Southern Energy Amends Financing Terms to Boost Drilling

Southern Energy Corp. has announced significant amendments to its previously announced equity fundraise, aiming to accelerate its drilling and completion programs. The company seeks to raise approximately US$6.0 million through the issuance of new units, with revised terms that could make the offering more attractive to investors. This move comes as the oil and gas sector continues to navigate volatile market conditions and fluctuating commodity prices.

The amendments include a reduction in the price per unit from 4.3 pence to 3.8 pence (or from C$0.08 to C$0.07 per Unit) and an increase in the number of Warrants per Unit from one half of one Common Share purchase Warrant to one whole Warrant per Unit. The exercise price of these Warrants has also been reduced from 5.3 pence to 4.8 pence (in the case of the Placing) or from C$0.10 to C$0.09 per Common Share (in the case of the Prospectus Offering).



These changes are designed to make the investment more accessible and potentially more lucrative for investors. The lower entry cost and increased potential upside could attract a broader range of participants, including those with limited capital. Additionally, the enhanced flexibility provided by the increased number of Warrants allows investors to choose between exercising the Warrants for future gains or selling them in the market for immediate returns.

The net proceeds from the fundraising are expected to fully fund the completion of three drilled and uncompleted ("DUC") wells on the Gwinville acreage, as well as the drilling of two vertical Cotton Valley wells on the Mechanicsburg acreage. The Gwinville DUCs are expected to have initial production rates of approximately 5.5 MMcf/d per well, with ultimate recovery per well of approximately 3.5 Bcfe. The Mechanicsburg wells are projected to have IP30 rates of approximately 4.2 MMcf/d plus 75 bbl/d of liquids per well, with ultimate recovery per well of approximately 3.7 Bcfe.



The company is also seeking approval from the holders of its outstanding convertible unsecured subordinated debentures to amend the terms of the indenture governing the Debentures. This amendment would allow for the conversion of the Debentures into Units at the revised pricing upon the completion of the fundraising. The success of this fundraising effort is crucial for Southern Energy Corp. as it aims to accelerate its development program and capitalize on strengthening U.S. natural gas prices.

However, the company faces several risks and uncertainties. The approval of the Debenture Amendment and the issuance of the Units upon the conversion of the Debentures remain subject to acceptance by the TSXV and the approval of the holders of the outstanding convertible unsecured subordinated debentures. Market conditions, including natural gas prices, could also impact the success of the fundraising and the development program. Additionally, regulatory and legal requirements could pose challenges and delays.

In summary, Southern Energy Corp.'s amended financing terms present both opportunities and risks. The lower entry cost and increased potential upside could attract more investors, while the accelerated development program could enhance the company's production capabilities. However, the success of this effort hinges on market conditions, regulatory approvals, and the company's ability to execute its plans effectively. Investors will be watching closely to see how these developments unfold and their impact on Southern Energy Corp.'s future prospects.