CALGARY, AB – Southern Energy Corp. (‘Southern‘ or the ‘Company‘) (TSXV:SOU)(AIM:SOUC) today announces the release of its second quarter financial and operating results for the three and six months ended June 30, 2021. Southern is an established producer with natural gas and light oil assets in Mississippi and Alabama 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 and six months ended June 30, 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 Canadian dollars, unless otherwise noted.
Q2 2021 Highlights
- Adjusted funds flow from operations1 totaled $749 thousand, in-line with Q2 2020, including $0.4 million of expenses related to the AIM listing (see ‘Subsequent Events‘, below), while $2.0 million was generated for the first six months of 2021, 42% higher than the comparable period in 2020.
- Average production of 12,467 Mcfe/d2 (2,078 boe/d), 92% natural gas in Q2 2021, an increase of 6% versus Q2 2020, and production in the first half of 2021 was 3% higher than the same period in 2020, largely due to the Mechanicsburg assets being down for the majority of Q2 2020 due to a third-party pipeline force majeure event.
- Southern’s Q2 2021 realized oil price increased 91% relative to Q2 2020, while the realized natural gas price increased 65% to average $77.71/bbl and $3.35/Mcf, respectively, reflecting the continued strength of product prices and the benefit of strategic access to premium-priced US sales hubs.
- Per unit operating expenses averaged $1.03/Mcfe in Q2 2021 and $1.02/Mcfe for the first half of 2021, a decline of 7% in Q2 and 14% in the first half relative to the 2020 periods, primarily attributable to lower contract labour and reduced equipment rentals.
- Operating netbacks1 averaged $1.70/Mcfe in Q2 2021 and $1.80/Mcfe for the first six months of 2021, representing increases of 20% and 29% over 2020, respectively, reflecting meaningful increases in realized prices, partially offset by higher royalties and a realized loss on derivatives.
- Improved liquidity and strategic flexibility following the retiring of its previous credit facility during the quarter, reducing the outstanding first lien debt balance from US$12.7 million ($15.5 million) to US$5.5 million ($6.8 million).
- The previous credit facility was retired with a cash settlement payment of US$8.0 million, plus accrued interest, which was financed through a new senior secured term loan of up to US$8.5 million and gross proceeds from a non-brokered private placement of $5.5 million (collectively, the ‘Debt Refinancing‘). See the Company’s Q2 2021 MD&A for transaction details.
- Net debt1 reduced to $17.7 million at June 30, 2021, reflecting a reduction of $10.6 million throughout Q2 2021 and a reduction of $13.9 million since June 30, 2020, as a result of the Debt Refinancing together with Southern’s focus on capital preservation and prudent use of excess adjusted funds flows from operations1 to improve the balance sheet.
- As at June 30, 2021, Southern had positive adjusted working capital1 of $2.5 million excluding royalty payables.
- On August 10, 2021, Southern was admitted to the AIM market of the London Stock Exchange plc (‘AIM‘) and the Company’s Common Shares began trading on August 10, 2021, under the symbol ‘SOUC’. The dual listing is expected to help Southern pursue its strategic objective of growth through acquisitions and organic opportunities by taking advantage of the AIM’s liquidity and access to a broader range of global investors.
|Three months ended
|Six months ended
|(000s, except $ per share)||2021||2020||2021||2020|
|Petroleum and natural gas sales||$||4,589||$||2,478||$||9,472||$||5,875|
|Net earnings (loss)||3,908||(1,871||)||3,110||(12,087||)|
|Net earnings (loss) per share|
|Adjusted funds flow from operations (1)||749||752||2,031||1,428|
|Weighted average shares outstanding|
|As at period end|
|Basic common shares outstanding||357,395||220,770||357,395||220,770|
|Net debt (1)||$||17,714||$||31,659||$||17,714||$||31,659|
(1) See ‘Reader Advisories – Non-IFRS Measures’.
Ian Atkinson, President and CEO of Southern, commented:
‘I am pleased with our results in the second quarter, as we generated positive adjusted funds flow from operations, completed our AIM listing, and successfully bolstered the balance sheet through our Debt Refinancing, positioning Southern well to continue executing our organic and acquisition-based growth strategy.’
‘Our proven financial discipline and commitment to long-term sustainability are features that we believe will set Southern apart as we strive to introduce the story to a host of new investors globally heading into a period of significant growth for the company.’
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 the upcoming winter. Southern currently has hedges on a total of 6,100 Mcf/d of natural gas production based on various contracts through December 31, 2021 and 4,000 Mcf/d for calendar 2022. A complete list of the fixed price and costless collar contracts can be found within Southern’s second quarter MD&A.
Southern has a minor capital program of $1.0 million planned for the remainder of 2021, directed towards maintenance capital to support the low corporate average decline rate of approximately 12% and a modest low risk recompletion program to take advantage of the strength in commodity prices. The Company’s long-term strategy remains consistent into the second half of 2021, 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 with the upcoming AIM listing. See “Non-IFRS Measures” under “Reader Advisory” below”.  Comprised of 139 bbl/d light and medium crude oil, 28 bbl/d NGLs and 11,465 mcf/d conventional natural gas. “Non-IFRS Measures” under “Reader Advisory” below”.