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Southern Energy Corp. Announces 2018 Year-End Reserves


CALGARYMarch 19, 2019 /CNW/ – Southern Energy Corp. (“Southern” or the “Corporation“) (SOU: TSXV) is pleased to provide a summary of our 2018 year-end reserves. Reserve numbers presented herein were derived from an independent reserves report (the “NSAI Report“) prepared by Netherland, Sewell & Associates, Inc. (“NSAI“), effective December 31, 2018.

“I am very pleased with our year-end reserves update”, said Ian Atkinson, President and Chief Executive Officer of the Corporation.  “It highlights the quality of the assets we have acquired in the U.S. Gulf Coast region and supports our strategy to grow through consolidation and organic growth in this area of premium commodity prices.”

“Although Southern is relatively new to the Canadian public market space,” added Mr. Atkinson, “we have years of operating experience in these areas and look forward to unlocking value for our shareholders.”

HIGHLIGHTS

  • Proved developed producing (“PDP“) net present value of $37.1 MM on a before tax basis, discounted at 10%. Total Proved (“TP“) net present value of $73.4 MM.
  • Year over year PDP reserve increase of 5.2 MMboe, primarily associated with the acquisition of the Gulf Pine Energy U.S. assets in December 2018; represents a PDP Finding, Development and Acquisition (“FD&A“) cost of $6.45/boe.
  • Year over year TP reserve increase of 11.0 MMboe, representing a TP FD&A cost of $3.03/boe.
  • Based on a management-estimated current operating netback of $12.50/boe, the TP FD&A recycle ratio for 2018 is 4.1.
  • Base PDP decline on Southern’s U.S. assets estimated at less than 13% for 2019.

2018 YEAR-END RESERVES SUMMARY

The summary below sets forth Southern’s gross and net reserves as at December 31, 2018, as evaluated in the NSAI Report. The figures in the following tables have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook and the reserve definitions contained in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.

Summary of Gross Oil and Gas Reserves as of December 31, 2018 (1), (2), (3), (4)

Reserves

Reserves Category

Heavy Oil
(Mbbl)

Light and Medium
Oil (Mbbl)

Condensate
(Mbbl)

NGL
(Mbbl)

Conventional
Natural Gas
(MMcf)

Gross

Net

Gross

Net

Gross

Net

Gross

Net

Gross

Net

Proved Developed Producing

138.5

118.4

175.9

135.8

231.8

186.4

129.1

103.8

27,528.7

21,918.9

Proved Developed Non-Producing

67.5

52.7

100.1

77.9

22.4

18.2

12,387.9

9,575.9

Proved Undeveloped

343.9

279.2

156.5

127.6

18,564.6

15,053.8

Total Proved

138.5

118.4

243.4

188.5

675.9

543.5

307.9

249.6

58,481.2

46,548.6

Probable

35.3

31.9

30.1

24.1

70.1

56.5

23.4

18.9

3,519.7

2,814.6

Total Proved Plus Probable

173.9

150.2

273.4

212.6

746.0

600.0

331.3

268.5

62,000.9

49,363.2

Summary of Net Present Values of Future Net Revenue as of December 31, 2018 (1), (2), (3), (4)

Net Present Value of Future Net Revenue

Reserves Category

Before Income Taxes, Discounted at (%/year)

0%

(M$)

5%
(M$)

10%
(M$)

15%
(M$)

20%
(M$)

Proved Developed Producing

64,968

47,135

37,118

30,797

26,466

Proved Developed Non-Producing

26,539

15,709

10,631

7,717

5,850

Proved Undeveloped

54,523

36,577

25,687

18,461

13,426

Total Proved

146,030

99,421

73,436

56,974

45,741

Probable

17,398

9,366

5,684

3,797

2,741

Total Proved Plus Probable

163,428

108,787

79,120

60,771

48,482

Notes:

(1)

The tables summarize the data contained in the NSAI Report and as a result may contain slightly different numbers due to rounding. 

(2)

Gross reserves means the total working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of the Corporation. Net reserves means the total working interest (operating or non-operating) share after deduction of royalty obligations, plus royalty interests.

(3)

Based on GLJ Petroleum Consultants Ltd.’s (“GLJ“) January 1, 2019 price forecast. 

(4)

The net present value of future net revenue attributable to the Corporation’s reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures, and well abandonment costs for only those wells assigned reserves by NSAI. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Corporation’s reserves estimated by NSAI represent the fair market value of those reserves. Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein. The recovery and reserve estimates of the Corporation’s oil, NGL and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual reserves may be greater than or less than the estimates provided herein.

Future Development Costs

The following table sets forth development costs deducted in the estimation of Southern’s future net revenue attributable to the reserve categories noted below:

Year

Reserves Category

2019
(M$)

2020
(M$)

2021
(M$)

2022
(M$)

2023
(M$)

Proved Developed Producing

Proved Developed Non-Producing

583

3,137

2,612

324

Proved Undeveloped

8,704

17,295

3,748

Total Proved

9,287

20,432

6,360

324

Probable

Total Proved Plus Probable

9,287

20,432

6,360

324

The future development costs are estimates of capital expenditures required in the future for Southern to convert proved undeveloped reserves to proved developed producing reserves.

NET ASSET VALUE

Based on the NSAI Report and GLJ’s January 1, 2019 forecast pricing, Southern’s net asset value calculation is as follows:

As at December 31, 2018

PDP

Total

Proved +

(M$)

Proved

Probable

Present Value Reserves, before tax (discounted at 10%)

37,118

73,436

79,120

Total Net Debt (unaudited)

(12,685)

(12,685)

(12,685)

Net Asset Value

24,433

60,751

66,435

Common Shares Outstanding (000’s)

204,357

204,357

204,357

Estimated Net Asset Value Per Basic Common Share

$            0.12

$       0.30

$       0.33

Notes:

(1)

The preceding table shows what is customarily referred to as a “produced out” net asset value calculation under which the current value of Southern’s reserves would be produced at the NSAI forecast future prices and costs.  The value is a snapshot in time as at December 31, 2018 and is based on various assumptions including commodity prices and foreign exchange rates that vary over time.  In this analysis, the present value of the proved and probable reserves is calculated at a before tax 10 percent discount rate.

(2)

Net debt or adjusted working capital (deficit), which represent current assets less current liabilities, excluding current derivative financial instruments, are used to assess efficiency, liquidity and the general financial strength of the Corporation. There is no IFRS measure that is reasonably comparable to net debt or adjusted working capital (deficit).

About Southern Energy Corp.

Southern Energy Corp. is an oil and natural gas exploration and production company. Southern has a primary focus on developing conventional and unconventional light oil and liquids rich natural gas resources in the SE Gulf States of MississippiAlabama, and Louisiana. Our management team has extensive experience with developing assets through the utilization of horizontal drilling and multi-staged fracture completion techniques. We have a long and successful history of working together as a team and have created significant shareholder value through high quality engineering and geoscience work.



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