Southern Energy Corp. ("Southern" or the "Company") (TSXV:SOU)(AIM:SOUC), an established producer with natural gas and light oil assets in Mississippi, announces its first quarter financial and operating results for the three months ended March 31, 2025. 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 months ended March 31, 2025, 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.
FIRST QUARTER 2025 HIGHLIGHTS
Petroleum and natural gas sales of $5.1 million during Q1 2025, an increase of 7% from the same period in 2024, largely due to the increase in natural gas pricing
Average realized natural gas and oil prices for Q1 2025 of $4.14/Mcf and $71.19/bbl, compared to $2.53/Mcf and $74.86/bbl in Q1 2024. Southern achieved an average premium of $0.49/Mcf (approximately 13%) above the NYMEX HH benchmark in Q1 2025
Average production of 12,808[1] Mcfe/d (2,135 boe/d) (96% natural gas) during Q1 2025, a decrease of 29% from the same period in 2024
Generated $0.9 million of Adjusted Funds Flow from Operations[2] in Q1 2025 ($0.00 per share basic and diluted), excluding $0.3 million of one-time transaction costs
Net loss of $3.9 million ($0.02 per share basic and diluted), compared to a net loss of $3.1 million in Q1 2024
Entered into various amendments to the Company's senior secured term loan which included an extension to the pausing of monthly repayments of principal to January 31, 2025 and a reduction of the repayment required from the eighth amendment to $1.45 million as at January 31, 2025, which the Company paid. Amended the monthly repayment of the principal amount outstanding calculation beginning on February 28, 2025 and amended the asset coverage ratio down to 1.5x in 2025 as well as reducing the Tranche B capacity to $5.0 million (see "Liquidity and Capital Resources - Credit Facility" in the March 31, 2025 MD&A for full details of the amendment)
SUBSEQUENT EVENTS
On April 8, 2025, Southern closed an equity financing raising aggregate gross proceeds of $5.0 million (approximately 拢3.9 million, C$7.2 million) through the issuance of a total of 102,482,673 new units (see "Shareholders' Equity - Share Capital" in the March 31, 2025 MD&A for full details)
On April 8, 2025, Southern converted the remaining convertible debentures in the amount of $3.1 million into 62,759,286 new units and issued 1,627,170new units for all accrued and unpaid interest (see "Liquidity and Capital Resources - Debenture Financing" in the March 31, 2025 MD&A for full details of the conversion)
Ian Atkinson, President and Chief Executive Officer of Southern, commented:
"Southern entered 2025 with renewed momentum, benefiting from both improved market conditions and the completion of our $5.0 million financing in April 2025. Natural gas prices showed early signs of recovery in the quarter, supported by strengthening demand fundamentals, from a colder than expected winter and tightening supply.
Robust natural gas pricing in Q1 2025 enabled Southern to achieve a $0.49/Mcf (13%) premium to the Henry Hub benchmark price. We remain encouraged by the macro outlook with strong demand forecasts, tied to lower storage levels compared to last year. Feed gas demand from U.S. LNG export facilities continues to rise, with the Golden Pass terminal and pipeline expected to begin receiving gas this year. Domestic consumption is also strengthening, led by growing power demand from data centers and widespread electrification of the economy. Combined with continued capital discipline across the upstream sector, we believe these dynamics will support a tighter U.S. natural gas balance throughout the year, which we aim to capitalise on.
With the recent financing complete and natural gas prices firming, we are excited to resume field operations, beginning with the first of three drilled but uncompleted wells in our Gwinville area. We have secured key services and will shortly commence operations on the 13-13 #2 Lower Selma Chalk horizontal well, with first production expected in June.
Southern remains committed to creating long-term shareholder value through disciplined capital deployment, operational efficiency, and strategic advantages of our asset base. With improving market tailwinds and a clear path to near-term production growth, we are optimistic about the opportunities that lie ahead in 2025."
Operations Update
The Company continues to progress its plans to complete its first Gwinville drilled and uncompleted ("DUC") well and has finalized procuring key services. Field operations are scheduled to commence on the 13-13 #2 Lower Selma Chalk horizontal well in the next few weeks, and Southern expects first production from the well in June 2025. Timing for the second and third horizontal completions (one Lower Selma Chalk and one City Bank) will depend on the results of the first completion operation, but the Company expects to have all three wells completed before the end of the year.
The Company has also advised that it has recently elected to voluntarily shut-in approximately 400 boepd of production from the Mechanicsburg and Greens Creek Fields due to an ongoing transportation dispute with a third party pipeline operator. On April 29, 2025, Southern was pleased to receive confirmation that the pipelines subject to the dispute are regulated by the Federal Energy Regulatory Commission ("FERC") and the third party submitted the initial filing to the regulator which includes setting maximum allowable transportation rates, subject to FERC review and approval. Southern will work closely with FERC staff to expedite the rate determination process and, in parallel, will continue to engage with the pipeline operator to pursue an agreement on an equitable fee structure that would allow the resumption of gas flows from these assets while the regulatory process continues.
Outlook
Southern has taken decisive steps to strengthen its financial position, including the successful completion of the equity financing in April 2025, along with the conversion of the convertible debentures, and the restructuring of financial covenants with support from its lender, effective from Q1 2025. These strategic actions, combined with the fixed-price swap contract of 5,000 MMBtu/d at $3.40/MMBtu through December 2026, provide the necessary financial stability to execute the capital program with confidence.
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.
We appreciate the continued support of our stakeholders and look forward to providing further updates on our operational progress as we work to drive long-term shareholder value.
Qualified Person's Statement
Gary McMurren, Chief Operating Officer, who has over 24 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.