Southern Energy Corp. is excited to announce successful early flowback results from the first well of the three-well horizontal padsite located in the Gwinville Field.
• Well GH 19-3 #2 is flowing at an initial level of 7.7 MMcf/d (1,280 boe/d), at a highly restricted flowing pressure, exceeding the Company's modeled type curve
• Additional volumes from GH 19-3 #2 have increased the Company's production approximately 60% to 3,175 boe/d, materially increasing gas sales as no test volumes are flared
• The Company remains largely unhedged, resulting in gas from GH 19-3 #2 being sold at current NYMEX gas prices
• Initial results indicate that flowback performance using the Generation 3 completion design is far superior to any previous Selma Chalk wells in the area
• Flowback results are expected from two recently completed Gwinville wells shortly
The GH 19-3 #2 well was opened to flowback following the stimulation operation. After approximately one week of clean-up, the well is flowing at 7.7 MMcf/d (1,280 boe/d) at a highly restricted flowing pressure of 1,100 psig. Production from the well is flowing directly to sales creating significant additional cash flow for the Company. The well continues to produce over 2,000 bbl/d of load fluid, with approximately 24% recovered to date. Throughout the first week of production, as more load fluid is recovered, the well's gas rate has consistently increased day over day.
Southern's Generation 3 completion design increased the stage count by over 275% and the proppant concentration by over 40% as compared to the most recent Selma Chalk horizontal wells completed in Mississippi between 2013 - 2015, and initial flowback performance suggests that the increased completion intensity is having a very positive result.
With the additional volumes from the new well, Southern's current WI sales production has increased approximately 60% to 3,175 boe/d (96% gas). The additional natural gas production from the new well is unhedged and being sold at current NYMEX gas prices.
Stimulation operations on the GH 19-3 #3 and #4 wells have also been completed, and both wells will begin flowback/clean-up shortly.
Ian Atkinson, President and CEO of Southern, commented:
"This is a transformational moment for our company; not only are we adding material production, reserves, and cash flow at a time when gas prices are near 14-year highs, but we are solidifying and executing our operational strategy to deliver multi-year redevelopment from our assets and highlighting the significant opportunity and optionality we have in providing equity growth for shareholders.
"We are extremely excited by these initial results from our Generation 3 completion design on these Gwinville Selma Chalk horizontal wells. The flowback results from the GH 19-3 #2 well are evidence of how our team has successfully used modern technology to revitalize these significantly under-developed conventional assets in the Gulf Coast area.
"While still premature to make accurate type curve predictions for these and future Gwinville wells, we can say at this point, that the early flowback performance is far superior to any of the previous Selma Chalk wells in the area. Our operations team has done an excellent job of safely managing the stimulations on the three-well pad, and we expect costs to come in-line with AFE estimates."
As at June 7, 2022, the Company is pleased to announce that 5.3 million warrants issued on April 22, 2021 ("2021 Warrants"), representing approximately 31% of outstanding 2021 Warrants, have been exercised for total proceeds of CAD$1.7 million to the Company. There are 11.8 million remaining 2021 Warrants outstanding that expire on April 30, 2023 for total proceeds of CAD$3.8 million to the Company. In addition, as of June 7, 2022, there have been 2,923 conversions of the outstanding 8% convertible unsecured subordinated debentures issued on June 14, 2019 and January 15, 2021 (the "Convertible Debentures") for 3.6 million new common shares, representing approximately 35% of the 8,389 Convertible Debentures issued.
It is noted that the above exercises include additional conversions since the time of the Company's previous total voting rights update on June 1, 2022, amounting to the issue of a further 468,750 new common shares since that time. These new common shares have been admitted to trading on AIM under the block admission announced on May 6, 2022. As of June 7, 2022, following the aforementioned share issues, the Company had a total of 86,903,733 common shares in issue. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company.