US: Southern Energy Corp announces capital budget, operational and reserves update

Southern Energy Corp has announced its capital budget and Gwinville operational update, year end reserves update and joint broker appointments.

• 2022 Year End Reserves Upgrade:
  • Highlights of the Company's year end independent oil and gas reserves evaluation as at December 31, 2022 (the 'NSAI Report') include:
    • an increase in proved developed producing ('PDP') reserves of 25% to 6.2 MMboe
    • an increase in total proved ('1P') reserves of 44% to 14.1 MMboe
    • an increase in total proved plus probable ('2P') reserves by 31% to 25.5 MMboe in 2022
    • before-tax net present value ('NPV') of 2P reserves, discounted at 10% ('NPV10'), of $142.5 million (an increase of 61% on year end 2021) 
• Gwinville Operational Update:
  • The Company announces the completion of its current drilling campaign of seven horizontal wells
  • Through technical improvements, Southern has reduced the average time from spud to total depth of its Gwinville wells from approximately 21 days to between 9-12 days and averaging 80-100% lateral placement in the high-graded porosity interval
• Capital Budget Update:
  • In response to the current low natural gas prices, Southern plans to moderate the Gwinville organic growth program from the planned capital budget of US$101.0 million announced in November 2022 to approximately US$55.0 million
  • Under its revised capital plan, Southern will have drilled seven horizontal wells at the Gwinville asset, completed three wells and have four wells remain as drilled but uncompleted ("DUCs") to be brought on in the future once natural gas prices are more supportive
• Broker Appointments:
  • Stifel Nicolaus Europe Limited and Tennyson Securities have both been appointed as the Company's joint corporate brokers with immediate effect

Ian Atkinson, President & Chief Executive Officer of Southern, commented:

'Although the drop in natural gas prices has brought us to the decision to moderate our Gwinville capital program, the overall impact of the applied learnings from the 2022 appraisal program have paid off and we are happy with the early results. In the current program we have drilled seven horizontal wells with longer laterals than the original appraisal wells in half the time on a per well basis and proven that the re-interpretation of our 3D seismic has improved our overall ability to stay within the targeted zone. We have positioned ourselves for the inevitable rebound in natural gas prices and look forward to moving equipment and manpower back into the Gwinville field quickly as price recovery occurs to re-initiate our organic growth plans and take advantage of maximising cashflows at the opportune time.'

Gary McMurren, Chief Operating Officer, commented:

'We are excited to report another year of material reserves growth in all major categories for the Company, highlighted by conservative additions to our Gwinville horizontal Selma Chalk inventory following our successful appraisal program in 2022. In our current development program, we will be testing two Lower Selma Chalk and two City Bank horizontal laterals with our modern completion design. The Lower Selma Chalk has only minimal reserve bookings in this year's report, and we have yet to book any City Bank development reserves, so upon completion of these horizons over the next few months, we expect to continue to add significant and predictable reserves growth in Gwinville for years to come.

The NSAI Report highlights the extensive running room and future development potential of only one of our existing core assets which will deliver long term sustainable free funds flow and organic growth. Further work is expected to unlock additional value for Southern shareholders, with the potential to significantly grow reserves in our portfolio in a short time frame.

With an average operating cost in 2022 of under $0.80/Mcfe, Southern has some of the highest margin natural gas assets in North America, which continues to benefit the business model and provide strong cashflow for the Company.'

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Source: Southern Energy Corp