Southern Energy Announces Year Ended December 2021, Financial & Operating Results

Source: www.gulfoilandgas.com 4/19/2022, Location: North America

Southern Energy Corp. ("Southern") (SOU) (SOUC) announces the release of its fourth quarter and year ended December 31, 2021, financial and operating results.

Southern is an established producer with natural gas and light oil assets in Mississippi characterized by a stable, low-decline production base, a significant low-risk drilling inventory and strategic access to the best commodity pricing in North America. Selected financial and operational information is outlined below and should be read in conjunction with the Company's consolidated financial statements (the "Financial Statements") and related management's discussion and analysis (the "MD&A") for the three months and year ended December 31, 2021 and annual information form ("AIF") for the year ended December 31, 2021, which are available on the Company's website at www.southernenergycorp.com and have been filed on SEDAR.

All figures referred to in this news release are denominated in U.S. dollars, unless otherwise noted.

FOURTH QUARTER AND YEAR END 2021 HIGHLIGHTS

- $1.4 million of adjusted funds flow from operations1 in Q4 2021 and $4.8 million for the full year of 2021, excluding $2.0 million of one-time expenses related to the listing of the common shares of the Company (the "Common Shares") on the AIM market of the London Stock Exchange plc (the "AIM"), an increase of 88% and 81% from the same periods in 2020, respectively

- Q4 2021 average production of 12,753 Mcfe/d2 (2,126 boe/d) (91% natural gas), resulting in average production for the year of 12,592 Mcfe/d3 (2,099 boe/d) (92% natural gas), a 6% and 2% decrease from the same periods in 2020, respectively, demonstrating the long life, low decline profile of Southern's base assets

- Petroleum and natural gas sales of $7.2 million in Q4 2021 and $19.9 million for full year 2021, an increase of 107% and 91% from the same periods in 2020, respectively

- Annual net earnings of $10.1 million in 2021 ($0.24 per share - basic) compared to a net loss of $7.8 million in 2020

- Net Debt reduced by $8.7 million in Q4 2021 and $16.6 million for the full year of 2021 to $6.4 million as at December 31, 2021

- Average realized oil and natural gas prices for Q4 2021 of $74.18/bbl and $5.55/Mcf, respectively, reflecting the benefit of strategic access to premium-priced US sales hubs

- Completed a series of low-cost well recompletions and workovers beginning in Q3 and carrying into early Q4 2021

- Work program had an overall cost of approximately $0.8 million and added approximately 1,250 Mcfe/d4 (208 boe/d) of production (approximately 80% natural gas)

- Production adds from work program helped to achieve low corporate decline rate of 2% in 2021

- Admission of Southern's entire issued share capital to trading on the AIM in August 2021

- Successful completion of an equity offering with both new and existing investors in November 2021 to raise aggregate gross proceeds of $10.0 million

- Disposal of the Company's remaining assets from its non-core Black Warrior Basin cash generating unit ("CGU") in December 2021 for net proceeds of $0.6 million

SUBSEQUENT EVENTS

- On February 1, 2022, Southern disposed of all its properties in the Smackover CGU for net proceeds of $0.8 million

- On April 8, 2022, Southern agreed a second amendment (the "Second Amendment") to its senior secured term loan of up to $8.5 million (the "New Facility") which, combined with the first amendment (the "First Amendment") effective December 30, 2021, resulted in: (a) an increase of Tranche B to $4.5 million ($4.0 million available to borrow); (b) an extension of the availability to June 30, 2022; and (c) the exclusion of transaction costs related to the Company's August 2021 AIM admission from the calculation of EBITDAX (as such term is defined in the Financial Statements)

Operational Update

Southern has completed the drilling operations on the three well horizontal padsite in Gwinville. Site preparation for the completion operations has begun and the Company anticipates initial production from the wells in May 2022. Flowback from the completions is planned to be directly into the Gwinville gathering system to sales, with no flaring required.

Outlook

Pending successful drilling results from the current three well program, Southern will evaluate the commencement of a continual drilling program in Gwinville through our low-risk drilling inventory to further our business plan to provide strong, long term profitable growth and competitive financial returns in a safe and responsible manner.

To further support the Gwinville drilling program, effective December 30, 2021, Southern entered into the First Amendment to the New Facility and then on April 8, 2022, Southern entered into a Second Amendment to the New Facility. The First and Second Amendments resulted in: (a) an increase of Tranche B to $4.5 million ($4.0 million available to borrow); (b) an extension of the availability to June 30, 2022; and (c) the exclusion of transaction costs related to the August 2021 AIM admission from the calculation of EBITDAX (as such term is defined in the Financial Statements).

