Southern Energy Corp. Announces Initial Results of 7.7 MMCF/D from First Gwinville Selma Chalk Horizontal Well

Southern Energy Corp. has released successful early flowback results from the first well of the three-well horizontal pad site located in the Gwinville field.

Highlights

• Well GH 19-3 No. 2 is flowing at an initial level of 7.7 MMcf/d (million cubic feet per day) (1,280 boe/d (barrels of oil equivalent per day)), at a highly restricted flowing pressure, exceeding the company's modelled type curve.
• Additional volumes from GH 19-3 No. 2 have increased the company's production approximately 60 per cent to 3,175 boe/d, materially increasing gas sales as no test volumes are flared.
• The company remains largely unhedged, resulting in gas from GH 19-3 No. 2 being sold at current NYMEX gas prices.
• Initial results indicate that flowback performance using the Generation 3 completion design is far superior to any previous Selma Chalk wells in the area.
• Flowback results are expected from two recently completed Gwinville wells shortly.

The GH 19-3 No. 2 well was opened to flowback following the stimulation operation. After approximately one week of clean-up, the well is flowing at 7.7 MMcf/d (1,280 boe/d) at a highly restricted flowing pressure of 1,100 psig. Production from the well is flowing directly to sales creating significant additional cash flow for the company. The well continues to produce over 2,000 bbl/d (barrels per day) of load fluid, with approximately 24 per cent recovered to date. Throughout the first week of production, as more load fluid is recovered, the well's gas rate has consistently increased day over day.

Southern's Generation 3 completion design increased the stage count by over 275 per cent and the proppant concentration by over 40 per cent as compared with the most recent Selma Chalk horizontal wells completed in Mississippi between 2013 to 2015, and initial flowback performance suggests that the increased completion intensity is having a very positive result.

With the additional volumes from the new well, Southern's current WI (working interest) sales production has increased approximately 60 per cent to 3,175 boe/d (96-per-cent gas). The additional natural gas production from the new well is unhedged and being sold at current NYMEX gas prices.

Stimulation operations on the GH 19-3 No. 3 and No. 4 wells have also been completed, and both wells will begin flowback/clean-up shortly.

Ian Atkinson, president and chief executive officer of Southern, commented:

"This is a transformational moment for our company; not only are we adding material production, reserves and cash flow at a time when gas prices are near 14-year highs, but we are solidifying and executing our operational strategy to deliver multiyear redevelopment from our assets and highlighting the significant opportunity and optionality we have in providing equity growth for shareholders.

"We are extremely excited by these initial results from our Generation 3 completion design on these Gwinville Selma Chalk horizontal wells. The flowback results from the GH 19-3 No. 2 well are evidence of how our team has successfully used modern technology to revitalize these significantly underdeveloped conventional assets in the Gulf Coast area.

"While still premature to make accurate type curve predictions for these and future Gwinville wells, we can say at this point, that the early flowback performance is far superior to any of the previous Selma Chalk wells in the area. Our operations team has done an excellent job of safely managing the stimulations on the three-well pad, and we expect costs to come in line with AFE estimates."

Share issues

As at June 7, 2022, the company is pleased to announce that 5.3 million warrants issued on April 22, 2021, representing approximately 31 per cent of outstanding 2021 warrants, have been exercised for total proceeds of $1.7-million to the company. There are 11.8 million remaining 2021 warrants outstanding that expire on April 30, 2023, for total proceeds of $3.8-million to the company. In addition, as of June 7, 2022, there have been 2,923 conversions of the outstanding 8-per-cent convertible unsecured subordinated debentures issued on June 14, 2019, and Jan. 15, 2021, for 3.6 million new common shares, representing approximately 35 per cent of the 8,389 convertible debentures issued.

It is noted that the aforementioned exercises include additional conversions since the time of the company's previous total voting rights update on June 1, 2022, amounting to the issue of a further 468,750 new common shares since that time. These new common shares have been admitted to trading on AIM (Alternative Investment Market) under the block admission announced on May 6, 2022. As of June 7, 2022, following the aforementioned share issues, the company had a total of 86,903,733 common shares in issue. This figure may be used by shareholders in the company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the company.

About Southern Energy Corp.

Southern Energy is a natural gas exploration and production company. Southern has a primary focus on acquiring and developing conventional natural gas and light oil resources in the southeast Gulf states of Mississippi, Louisiana and east Texas. The company's management team has a long and successful history working together and have created significant shareholder value through accretive acquisitions, optimization of existing oil and natural gas fields, and the utilization of redevelopment strategies utilizing horizontal drilling and multistaged fracture completion techniques.

Qualified person's statement

Gary McMurren, vice-president of engineering, who has over 22 years of relevant experience in the oil industry and has approved the technical information contained in this announcement. Mr. McMurren is registered as a profession engineer with the Association of Professional Engineers and Geoscientists of Alberta and received a bachelor of science degree in chemical engineering (with distinction) from the University of Alberta.

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