TIDMSOUC
RNS Number : 5073W
Southern Energy Corp.
18 April 2023
SOUTHERN ENERGY CORP. ANNOUNCES FOURTH QUARTER AND YEAR 2022
FINANCIAL AND OPERATING RESULTS
Calgary, Alberta - April 18, 2023 - Southern Energy Corp.
("Southern" or the "Company") (TSXV:SOU) (AIM:SOUC)(OTCQX:SOUTF),
an established producer with natural gas and light oil assets in
Mississippi, announces the release of its fourth quarter and year
end December 31, 2022, financial and operating results. Selected
financial and operational information is outlined below and should
be read in conjunction with the Company's audited 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, 2022 and annual information form
("AIF") for the year ended December 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.
FOURTH QUARTER AND YEAR 2022 HIGHLIGHTS
-- $3.1 million of adjusted funds flow from operations [1] in Q4
2022 ($0.02 per share basic and diluted) compared $1.4 million in
Q4 2021 ($0.02 per share basic and diluted) and $17.2 million for
the year ended December 31, 2022 ($0.16 per share basic and $0.14
per share diluted), an increase of 500% from the same period in
2021
-- Net earnings of $1.7 million ($0.01 per share basic and
diluted) and $9.3 million ($0.09 per share basic and $0.08 per
share diluted) for the three and twelve months ended December 31,
2022; as compared to net earnings of $3.3 million ($0.06 per share
basic and $0.05 per share diluted) and $10.1 million ($0.24 per
share basic and $0.19 per share diluted) in the same period of
2021. 2021 results included the one-time recognition of an
impairment recovery and gain on debt retirement
-- Petroleum and natural gas sales were $9.8 million in Q4 2022
and $45.2 million for the full year 2022, an increase of 37% and
127% from the same periods in 2021, respectively
-- Average production of 16,084 Mcfe/d [2] (2,681 boe/d) (96%
natural gas) during Q4 2022 and 15,584 Mcfe/d [3] (2,597 boe/d)
(95% natural gas) for the full year 2022, an increase of 26% and
24% from the same periods in 2021, respectively
-- Average realized natural gas and oil prices for Q4 2022 of
$6.35/Mcf and $81.98/bbl, respectively, reflecting the benefit of
strategic access to premium-priced US sales hubs in a geographic
region with strong industrial and power generation natural gas
demand
-- On July 7, 2022, successfully closed a $17.5 million bought
deal prospectus offering in Canada and a $13.5 million placing in
the UK, raising aggregate gross proceeds of $31.0 million
-- Successfully negotiated a $25.0 million borrowing capacity
increase in respect of its senior secured term loan ("Credit
Facility") to increase the total Credit Facility to $35.0
million
-- Exited Q4 2022 with positive net cash(1) of $13.4 million
-- In November 2022, spud three horizontal wells from the 18-10
padsite at Gwinville which included the first City Bank appraisal
well
Ian Atkinson, President and CEO of Southern, commented:
"Our Q4 and full year 2022 results have provided a preview of
what Southern can and expects to achieve, with its strong
underlying production base and technical ability to organically
grow our assets at constructive natural gas prices. Our equity
financing in July and Credit Facility expansion in September have
put the Company in a position to weather the natural gas price
volatility and provide flexibility and patience as we continue to
work towards our goal to reach 25,000 boe/d. We're excited to build
upon the learnings from our three well appraisal program in Q2, as
well as the seven wells drilled as part of the follow up program at
Gwinville which will continue to translate into future drilling and
cost efficiencies when the program resumes. We have positioned
ourselves to re-ignite our organic growth in a more supportive
natural gas price environment and will continue to seek growth
opportunity to increase significant shareholder value as we
continue through the year."
Financial Highlights
Three months ended December 31, Year ended December 31,
(000s, except $ per share) 2022 2021 2022 2021
------------------------------------------------- ---------------- --------------- --------------- --------------
Petroleum and natural gas sales $ 9,830 $ 7,151 $ 45,217 $ 19,942
Net earnings 1,749 3,311 9,299 10,093
Net earnings per share
Basic 0.01 0.06 0.09 0.24
Fully diluted 0.01 0.05 0.08 0.19
Adjusted funds flow from operations (1) 3,059 1,426 17,156 2,860
Adjusted funds flow from operations per share (1)
Basic 0.02 0.02 0.16 0.07
Fully diluted 0.02 0.02 0.14 0.05
Capital expenditures 10,218 1,755 30,434 2,562
Weighted average shares outstanding
Basic 137,378 58,087 108,144 42,545
Fully diluted 146,797 73,895 122,972 55,047
As at period end
Basic common shares outstanding 138,057 78,122 138,057 78,122
Total assets 97,652 46,212 97,652 46,212
Non-current liabilities 12,817 12,609 12,817 12,609
Positive net cash (net debt) (1) $ 13,437 $ (6,431) $ 13,437 $ (6,431)
------------------------------------------------- ---------------- --------------- --------------- --------------
Note:
(1) See "Reader Advisories - Specified Financial Measures".
