Southern Energy Corp (TSX-V:SOU, AIM:SOUC, OTC:MAXMD) third quarter results showed a marked step-up from its second quarter, reflecting a full quarter's benefit from the three-well Gwinville pilot development programme, higher gas prices and a maintained low cost base.
That was the view of analysts at Canaccord, who said this positive trajectory looks set to accelerate in 2023 with the next stage of development drilling now underway.
“We expect that to deliver additional production from Q1 23, and we anticipate that will rise throughout the year as new wells are rolled out," analysts wrote.
READ: Southern Energy posts strong third quarter as it lifts production amid higher commodity prices
Realised gas prices have been very strong, especially during the summer, due to the macro environment (particularly European demand for imported LNG) and the specific optimal location of Southern's assets, analysts wrote.
The 3Q results are just the first sign of Southern's planned growth, according to Canaccord.
“The next stage, the upcoming five wells, will see the company applying the learnings from the pilot programme, primarily longer horizontal reservoir penetrations and improved drill-bit guidance” the broker stated.
“Results from those together with the three pilot wells can be expected to factor in to updated reserve and resource estimates.”
On valuation, the broker kept its speculative buy rating but raised its price target to 150p from 145p.
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