TIDMSOUC
RNS Number : 9600U
Southern Energy Corp.
29 November 2023
SOUTHERN ENERGY CORP. ANNOUNCES THIRD QUARTER 2023 FINANCIAL AND OPERATING RESULTS
SOUTHERN ENERGY CORP. ANNOUNCES THIRD QUARTER 2023 FINANCIAL AND
OPERATING RESULTS AND DIRECTOR RETIREMENT
Calgary, Alberta - November 29, 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 its third quarter financial and operating
results for the three and nine months ended September 30, 2023.
Selected financial and operational information is outlined below
and should be read in conjunction with the Company's unaudited
consolidated financial statements and related management's
discussion and analysis (the "MD&A") for the three and nine
months ended September 30, 2023, which are available on the
Company's website at www.southernenergycorp.com and have been filed
under the Company's profile on SEDAR+ at www.sedarplus.ca.
All figures referred to in this news release are denominated in
U.S. dollars, unless otherwise noted.
THIRD QUARTER 2023 HIGHLIGHTS
-- Petroleum and natural gas sales of $5.3 million in Q3 2023
and $14.2 million for the nine months ended September 30, 2023
-- Generated $1.1 million of adjusted funds flow from operations
[1] in Q3 2023 ($0.01 per share basic and fully diluted)
-- Net loss of $2.4 million in Q3 2023 ($0.02 net loss per share basic and fully diluted)
-- Q3 2023 average production of 16,881 [2] Mcfe/d (2,814 boe/d) (95% natural gas)
-- Average realized natural gas and oil prices for Q3 2023 of
$2.83/Mcf and $82.65/bbl compared to $10.00/Mcf and $91.93/bbl in
Q3 2022, and $2.18/Mcf and $72.83/bbl in the prior quarter
-- Successfully renegotiated an increase of $2.0 million in the
borrowing base of the Company's senior secured term loan (the
"Credit Facility"), extended the availability of Tranche B to
August 31, 2025 to match the term of the Credit Facility, and
extended the principal amortization period of the Credit Facility
by twelve months
SUBSEQUENT EVENTS
-- On November 9, 2023, closed an equity financing raising
aggregate gross proceeds of $5.0 million through the issuance of a
total of 26,630,000 new Common Shares
-- In early December 2023, the Company is mobilizing equipment
to the field in Gwinville to start completion operations on the
first drilled and uncompleted ("DUC") well at the 14-6 #3 (Upper
Selma Chalk)
Ian Atkinson, President and Chief Executive Officer of Southern,
commented:
"Southern is in an extremely strong position in the fourth
quarter of 2023, with prevailing natural gas prices having
significantly increased and our balance sheet capitalized, enabling
us to go after the organic growth opportunities in our portfolio.
In Q3 2023, we completed the synergistic infrastructure
modifications at Gwinville connecting the newly acquired assets to
our legacy Southern gathering system. We will have reduced field
compression from five sites at the time of acquiring the assets to
one site, which provides significant savings in both operating
costs and fuel gas. In November 2023, we completed an equity
fundraise to accelerate the completion of our four drilled and
uncompleted wells at Gwinville. Initial cost estimates suggest that
service costs are entering back into a deflationary period, and we
are excited to execute our first slickwater fracture treatment in
the Gwinville program.
"We continue to be encouraged by the outlook of supply and
demand dynamics for U.S. natural gas, as at least two of the
upcoming Gulf Coast LNG export projects, at Cheniere Energy's
Corpus Christi expansion and Golden Pass LNG have recently
announced they are ahead of schedule. Southern is well positioned
to capitalize on natural gas prices with production behind pipe
which can be brought on stream in a short time frame and we are
excited to continue to grow the business with our new and
longstanding shareholders."
Financial Highlights
Three months ended September 30, Nine months ended September 30,
(000s, except $ per share) 2023 2022 2023 2022
------------------------------------------ ----------------- ------------- -------------------- ------------------
Petroleum and natural gas sales $ 5,285 $ 19,151 $ 14,215 $ 35,387
Net (loss) earnings (2,367) 6,567 (7,254) 7,550
Net (loss) earnings per share
Basic (0.02) 0.05 (0.05) 0.08
Fully diluted (0.02) 0.04 (0.05) 0.07
Adjusted funds flow from operations (1) 1,071 8,273 2,450 14,097
Adjusted funds flow from operations per
share (1)
Basic 0.01 0.06 0.02 0.14
Fully diluted 0.01 0.06 0.02 0.13
Capital expenditures and acquisitions 1,734 3,240 41,918 20,216
Weighted average shares outstanding
Basic 139,086 132,822 138,907 98,293
Fully diluted 139,086 148,641 138,907 108,671
As at period end
Common shares outstanding 139,088 135,909 139,088 135,909
Total assets 102,401 90,200 102,401 90,200
Non-current liabilities 21,373 9,613 21,373 9,613
Positive net cash (net debt) (1) $ (27,603) $ 20,435 $ (27,603) $ 20,435
------------------------------------------ ----------------- ------------- -------------------- ------------------
Note:
(1) See "Reader Advisories - Specified Financial Measures".
Gwinville Development Update
With the net proceeds of the recent equity fundraise, the
Company will accelerate the completion of the four Gwinville wells
that were drilled in Q1 2023. The Company expects the first well to
be on-line before the end of the year, with IP30 rates likely
available towards the end of January 2024. Cost estimates for the
completion of the 14-06 #3 well are anticipated to be $3 million or
less as the Company intends to take advantage of the deflationary
service cost pressures since the last wells were completed.
Follow-on completions are anticipated in the first half of 2024,
depending on natural gas pricing.