Outlook
In order to be diligent in protecting the Company balance sheet
and respond to the current low natural gas prices, Southern has
moderated and taken a pause on the Gwinville organic growth
program. Southern has left four drilled, uncompleted wells ("DUCs")
that can be quickly completed and brought online through Southern's
100% owned equipment at higher natural gas prices. Southern
currently has $23.0 million of unused capacity on its Credit
Facility, which can be utilized to complete the DUCs at supportive
natural gas prices or be opportunistic with counter cyclical
inorganic growth opportunities.
Natural gas prices have been under pressure in 2023 coming off a
mild winter in North America and increased production from the
depletion of the DUC well inventory as a result of higher prices in
2022. In Q1 2023, Southern was protected from some of the
volatility with a costless collar on 2,000 MMBtu/d of production
with a floor price of $3.50/MMBtu. To further protect against the
volatility, Southern has entered into a basis swap transaction to
secure a premium to NYMEX of $0.32 per MMBtu on 1,000 MMBtu/d from
April 1, 2023 to October 31, 2023. The Company continues to monitor
the basis differential prices and is prepared to hedge additional
basis exposure at elevated basis premiums.
Calvin Yau, Chief Financial Officer of Southern, commented :
"2022 was a record year for Southern thanks to strong production
from our base assets and the Gwinville appraisal program along with
the continued strength of natural gas spot and basis pricing
premiums to NYMEX in Southeastern U.S., building a solid foundation
for Southern as we enter 2023. While we were excited to begin our
long-term drilling program, we felt it was prudent to take a pause
and protect our balance sheet in order to be flexible and able to
capitalize on potential opportunities or quickly resume our organic
growth program at the right time. Southern is in an enviable
position being able to operate in a nimble and dynamic way around
our drilling program, and with a constructive outlook for the U.S.
natural gas market in the short to medium term, we are confident in
maximising value from our assets by sensible well management.
"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 and continuing to create shareholder
value."
Operational Update
The Company continues to flow back the Gwinville 18-10 #1 City
Bank well, with load fluid recovery of approximately 9%. Based on
historic vertical and early generation horizontal well completions
in the City Bank reservoir in Gwinville, peak gas rates are not
expected until the load fluid recovery is closer to 20%, which is
expected to be towards the end of this quarter. Early gas rates are
encouraging and Southern is excited to provide further operational
updates in Q2 2023 as the modern generation City Bank type curve
results are established.
Remediation plans for the 18-10 #3 Upper Selma Chalk well that
experienced a mechanical integrity issue with the production casing
during completion operations continue to be finalized, with field
execution expected in late Q2 2023.
The four wells that are awaiting completion include our first
two Lower Selma Chalk laterals, along with our second City Bank
lateral and one Upper Selma Chalk lateral. These four wells are
some of our longest laterals to-date. They were drilled with an
average lateral length of approximately 5,400' and were steered
within the high-graded intervals for an average of 95% of the
wellbore length. The two padsites can be brought on production
within a matter of weeks once completion operations are
resumed.
Corporate Presentation
A new corporate presentation dated April 2023 is now available
on the Company website at www.southernenergycorp.com .
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
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 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
James Spinney / James Bellman +44 (0) 20 7409 3494
Canaccord Genuity - Joint Broker
Henry Fitzgerald-O'Connor / James Asensio +44 (0) 20 7523 8000
Stifel Nicolaus Europe Limited - Joint Broker
Callum Stewart / Ashton Clanfield +44 (0) 20 7710 7600
Tennyson Securities - Joint Broker
Peter Krens / Pav Sanghera +44 (0) 20 7186 9033
Camarco
Owen Roberts / Billy Clegg / Hugo Liddy +44 (0) 20 3757 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.
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
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, the Company's
capital budget, expectations regarding material reserves,
anticipated operational results in 2023 including, but not limited
to, capital expenditures and drilling plans, expectations regarding
commodity prices, the performance characteristics of the Company's
oil and natural gas properties, the Company's hedging strategy, the
ability of the Company to achieve drilling success consistent with
management's expectations, the sources 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 the use of proceeds from all
sources, including the Company's credit facilities, the
availability and renewal of the Credit Facility and future
amendments thereto, future organic and inorganic growth and
acquisition opportunities within the resource market, and
costs/debt reducing activities. 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, 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, 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 labour, supplies, or services, the impact of
COVID-19 and variant strains of the virus, commodity price and
exchange rate
fluctuations, geo-political risks, political and economic
instability abroad, wars (including the Russo-Ukrainian War),
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. The Russo-Ukrainian
War is particularly noteworthy, as this conflict has the potential
to disrupt the global supply of oil and gas, and its full impact
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.
"Positive Net Cash (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] See "Specified Financial Measures" under "Reader Advisory"
below
[2] Comprised of 107 bbl/d light and medium crude oil, 11 bbl/d
NGLs and 15,376 Mcf/d conventional natural gas
[3] Comprised of 116 bbl/d light and medium crude oil, 14 bbl/d
NGLs and 14,804 Mcf/d conventional natural gas
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END
ACSIRMMTMTABTJJ
(END) Dow Jones Newswires
April 18, 2023 02:00 ET (06:00 GMT)
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