In addition, and as part of its risk management and sustainability strategy, Southern has entered into fixed price and costless collar hedges to mitigate the effects of market volatility while retaining the ability to participate in potential natural gas price appreciation during 2022. Southern currently has hedged 4,000 MMBtu/d of natural gas production for Q1 2022 through a costless collar with a floor of $3.50/MMBtu and ceiling of $5.10/MMBtu. On January 28, 2022, Southern entered into a fixed price hedge on production of 2,000 MMBtu/d of natural gas at a price of $4.61/MMBtu from March 1, 2022 through December 31, 2022. Combined with the existing fixed price hedge that Southern has in place, the Company has 6,000 MMBtu/d of natural gas production hedged at an average price of $3.60/MMBtu from April 1, 2022 to December 31, 2022. These hedge volumes equate to approximately 52% of current production. On April 4, 2022, Southern entered into a costless collar with a floor of $3.50/MMBtu and a ceiling of $20.00/MMBtu for 2,000 MMBtu/d of natural gas from November 1, 2022 through March 31, 2023. While the resulting realized losses on commodity contracts had an impact on cash flow from operating activities as gas prices rallied in the second half of 2021, Southern expects the impact will moderate in 2022 as some of these older natural gas hedges expire. A complete list of the fixed price and costless collar contracts can be found within Southern's fourth quarter MD&A.

The Company's long-term strategy remains consistent into 2022, with an unwavering commitment to environmental, social and governance ("ESG") principles that support the continued development and consolidation of prolific reservoirs that are outside of the more expensive shale basins. Cost savings and financial discipline will remain a priority through the continued enhancement of operations and the ongoing evaluation of opportunities to reduce operating and capital costs.

Southern thanks all of its stakeholders for their ongoing support and looks forward to providing future updates on operational activities supported by the Company's recently enhanced financial flexibility and wider exposure to new pools of capital following the quotation of its common shares on AIM.

Ian Atkinson, President and CEO of Southern, commented:

"We are pleased to be reporting our Q4 and Full Year Results for 2021, which are demonstrative of the significant progress achieved this year and of the quality of our asset base and strategy. In particular, we are pleased to report substantially increased earnings of $10.1 million in a year which saw Southern Energy Corp's shares admitted to trading on AIM and the raising of additional equity funding from both Canada and the UK to support our ongoing drilling campaign at Gwinville.

"The team at Southern have worked relentlessly this year, driving substantial value for the Company as well as providing robust foundations for expansion. With the results of our Gwinville wells expected in May, we look forward to updating shareholders on operational developments and continue striving towards our substantial growth ambitions for 2022 and beyond.

"I would like to thank all of the Southern Energy Corp staff for their work, and our shareholders for their continued support.

Warrant Vesting Threshold Amendment

It is intended that, following publication of these results, an amendment will be adopted by the Board to the acceleration provisions of the 7,240,000 performance-based Common Share purchase warrants issued in 2018 ("Performance Warrants"). Pursuant to such amendment, the Performance Warrants vest and become exercisable as to one-third upon the 20-day volume weighted average trading price of the Common Shares (the "Market Price") equaling or exceeding CAD$1.20, an additional one-third upon the Market Price equaling or exceeding CAD$1.35 and a final one-third upon the Market Price equaling or exceeding CAD$1.50. In addition, in the event the Market Price equals or exceeds CAD$1.65, each Performance Warrant shall be exercisable for 1.5 Common Shares, provided that, at the time of exercise in respect of the additional 0.5 of a Common Share per Performance Warrant, the Common Shares are listed on the facilities of a recognized stock exchange (other than the TSXV) or the Common Shares are acquired for cash or for the securities of a company listed on a recognized stock exchange (other than the TSXV). These acceleration thresholds were previously set at CAD$1.20, CAD$1.60, CAD$2.00, and CAD$3.20, respectively, prior to the amendments that will be adopted by the Board. A further update will be provided in the event that the amendment to the Performance Warrants described above is not completed.


United Kingdom >>  8/15/2022 - The leading representative body for the UK offshore energy industry has today urged government to prioritise the domestic production of energy. It com...
Saudi Arabia >>  8/14/2022 - The Saudi Arabian Oil Company (“Aramco” or “the Company”) today announced its financial results for the second quarter of 2022, posting a 90% year-on-...

Australia >>  8/12/2022 - Jadestone Energy plc (“Jadestone”, or the “Company”) an independent oil and gas production company focused on the Asia-Pacific region, provides the fo...
Nigeria >>  8/12/2022 - ADM Energy PLC, a natural resources investing company, is pleased to announce the completion of the 17th Lifting ("Lifting") at the Aje Field, part of...

Brazil >>  8/11/2022 - Alvopetro Energy Ltd. announces operating and financial results for the second quarter of 2022 including record funds flow from operations of $12.4 mi...
Iraq >>  8/11/2022 - Genel Energy notes that DNO, as operator of the Tawke PSC (Genel 25% working interest), has issued an update on licence activity

Gross prod...





Gulf Oil and Gas
Copyright © 2021 Universal Solutions All rights reserved. - Terms of Service - Privacy Policy.