TIDMSOUC
RNS Number : 7249B
Southern Energy Corp.
06 June 2023
SOUTHERN ENERGY CORP. ANNOUNCES CLOSING OF SYNERGISTIC ASSET
ACQUISITION TO CONSOLIDATE THE GWINVILLE FIELD AND RESTRICTED SHARE
AWARD GRANT
Calgary, Alberta - June 6, 2023 - Southern Energy Corp.
("Southern" or the "Company") (TSXV:SOU) (AIM:SOUC)(OTCQX:SOUTF)
announces the closing of its acquisition of the remaining producing
acreage in the Gwinville Field (the "Assets") in Jefferson Davis
County, Mississippi from PetroTX Energy, LLC for a cash purchase
price of $3.2 million (the "Transaction") that was previously
announced May 23, 2023.
Ian Atkinson, President and CEO of Southern, commented:
"We are very pleased to close this highly accretive acquisition.
Our team has already begun optimizing the newly consolidated assets
including through marketing opportunities, with additional volumes
and access to the Florida Gas Transmission sales point, which is
currently receiving a strong premium to NYMEX Henry Hub, and the
rationalisation of operating costs. We will continue to achieve
synergies through the further reduction of operating costs and
through additional marketing opportunities. This Transaction
demonstrates our ability to execute high value growth opportunities
at all stages in the commodity cycle and we will look to build on
this through organic development of the Gwinville area in the
future."
Details of the Transaction
The Assets are currently producing approximately 400 boe/d (99%
natural gas) of high working interest production at less than 8%
projected annual decline from over 8,500 acres of
held-by-production acreage and include significant redevelopment
opportunities in the Selma Chalk formation.
The Company anticipates that the Asset's operating cost savings
of more than 30% will be realized almost immediately, primarily
driven by the consolidation of infrastructure, staff, and services
in the Gwinville Field. The Transaction is consistent with the
Company's strategy to consolidate stable, low decline, cash flowing
assets that have been historically under-capitalized at highly
attractive and accretive metrics.
Transaction Highlights [1] :
-- PDP PV10 value of $7.7 million, including operations
synergies, representing a PDP PV34 valuation or a nearly 60%
discount to PDP PV10
o This includes expected operational synergies with a PV10 value
of more than $5 million
-- Next twelve months cash flow of $0.9 million, representing a
3.6x cash flow multiple; 2022 cash flow of $3.7 million,
representing a 0.9x cash flow multiple
-- Flowing Production (WI) addition per boe/d acquired of $7,800
($1,300/Mcfe/d), on an annual basis
-- 1.8 MMboe PDP Reserves (WI) addition at implied price of $1.76/boe
-- Potential 2P Reserves (WI) addition of 14.5 MMboe ; 20+ net
Selma Chalk drilling locations identified
-- Projected 7% increase to sales gas volumes through fuel gas reduction
-- Estimated operating cost savings of more than 30% expected to
be achieved through synergies with our current Gwinville
acreage
-- 239 total / 204 producing (net) wells with low future
plugging liability associated with the assets
PDP reserves, 2P reserves and PV10 in respect of the Assets have
been internally estimated by the Company's Internal Qualified
Reserves Evaluator ("QRE") and prepared in accordance with National
Instrument 51-101 - Standards of Disclosure for Oil and Gas
Activities ("NI 51-101") and the most recent publication of the
Canadian Oil and Gas Evaluation Handbook ("COGEH"). "Internally
estimated" means an estimate that is derived by the Company's
internal QRE and prepared in accordance with NI 51-101. All
internal estimates contained in this press release have been
prepared effective as of June 1, 2023. Reserves values are based on
working interest reserves of the Assets before deduction of
royalties and without including any of royalty interest
reserves.
The consideration of $3.2 million was funded through existing
capacity from the senior secured term loan (the "Credit Facility")
with Southern's current lender, who is highly supportive of the
Transaction. Southern still has approximately $14.5 million of
capacity remaining on the Credit Facility after closing the
Transaction, which provides ample funds to complete the four
drilled but uncompleted wells from the Gwinville drilling program
when natural gas prices are supportive.
Restricted Share Award Grant
Southern has granted restricted share awards ("RSAs") to certain
employees, officers and directors of the Company as part of
Southern's overall compensation and employee retention program, in
accordance with the terms of the Company's share award incentive
plan. For more information regarding the Company's compensation
philosophy and practices, please see Southern's management
information circular dated May 1, 2023, which is available on the
Company's SEDAR profile at www.sedar.com .
Southern has granted an aggregate of 1,255,800 RSAs, of which
837,500 were issued to directors and persons discharging managerial
responsibilities ("PDMR") of the Company, as set out below. The
RSAs vest as to one third on each of the first, second and third
anniversary date of the grant date. On the vesting dates of such
RSAs, the holder is entitled to receive a cash payment or its
equivalent in fully paid common shares of the Company ("Common
Shares"), at the Company's discretion, equal to the closing market
value per Common Share on the TSX Venture Exchange on the business
day prior to such payment.
