TIDMSOUC
RNS Number : 3017Q
Southern Energy Corp.
17 October 2023
SOUTHERN ENERGY CORP. PROVIDES OPERATIONAL UPDATE
Calgary, Alberta - October 17, 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, is pleased to provide an update on field operations
and production, as well as recent financial hedging contracts that
have been executed.
Operations Update
Production for the third quarter averaged 2,814 boe/d (95%
natural gas), representing a 6% increase over the prior quarter and
largely reflecting the impact of the synergistic Gwinville
acquisition (the "Transaction") completed in June 2023. Current
production is approximately 2,900 boe/d.
At Gwinville, Southern has completed the process of installing
the necessary pipeline infrastructure to consolidate the two
gathering systems, allowing the Company to run just one central
compressor station compared to the five that were running before
the Transaction. These synergies will not only remove costly rental
compression and allow monetization of spare owned compressors but
will also eliminate the need for approximately 250 Mcf/d of fuel
gas and associated emissions which can instead be added directly
into sales volumes. Additionally, the Company has recently
initiated workover operations on two shut-in wells on the acquired
lands to re-establish production. The wells were previously
producing at a combined rate of approximately 800 Mcf/d.
In September, the Company attempted to mechanically remediate
the casing on the 18-10 #3 Upper Selma Chalk horizontal well
without success. Subsequently, the heel section of the lateral (10
of 48 stages, 1,060 feet total lateral length, and 740 feet of
effective lateral length) was turned over to production and the
well is currently flowing at a restricted rate of 1.2 MMcf/d. The
Company is considering alternative casing remediation methods for
possible execution in Q1 2024.
In light of the recent recovery in U.S. natural gas prices above
$3/MMBtu, the Company is also in the process of re-bidding
completion services in connection with the four high quality
uncompleted horizontal wells at Gwinville.
Ian Atkinson, President and Chief Executive Officer of Southern,
commented:
"We are excited with the progress we have made with the
Gwinville acquisition integration, realizing quick and incremental
value for shareholders through operating cost reductions and now
through the start of work to increase production on the asset. At
the time of pausing our capital program in Q1 2023, in response to
the price of gas reaching $2.00/MMBtu, we had made a significant
investment including four drilled uncompleted horizontal wells
("DUCs"), incremental Company owned field compression, wellhead
facilities, Company owned water disposal capacity, and well casing
for future drilling. This pre-investment positions Southern to
expedite our corporate growth in light of the recent improvements
in the price of U.S. natural gas and the anticipated drop in the
cost of services. We look forward to updating the market further as
we make key operational decisions in light of resurgent US natural
gas prices."
Recent Financial Hedging Initiatives
With the recent natural gas price recovery, Southern has taken
the opportunity to add further hedges, both in the near term and
through the 2024 and 2025 calendar years, to protect future cash
flows and ensure balance sheet resiliency through the commodity
price cycle. Natural gas prices have been under pressure through
the beginning of 2023, with the Q2 2023 Henry Hub price averaging
$2.10/MMBtu, improving to $2.55/MMBtu in Q3 2023, and is currently
at approximately $3.20/MMBtu. The Company's hedge contracts, listed
below, will ensure a strong natural gas price floor, allowing
Southern the ability to execute and capitalize on its organic
operational plans over the coming years.
Natural Gas Volume Pricing
-------------------------- ------------- ------------------------------------
Fixed Price Swap
Oct 1, 2023 - Dec 31, 2023 2,000 MMBtu/d NYMEX - HH $3.095/MMBtu
Oct 1, 2023 - Dec 31, 2023 1,000 MMBtu/d NYMEX - HH $3.050/MMBtu
Jan 1, 2024 - Dec 31, 2025 1,000 MMBtu/d NYMEX - HH $3.880/MMBtu
Apr 1, 2024 - Oct 31, 2024 1,500 MMBtu/d NYMEX - HH $3.208/MMBtu
Apr 1, 2024 - Oct 31, 2024 1,500 MMBtu/d NYMEX - HH $3.420/MMBtu
Apr 1, 2025 - Oct 31, 2025 1,500 MMBtu/d NYMEX - HH $3.420/MMBtu
Costless Collar
Sep 1, 2023 - Mar 31, 2024 2,000 MMBtu/d NYMEX - HH $3.00 - $3.98/MMBtu
Jan 1, 2024 - Mar 31, 2024 1,000 MMBtu/d NYMEX - HH $3.00 - $4.60/MMBtu
Nov 1, 2024 - Mar 31, 2025 1,000 MMBtu/d NYMEX - HH $3.50 - $5.20/MMBtu
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.
Qualified Person's Statement
Gary McMurren, Chief Operating Officer, who has over 23 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
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 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
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, anticipated operational
activities and results including, but not limited to, capital
expenditures, drilling and completion plans and casing remediation
activities, expectations regarding commodity prices, the
performance characteristics of the Company's oil and natural gas
properties, successful integration of the assets acquired through
the Transaction and corresponding cost reductions, the Company's
hedging strategy, the ability of the Company to achieve drilling
success consistent with management's expectations, the Company's
expectations regarding completion of wellbores and DUCs and timing
thereof, the sources of funding for the Company's activities, the
effect of market conditions on the Company's performance, future
organic and inorganic growth and acquisition opportunities within
the resource market, and costs/debt reducing activities.
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, including the assets
acquired pursuant to the Transaction, 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
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 management's discussion and analysis for the period
ended June 30, 2023, 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 flows and balance sheet
resiliency, 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.
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.
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END
UPDGPGRWUUPWPUQ
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