Southern Energy Announces Closing of Gwinville Field Acquisition

Southern Energy Corp. ("Southern" or the "Company") (TSXV:SOU) (AIM:SOUC)(OTCQX:SOUTF) announces the closing of its acquisition of the remaining producing acreage in the Gwinville Field (the "Assets") in Jefferson Davis County, Mississippi from PetroTX Energy, LLC for a cash purchase price of $3.2 million (the "Transaction") that was previously announced May 23, 2023.

Ian Atkinson, President and CEO of Southern, commented:

"We are very pleased to close this highly accretive acquisition. Our team has already begun optimizing the newly consolidated assets including through marketing opportunities, with additional volumes and access to the Florida Gas Transmission sales point, which is currently receiving a strong premium to NYMEX Henry Hub, and the rationalisation of operating costs. We will continue to achieve synergies through the further reduction of operating costs and through additional marketing opportunities. This Transaction demonstrates our ability to execute high value growth opportunities at all stages in the commodity cycle and we will look to build on this through organic development of the Gwinville area in the future."

Details of the Transaction

The Assets are currently producing approximately 400 boe/d (99% natural gas) of high working interest production at less than 8% projected annual decline from over 8,500 acres of held-by-production acreage and include significant redevelopment opportunities in the Selma Chalk formation.

The Company anticipates that the Asset's operating cost savings of more than 30% will be realized almost immediately, primarily driven by the consolidation of infrastructure, staff, and services in the Gwinville Field. The Transaction is consistent with the Company's strategy to consolidate stable, low decline, cash flowing assets that have been historically under-capitalized at highly attractive and accretive metrics.

Transaction Highlights [1]:

· PDP PV10 value of $7.7 million, including operations synergies, representing a PDP PV34 valuation or a nearly 60% discount to PDP PV10

o This includes expected operational synergies with a PV10 value of more than $5 million

· Next twelve months cash flow of $0.9 million, representing a 3.6x cash flow multiple; 2022 cash flow of $3.7 million, representing a 0.9x cash flow multiple

· Flowing Production (WI) addition per boe/d acquired of $7,800 ($1,300/Mcfe/d), on an annual basis

· 1.8 MMboe PDP Reserves (WI) addition at implied price of $1.76/boe

· Potential 2P Reserves (WI) addition of 14.5 MMboe; 20+ net Selma Chalk drilling locations identified

· Projected 7% increase to sales gas volumes through fuel gas reduction

· Estimated operating cost savings of more than 30% expected to be achieved through synergies with our current Gwinville acreage

· 239 total / 204 producing (net) wells with low future plugging liability associated with the assets

PDP reserves, 2P reserves and PV10 in respect of the Assets have been internally estimated by the Company's Internal Qualified Reserves Evaluator ("QRE") and prepared in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the most recent publication of the Canadian Oil and Gas Evaluation Handbook ("COGEH"). "Internally estimated" means an estimate that is derived by the Company's internal QRE and prepared in accordance with NI 51-101. All internal estimates contained in this press release have been prepared effective as of June 1, 2023. Reserves values are based on working interest reserves of the Assets before deduction of royalties and without including any of royalty interest reserves.

The consideration of $3.2 million was funded through existing capacity from the senior secured term loan (the "Credit Facility") with Southern's current lender, who is highly supportive of the Transaction. Southern still has approximately $14.5 million of capacity remaining on the Credit Facility after closing the Transaction, which provides ample funds to complete the four drilled but uncompleted wells from the Gwinville drilling program when natural gas prices are supportive.

Restricted Share Award Grant

Southern has granted restricted share awards ("RSAs") to certain employees, officers and directors of the Company as part of Southern's overall compensation and employee retention program, in accordance with the terms of the Company's share award incentive plan. For more information regarding the Company's compensation philosophy and practices, please see Southern's management information circular dated May 1, 2023, which is available on the Company's SEDAR profile at www.sedar.com.

Southern has granted an aggregate of 1,255,800 RSAs, of which 837,500 were issued to directors and persons discharging managerial responsibilities ("PDMR") of the Company, as set out below. The RSAs vest as to one third on each of the first, second and third anniversary date of the grant date. On the vesting dates of such RSAs, the holder is entitled to receive a cash payment or its equivalent in fully paid common shares of the Company ("Common Shares"), at the Company's discretion, equal to the closing market value per Common Share on the TSX Venture Exchange on the business day prior to such payment.