively over the past
month. Our long-term drilling program will add new unhedged
production allowing Southern and its shareholders to realize
significant additional value, from sales made at premiums to
NYMEX."
The Company's long-term strategy remains consistent, 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.
Corporate Update
The Company confirms that, further to the announcement of June
16, 2022, Paul Baay has been appointed as a Non-Executive Director
of the Company. The information regarding Paul Baay required to be
disclosed pursuant to Schedule 2(g) of the AIM Rules for Company is
set out below:
Paul Raymond Baay, aged 59
Current Directorships/Partnerships Past Directorships/Partnerships within last 5 years
Alberta Foundation for the Arts AlkaLi3 Resources Inc
----------------------------------------------------
Calvalley Petroleum (Cyprus) Ltd Council for Canadian American Relations
----------------------------------------------------
Carnegies Institution of Canada Junior Achievement of Southern Alberta
----------------------------------------------------
National Gallery of Canada Loop Insights Inc
----------------------------------------------------
Octavia Energy Corporation Limited
----------------------------------------------------
Touchstone Exploration Inc
----------------------------------------------------
Paul Baay holds no direct or indirect interest in the Company's
issued share capital.
There is no further information to be disclosed pursuant to
Schedule 2(g) of the AIM Rules for Companies.
Management Changes
Southern is also pleased to announce the promotion of Mr. Gary
McMurren, VP Engineering, to the role of Chief Operating Officer,
Mr. Jeff Forrester, Engineering Manager, to the role of VP
Engineering and Mr. Ryan Read, Controller, to the role of VP
Finance.
Mr. McMurren has over 22 years of engineering, operational and
management experience in the oil and gas industry and was a
co-founder and VP Engineering of Gulf Pine Energy Partners. Mr.
McMurren was formerly the Director of Light Oil at Athabasca Oil
Corp. Prior thereto, he has held senior engineering positions at
Galleon Energy Inc., ARC Resources Ltd., and Talisman Energy Inc.
He holds a Bachelor of Science in Chemical Engineering Degree and a
Professional Engineer designation.
Mr. Forrester has over 15 years of engineering, operations and
management experience in the oil and gas industry. He was the
Engineering Manager at Gulf Pine. Prior thereto, he has held both
engineering and operations roles at Athabasca, and ARC Resources
Ltd. He holds a Bachelor of Science in Chemical Engineering with a
minor in Petroleum Engineering and is a designated Professional
Engineer.
Mr. Read has over 17 years of financial, operational and
management experience in the oil and gas industry. Mr. Read was the
Controller of Gulf Pine. Prior thereto, he was the Assistant
Controller at Long Run Exploration Ltd. and has worked both
financial and operational roles at Galleon Energy Inc. and Devon
Canada. He holds a Bachelor of Commerce Degree in Finance and Risk
Management, a Chartered Financial Analyst Designation, and is a
member of the Chartered Professional Accountants of Alberta.
Block Admission and Total Voting Rights
Further to the Company's announcement on May 6, 2022, regarding
the application to AIM for a block admission in respect of certain
outstanding dilutive instruments in the Company (the "Block
Admission"), the Company has applied to AIM to add a further
14,262,643 common shares in the Company ("Common Shares") to the
existing outstanding block admission, taking the total number of
common shares subject to block admission to 18,863,750 new Common
Shares. This will be used to facilitate the admission of Common
Shares to trading following future exercises of outstanding
warrants issued in 2021 ("2021 Warrants") and future conversions of
outstanding 8% convertible unsecured subordinated debentures issued
on June 14, 2019, and January 15, 2021, (the "Convertible
Debentures"). The number of Common Shares admitted for these
purposes is as follows:
-- up to 13,312,500 Common Shares in connection with the 2021 Warrants; and
-- up to 5,551,250 Common Shares in connection with the Convertible Debentures.
The Common Shares cited above will be issued from time to time
pursuant to exercises of the 2021 Warrants and conversions of the
outstanding Convertible Debentures.
New Common Shares issued under the block admission will rank
pari passu in all respects with existing Common Shares, and it is
expected that the block admission will become effective from 8.00
a.m. on or around 24 August 2022. There is no immediate change to
the Company's issued share capital as a result of this block
admission.
The Company will make six-monthly announcements of the
utilisation of the block admission, in line with its obligations
under AIM Rule 29.
At the time of this announcement, Southern Energy has
135,908,785 Common Shares in issue. This figure may be used by
shareholders in the Company as the denominator for the calculations
by which they will determine if they are required to notify their
interest in, or a change in their interest in, the share capital of
the Company.
Qualified Person's Statement
Gary McMurren, COO, who has over 22 years of relevant experience
in the oil industry and has approved the technical information
contained in this announcement. Mr. McMurren is registered as a
Profession 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 or contact :
Southern Energy Corp.
Ian Atkinson (President and CEO) +1 587 287 5401
Calvin Yau (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 / Gerel Bastin 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 characterized by a stable, low-decline
production base, a significant low-risk drilling inventory and
strategic access to premium commodity pricing in North America.
