Southern Energy Corp (TSX-V:SOU, AIM:SOUC, OTC:MAXMD), the oil and gas producer, reported net earnings of $6.6 million in the third quarter to end-September, up from $4.3 million in the year-earlier period, on sales of $19.2 million, which was 268% higher than in the third quarter of 2021.
Average production in the quarter came in at 3,408 barrels of oil equivalent per day (boe/d), of which 96% was natural gas. That was an increase of 67% compared to the year-earlier quarter.
"Our Q3 results have displayed that with a strong underlying production base and exposure to high prevailing commodity prices, and in particular the $10.00/Mcf our gas production has achieved, our business can provide significant cash flows and valuable capital to further our ambitious growth plans," said Ian Atkinson, CEO of Southern in a statement.
"Our recent equity financing and credit facility expansion will allow us to accelerate the organic growth strategy portion of our goal to reach 25,000 boe/d," he added.
The company, which has assets in the Gulf States of Mississippi, Louisiana, and East Texas, said that the success of the first three wells at its Gwinville field in Mississipi has already lifted corporate production by over 100% and the firm remained "truly excited" at the asset's future potential.
READ: Southern Energy Corp reports $3.6 million of adjusted funds flow from operations in Q2 2022, an increase of 490% from the same period in 2021
"We now look forward to beginning a long-term development drilling program, starting in Q4 2022, to unlock shareholder value due to the significant reserves, production and cashflow growth in Gwinville," said Atkinson.
Finance chief Calvin Yau added: "From a balance sheet perspective our $31.0 million equity financing and $25.0 million increase to the company's existing borrowing capacity means that we are able to fund a capital programme that allows us a level of cashflow which we can recycle into further development of our asset base, increasing cashflows further."
Southern realized on average in the latest quarter $10 per thousand cubic feet of gas (Mcf) and $91.93 per barrel of oil (bbl), reflecting the benefit of strategic access to premium-priced US sales hubs.
The quarter also saw the company successfully renegotiate an increase of $25 million borrowing capacity (currently undrawn) with its current lender on a senior secured term loan to increase its total credit facility to $35 million.
Based on the success of the initial three well appraisal program at Gwinville, the firm's board has approved a capital budget of $78.1 million for the first half of 2023.
Southern noted it had recently spudded the first well in the next phase of the drilling program at Gwinville.
Contact the writer at giles@proactiveinvestors.com