PDMR Position RSAs Awarded
--------------- ------------------------------ -------------
Ian Atkinson President and CEO (Director) 312,500
Calvin Yau CFO 262,500
Gary McMurren COO 262,500
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
Currency . All currency amounts in this press release are in
United States dollars (unless otherwise stated).
Disclosure of Oil and Gas Information
Unit Cost Calculation . 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.
Product Types . References to "natural gas" throughout this
press release refer to conventional natural gas as defined by NI
51-101.
Reserves Disclosure. All reserves values and ancillary
information contained in this press release are derived from the
QRE's evaluation of the Assets unless otherwise noted. All reserve
references in this press release are "company gross reserves".
Company gross reserves are the seller's total working interest
reserves before the deduction of any royalties payable by the
seller in respect of the Assets. Estimates of reserves for
individual properties may not reflect the same level of confidence
as estimates of reserves for all properties, due to the effect of
aggregation. There is no assurance that the forecast price and cost
assumptions applied by the QRE in evaluating the Assets will be
attained and variances could be material. All reserves assigned to
the Assets are located in the State of Mississippi and presented on
a consolidated basis.
Drilling Locations. This press release discloses drilling
inventory in respect of the Assets as unbooked/potential locations.
Unbooked locations are internal estimates based on the prospective
acreage and an assumption as to the number of wells that can be
drilled per section based on industry practice and internal review.
Unbooked locations do not have attributed reserves or
resources.
All of the net drilling locations identified herein are
currently unbooked locations in the Company's inventory.
Unbooked locations have been identified by management as an
estimation of multi-year drilling activities in respect of the
Assets based on evaluation of applicable geologic, seismic,
engineering, production and reserves information. There is no
certainty that the Company will drill all unbooked drilling
locations and if drilled there is no certainty that such locations
will result in additional oil and gas reserves, resources or
production. The drilling locations considered for future
development will ultimately depend upon the availability of
capital, regulatory approvals, seasonal restrictions, oil and
natural gas prices, costs, actual drilling results, additional
reservoir information that is obtained and other factors. While
certain of the unbooked drilling locations have been de-risked by
drilling existing wells in relative close proximity to such
unbooked drilling locations, other unbooked drilling locations are
farther away from existing wells where management has less
information about the characteristics of the reservoir and
therefore there is more uncertainty whether wells will be drilled
in such locations and if drilled there is more uncertainty that
such wells will result in additional oil and gas reserves,
resources or production.
Proved reserves are those reserves that can be estimated with a
high degree of certainty to be recoverable. It is likely that the
actual remaining quantities recovered will exceed the estimated
proved reserves. Probable reserves are those additional reserves
that are less certain to be recovered than proved reserves. It is
equally likely that the actual remaining quantities recovered will
be greater or less than the sum of the estimated proved plus
probable reserves. Proved developed producing reserves are those
reserves that are expected to be recovered from completion
intervals open at the time of the estimate. These reserves may be
currently producing or, if shut-in, they must have previously been
on production, and the date of resumption of production must be
known with reasonable certainty. Undeveloped reserves are those
reserves expected to be recovered from known accumulations where a
significant expenditure (e.g., when compared to the cost of
drilling a well) is required to render them capable of production.
They must fully meet the requirements of the reserves category
(proved, probable, possible) to which they are assigned. Certain
terms used in this press release but not defined are defined in NI
51-101, CSA Staff Notice 51-324 - Revised Glossary to NI 51-101,
Revised Glossary to NI 51-101, Standards of Disclosure for Oil and
Gas Activities ("CSA Staff Notice 51-324") and/or the COGEH and,
unless the context otherwise requires, shall have the same meanings
herein as in NI 51-101, CSA Staff Notice 51-324 and the COGEH, as
the case may be.
Abbreviations
2P proved plus probable reserves
bbl barrels
Mbbls thousand barrels
bbls/d barrels per day
$M thousands of US dollars
boe barrels of oil equivalent
Mboe thousand barrels of oil equivalent
MMboe million barrels of oil equivalent
boe/d barrels of oil equivalent per day
Bcfe billion cubic feet equivalent
Mcfe million cubic feet equivalent
Mcfe/d million cubic feet equivalent per day
Mcf thousand cubic feet
Mcf/d thousand cubic feet per day
MMcf/d million cubic feet per day
MMBtu million British Thermal Units
PDP proved developed producing reserves
PV net present value, all references to PV in this press
release are before-tax
PV10 net present value (before-tax), using a 10% discount
rate
PV34 net present value (before-tax), using a 34% discount
rate
Forward Looking Information
This press release contains certain forward-looking information
(collectively referred to herein as "forward-looking statements")
within the meaning of applicable Canadian securities laws.