Southern has a primary focus on acquiring and developing
conventional natural gas and light oil resources in the southeast
Gulf States of Mississippi, Louisiana, and East Texas. Our
management team has a long and successful history working together
and have created significant shareholder value through accretive
acquisitions, optimization of existing oil and natural gas fields
and the utilization of re-development strategies utilizing
horizontal drilling and multi-staged fracture completion
techniques.
READER ADVISORY
MCFE Disclosure . Natural gas liquids volumes are recorded in
barrels of oil (bbl) and are converted to a thousand cubic feet
equivalent (Mcfe) using a ratio of six (6) thousand cubic feet to
one (1) barrel of oil (bbl). Natural gas volumes recorded in
thousand cubic feet (Mcf) are converted to barrels of oil
equivalent (boe) using the ratio of six (6) thousand cubic feet to
one (1) barrel of oil (bbl). Mcfe and boe may be misleading,
particularly if used in isolation. A boe conversion ratio of 6
mcf:1 bbl or a Mcfe conversion ratio of 1 bbl:6 Mcf is based in an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. In addition, given that the value ratio based on the
current price of oil as compared with natural gas is significantly
different from the energy equivalent of six to one, utilizing a boe
conversion ratio of 6 Mcf:1 bbl or a Mcfe conversion ratio of 1
bbl:6 Mcf may be misleading as an indication of value.
Throughout this press release, "crude oil" or "oil" refers to
light and medium crude oil product types as defined by National
Instrument 51-101 - Standards of Disclosure for Oil and Gas
Activities ("NI 51-101"). References to "NGLs" throughout this
press release comprise pentane, butane, propane, and ethane, being
all NGLs as defined by NI 51-101. References to "natural gas"
throughout this press release refers to conventional natural gas as
defined by NI 51-101.
Unit Cost Calculation. For the purpose of calculating unit
costs, natural gas volumes have been converted to a boe using six
thousand cubic feet equal to one barrel unless otherwise stated. A
boe conversion ratio of 6:1 is based upon an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. This conversion
conforms with National Instrument 51 101 - Standards of Disclosure
for Oil and Gas Activities. Boe may be misleading, particularly if
used in isolation.
Short-Term Results. References in this press release to IP30,
production test rates, initial test 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 for Southern. A pressure transient analysis or well test
interpretation has not been carried out in respect of all wells.
Accordingly, the Company cautions that the test results should be
considered to be preliminary.
Type Curves. Certain type curves disclosure presented herein
represents estimates of the production decline and ultimate volumes
expected to be recovered from wells over the life of the well. The
type curves represent what management thinks an average well will
achieve, based on methodology that is analogous to wells with
similar geological features. Individual wells may be higher or
lower but over a larger number of wells, management expects the
average to come out to the type curve. Over time type curves can
and will change based on achieving more production history on older
wells or more recent completion information on newer wells.
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
IP30 average production for the first 30 days that a well is onstream
Mcf thousand cubic feet
Mcf/d thousand cubic feet per day
MMcf million cubic feet
MMcf/d million cubic feet per day
Mcfe thousand cubic feet equivalent
Mcfe/d thousand cubic feet equivalent per day
MMBtu million British thermal units
MMBtu/d million British thermal units per day
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, oil and natural gas production levels, including the
objective of achieving production of 25,000 boe/d; expectations
regarding material reserves additions in the 2022 reserves report,
anticipated operational results for H2 2022 including, but not
limited to, capital expenditures and drilling plans, including
expectations that the drilling program at Gwinville field will be
self-funded from Q4 2022 onwards; expectations regarding commodity
prices; the performance characteristics of the Company's oil and
natural gas properties; hedging strategy; the ability of the
Company to achieve drilling success consistent with management's
expectations; and the source of funding for the Company's
activities, the effect of market conditions and the COVID-19
pandemic on the Company's performance, Southern's planned ESG
initiatives, 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 are expected to be amended in accordance with
the non-binding term sheet, the availability and renewal of the
Credit Facility and future amendments thereto, future organic
growth and acquisition opportunities, costs/debt reducing
activities, and planned capital expenditures. 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 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 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, prevailing commodity prices, price volatility, price
differentials and the actual prices received for the Company's
products, royalty regimes and exchange rates, 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 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 . This press release
contains future-oriented financial information and financial
outlook information (collectively, "FOFI") about Southern's
prospective results of operations, cash flow, increased capacity
under the credit facility, capital expenditures and payout of
wells, 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 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.
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.
[1] See "Specified Financial Measures" under "Reader Advisory"
below
[2] Comprised of 100 bbl/d light and medium crude oil, 13 bbl/d
NGLs and 13,491 Mcf/d conventional natural gas
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END
MSCDXGDICSDDGDD
(END) Dow Jones Newswires
August 23, 2022 02:00 ET (06:00 GMT)
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