Outlook
The Company currently has $10.0 million of unused capacity on
its Credit Facility, which can be utilized alongside its existing
cash balance to complete the four drilled uncompleted horizontal
wells at supportive natural gas prices.
As part of its risk management and sustainability strategy,
Southern continuously monitors both the price of NYMEX, as well as
the basis differentials, in order to mitigate some of the
volatility of natural gas prices. Southern's current commodity
hedge program includes:
Natural Gas Volume Pricing
--------------------------- -------------- -------------------------------
Fixed Price Swap
October 1, 2023 - December
31, 2023 2,000 MMBtu/d NYMEX - HH $3.095/MMBtu
October 1, 2023 - December
31, 2023 1,000 MMBtu/d NYMEX - HH $3.050/MMBtu
January 1, 2024 - December
31, 2025 1,000 MMBtu/d NYMEX - HH $3.880/MMBtu
April 1, 2024 - October 1,500 MMBtu/d NYMEX - HH $3.208/MMBtu
31, 2024
April 1, 2024 - October
31, 2024 1,500 MMBtu/d NYMEX - HH $3.420/MMBtu
April 1, 2025 - October
31, 2025 1,500 MMBtu/d NYMEX - HH $3.420/MMBtu
Costless Collar
October 1, 2023 - March 2,000 MMBtu/d NYMEX - HH $3.00 - $3.98/MMBtu
31, 2024
January 1, 2024 - March 1,000 MMBtu/d NYMEX - HH $3.00 - $4.60/MMBtu
31, 2024
November 1, 2024 - March 1,000 MMBtu/d NYMEX - HH $3.50 - $5.20/MMBtu
31, 2025
Southern will continue to monitor NYMEX prices and the basis
differential prices and is prepared to hedge additional volumes in
a tactical manner going forward.
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.
Director Retirement
Mr. Andrew McCreath has retired from the Company's board of
directors effective today to focus on other commitments. The board
and management team wish to express their gratitude to Mr. McCreath
for his contributions during his 5 years of service. The Company
does not have any immediate plans to appoint a replacement
Non-Executive Director following Mr. McCreath's departure, though
will keep this position under review.
Qualified Person's Statement
Gary McMurren, Chief Operating Officer, who has over 22 years of
relevant experience in the oil industry, 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
+44 (0) 20 7409
Strand Hanson Limited - Nominated & Financial Adviser 3494
James Spinney / James Bellman
+44 (0) 20 7710
Stifel Nicolaus Europe Limited - Joint Broker 7600
Callum Stewart / Ashton Clanfield
+44 (0) 20 7186
Tennyson Securities - Joint Broker 9033
Peter Krens / Pav Sanghera
+44 (0) 20 3757
Camarco 4980
Owen Roberts / Billy Clegg / Hugo Liddy
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 ADVISORIES
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 NI 51-101. 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
IP30 average hydrocarbon production rate for the first 30 days
of a well's life
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
NYMEX New York Mercantile Exchange
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", "budget", "continue", "evaluate", "forecast", "may",
"will", "can", "target" "potential", "result", "could", "should" 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, the Company's capital budget,
anticipated operational results, capital expenditures, drilling and
completion plans and casing remediation activities, expectations
regarding commodity prices and service costs, the performance
characteristics of the Company's oil and natural gas properties,
the Company's hedging strategy and execution thereof, the ability
of the Company to achieve drilling success consistent with
management's expectations, the Company's expectations regarding
completion of the four drilled and uncompleted horizontal wells and
timing thereof (including anticipated costs and the attainment and
timing of well completion services relating thereto), the sources
of funding for the Company's activities, the effect of market
conditions on the Company's performance, the anticipated use of
proceeds from Southern's recent equity financing, the Company's
execution of and anticipated benefits of the planned slickwater
treatment in the Gwinville program , outlook in respect of Gulf
Coast LNG export projects at Cheniere Energy's Corpus Christi
expansion and Golden Pass LNG, the Company's risk management
activities including hedging positions and targets, expectations
regarding the use of proceeds from all sources including the Credit
Facility, the availability and renewal of the Credit Facility and
future amendments, and the Company's risk management and
sustainability strategy. 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, but not limited to, 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
integration of recently acquired assets into the Company's
operations, 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, the Company's ability to source and complete
asset acquisitions, and the Company's ability to execute its plans
and strategies.
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
pandemics, commodity price and exchange rate fluctuations,
geo-political risks, political and economic instability abroad,
wars (including the Russo-Ukrainian war and the Israel-Palestinian
conflict ), 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 and the
Israel-Palestinian conflict are particularly noteworthy, as these
conflicts have the potential to disrupt the global supply of oil
and gas, and their full impact remains uncertain. These and other
risks are set out in more detail in Southern's MD&A and annual
information form for the year ended December 31, 2022, which are
available on the Company's website at www.southernenergycorp.com
and filed under the Company's profile on SEDAR+ at
www.sedarplus.ca.
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, adjusted funds flow,
capital expenditures, tax rates, cost estimates, positive net cash
(net debt), payout of wells, and prospective results of operations
and production 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 International Financial Reporting Standards ("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, 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 under the Company's profile on
SEDAR+ at www.sedarplus.ca.
"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.
"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 "Reader Advisories - Specified Financial Measures"
[2] Comprised of 144 bbl/d light and medium crude oil, 9 bbl/d
NGLs and 15,963 Mcf/d conventional natural gas
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END
UPDQVLFLXFLEFBV
(END) Dow Jones Newswires
November 29, 2023 02:00 ET (07:00 GMT)
Southern Energy (LSE:SOUC)
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Southern Energy (LSE:SOUC)
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