Forward-looking statements are often, but not always, identified by
the use of words such as "guidance", "outlook", "anticipate",
"target", "plan", "continue", "intend", "consider", "estimate",
"expect", "may", "will", "should", "could" or similar words
suggesting future outcomes. More particularly, this press release
contains statements concerning: Southern's business strategy,
objectives, strengths and focus; anticipated benefits of the
Transaction, including anticipated natural gas production levels,
decline rates and cash flow in respect of the Assets; anticipated
operational results; capital expenditures and drilling plans and
locations; anticipated operational synergies and cost savings
resulting from the Transaction; the performance characteristics of
the Company's oil and natural gas properties, including the Assets;
and the ability of the Company to achieve drilling success
consistent with management's expectations. Statements relating to
production, reserves, recovery, replacement, costs and valuation
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 document are
based on certain key expectations and assumptions made by Southern,
including those relating to: the business plan of Southern,
including in respect of the Assets acquired pursuant to the
Transaction; the timing of and success of future drilling,
development and completion activities; the geological
characteristics of Southern's properties, including the Assets; the
successful integration of the Assets into Southern's operations;
prevailing commodity prices, price volatility, price differentials
and the actual prices received for the Company's products; the
availability and performance of drilling rigs, facilities,
pipelines and other oilfield services; the timing of past
operations and activities in the planned areas of focus; the
drilling, completion and tie-in of wells being completed as
planned; the performance of new and existing wells; the application
of existing drilling and fracturing techniques; prevailing weather
and break-up conditions; royalty regimes and exchange rates; the
application of regulatory and licensing requirements; the continued
availability of capital and skilled personnel; the ability to
maintain or grow the banking facilities; the accuracy of Southern's
geological interpretation of its drilling and land opportunities,
including the ability of seismic activity to enhance such
interpretation; and Southern's ability to execute its plans and
strategies.
Although management considers these assumptions to be reasonable
based on information currently available, undue reliance should not
be placed on the forward-looking statements because Southern can
give no assurances that they may prove to be correct. By their very
nature, forward-looking statements are subject to certain risks and
uncertainties (both general and specific) that could cause actual
events or outcomes to differ materially from those anticipated or
implied by such forward-looking statements. These risks and
uncertainties include, but are not limited to: incorrect
assessments of the value of benefits to be obtained from
exploration and development programs; changes in the financial
landscape both domestically and abroad, including volatility in the
stock market and financial system; wars (including Russia's war in
Ukraine); risks associated with the oil and gas industry in general
(e.g. operational risks in development, exploration and production;
and delays or changes in plans with respect to exploration or
development projects or capital expenditures); unforeseen
difficulties in integrating the Assets into Southern's operations;
commodity prices; increased operating and capital costs due to
inflationary pressures; the uncertainty of estimates and
projections relating to production, cash generation, costs and
expenses; health, safety, litigation and environmental risks;
inflationary risks; access to capital; and the COVID-19 pandemic.
Due to the nature of the oil and natural gas industry, drilling
plans and operational activities may be delayed or modified to
react to market conditions, results of past operations, regulatory
approvals or availability of services causing results to be
delayed. Please refer to the annual information form for the year
ended December 31, 2022 and management's discussion and analysis
for the period ended March 31, 2023, and other continuous
disclosure documents for additional risk factors relating to
Southern, which can be accessed either on Southern's website at
www.southernenergycorp.com or under the Company's profile on
www.sedar.com.
The forward-looking statements contained in this press release
are made as of the date hereof and the Company does not undertake
any obligation to update publicly or to revise any of the included
forward-looking statements, except as required by applicable law.
The forward-looking statements contained herein are expressly
qualified by this cautionary statement.
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about Southern's prospective results of operations,
operating costs, cash flow and expectations regarding continued
significant and predictable reserves growth, including pro forma
the completion of the Transaction, 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 and the Transaction. 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.
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.
PDMR NOTIFICATION FORMS
Details of the person discharging managerial responsibilities
1 / person closely associated
a) Name 1. Ian Atkinson
2. Calvin Yau
3. Gary McMurren
------------------------------- -----------------------------------------------
Reason for the notification
2
--------------------------------------------------------------------------------
a) Position/status 1. President and CEO (Director)
2. CFO
3. COO
------------------------------- -----------------------------------------------
b) Initial notification/Amendment Initial notification
------------------------------- -----------------------------------------------
Details of the issuer, emission allowance market participant,
3 auction platform, auctioneer or auction monitor
--------------------------------------------------------------------------------
a) Name Southern Energy Corp.
------------------------------- -----------------------------------------------
b) LEI 213800R25GL7J3EBJ698
------------------------------- -----------------------------------------------
Details of the transaction(s): section to be repeated for
4 (i) each type of instrument; (ii) each type of transaction;
(iii) each date; and (iv) each place where transactions have
been conducted
--------------------------------------------------------------------------------
a) Description of the Restricted Share Awards to receive common
financial instrument, shares in Southern Energy Corp. or equivalent
type of instrument cash payment, at Company's sole discretion
on vesting dates
Identification code CA8428133059
b) Nature of the transaction Grant of restricted share awards
c) Price(s) and volume(s) Effective price Volumes
1. CAD$0.385 312,500
---------------- --------
2. CAD$0.385 262,500
---------------- --------
3. CAD$0.385 262,500
---------------- --------
d) Aggregated information N/A (single transaction for each individual)
e) Date of the transaction 6 June 2023
f) Place of the transaction Outside of a trading venue
------------------------------- -----------------------------------------------
(1) Cash flow and economic calculations based on Strip Pricing effective May 1, 2023
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END
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