Southern Energy Announces Q4 & Year End 2023 Results

Southern Energy Corp. ("Southern") (TSXV:SOU) (AIM:SOUC)(OTCQX:SOUTF), an established producer with natural gas and light oil assets in Mississippi, announces its fourth quarter and year end December 31, 2023 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 and related management's discussion and analysis (the "MD&A") for the three and twelve months ended December 31, 2023, as well as the Company's annual information form for the year ended December 31, 2023, (the "AIF"), all of 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.

FOURTH QUARTER AND YEAR END 2023 HIGHLIGHTS
- Average production of 16,755[1] Mcfe/d (2,793 boe/d) (96% natural gas) during Q4 2023 and 16,305[2] Mcfe/d (2,718 boe/d) (95% natural gas) for the year ended December 31, 2023, an increase of 4% and 5% from the same periods in 2022, respectively

- On June 1, 2023, Southern completed a strategic and highly synergistic acquisition in Gwinville of assets producing approximately 400 boe/d (99% natural gas) for cash consideration of $3.2 million (the "Gwinville Acquisition")

- Generated $0.8 million of adjusted funds flow from operations[3] in Q4 2023 ($0.01 per share basic and diluted) and $3.2 million for the year ended December 31, 2023 ($0.02 per share basic and diluted)

- Petroleum and natural gas sales were $5.1 million in Q4 2023 and $19.3 million for the year ended December 31, 2023, a decrease of 48% and 57% from the same periods in 2022, respectively, largely due to a significant depreciation in the natural gas price

- Average realized natural gas and oil prices for Q4 2023 of $2.95/Mcf and $76.97/bbl compared to $6.35/Mcf and $81.98/bbl in Q4 2022

- Net loss of $39.6 million ($0.26 per share basic and diluted) and $46.8 million ($0.33 per share basic and diluted) for the three and twelve months ended December 31, 2023, respectively, due to a $38.0 million non-cash impairment charge recorded at December 31, 2023

- Year-end 2023 proved developed producing ("PDP") reserves were 7.5 MMboe and total proved plus probable ("2P") reserves were 29.6 MMboe, an increase of 21% and 16% from year-end 2022 and reflecting a reserve life index of eight years and 31 years, respectively

- Reserve replacement of 229% in PDP, 96% in total proved ("1P"), and 521% in 2P 2023 reserve categories

- Drilled six net wells at Gwinville in Q1 2023 from three padsites, with each subsequent pad drilling operation resulting in fewer drilling days per well depth adjusted

- On November 9, 2023, successfully closed an equity financing raising aggregate gross proceeds of $5.0 million

- In December 2023, Southern successfully completed the first of its four high quality uncompleted horizontal wells ("DUCs") from the Q1 2023 drilling program - the GH 14-06 #3 wellbore. The operation was completed safely and under budget

SUBSEQUENT EVENTS

- On February 28, 2024, entered into the sixth amendment (the "Sixth Amendment") to the Company's senior secured term loan (the "Credit Facility"), which among other amendments, included extending the term of the Credit Facility from August 31, 2025 to December 31, 2026 (see "Liquidity and Capital Resources - Credit Facility" in the December 31, 2023 MD&A for full details of the amendment)

- Southern monetized its fixed price swap derivative contracts to take advantage of the positive unrealized gain position, realizing net proceeds of $1.1 million.

- Entered into a fixed price swap derivative contract of 5,000 MMBtu/d for the period of May 2024 - December 2026 at a price of $3.40/MMBtu

Ian Atkinson, President and Chief Executive Officer of Southern, commented: "Looking at 2023, Southern is pleased to have made significant progress re-developing its large scale Gwinville asset, highlighted by the recent completion of the GH 14-06 #3 well, which achieved an IP30 rate of 5.2 MMcf/d, while deploying 40% less capital than early 2023 completion costs. We have three remaining high impact DUCs at Gwinville that we plan to complete and bring online as natural gas prices are expected to continue to recover into Q3 and Q4 of 2024. Completing the highly accretive acquisition at Gwinville in Q2 2023 illustrates our ability to execute on the inorganic focus of our business plan in lower commodity price cycles. Southern believes the strategy of accretive acquisitions in commodity price troughs, coupled with cost-effective organic growth heading into commodity price peaks, strikes a balance to create long term shareholder value in volatile commodity price environments.

"We continue to be encouraged by the outlook of supply and demand dynamics for U.S. natural gas as the new Gulf Coast LNG export facilities will start accepting feed gas later this summer, significantly increasing demand for natural gas in the region. Additionally, we are now seeing some material increases in domestic power demand through artificial intelligence ("AI") data center build out, crypto-currency mining and the electrification of transportation which will add to the overall demand for gas-fired power generation. The supply dynamic is also changing as we are starting to see the effects of large U.S. natural gas producers' willingness to both curtail current production and significantly reduce drilling and completion activity. This is manifesting into the supply side of the equation with U.S. production below 100 bcf/d at the start of April 2024, down from the Q4 2023 peak of 106 bcf/d.

"Southern is well positioned to capitalize on rising 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."