Southern Energy Corp. (SOU:TSX; SOUTF:OTCMKTS; SOUC:AIM) lowered its well drilling and completion costs, but to return to growth, it still needs the Henry Hub gas price over US$3 per thousand cubic foot (US$3/Mcf), reported Auctus Advisors analyst Stephane Foucaud in a May 30 research note. The Canadian oil and gas producer can hold off until the price reaches this point.
"With available undrawn credit facilities of about US$14.5 million (US$14.5M) and corporate cash flow break-even of about US$1.80-1.90/Mcf (Henry Hub), the company is well positioned to wait for a rebound in gas prices," Foucaud wrote.
Possible 567% Gain
Auctus maintained its target price of £1.60 per share on Southern Energy, currently trading at about £0.24 per share.
The difference between these two prices implies a large potential return for investors of 567%.
Well Costs Reduced
Southern has four already-drilled wells ready for completion: two Lower Selma Chalk laterals, one City Bank lateral, and one Upper Selma Chalk lateral, Foucaud relayed. Now, after having effected cost efficiencies, it will run the company about US$3.4M to complete each well.
As such, it is expected Southern will hold off until the Henry Hub gas price, currently about US$2.25/Mcf, exceeds US$3/Mcf, purported Foucaud. Completion is now forecasted for potentially Q4/23.
"The acquisition of the Gwinville assets from PetroTx has provided Southern with additional access to the Florida Gas Transmission System that provides access to a market with much higher gas price premium than achieved by Southern in the past," Foucaud pointed out.
First Quarter in Brief
Also, in his report, Foucaud noted that during Q1/23, Southern produced 2,607 barrels of oil equivalent per day, as expected.
As of the quarter's end, March 31, 2023, the energy company had about US$12M of cash and US$19M of net debt, including working capital.
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- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Disclosures for Auctus Advisors, Southern Energy Corp., May 30, 2023
Southern Energy (“Southern” or the “Company”) is a corporate client of Auctus Advisors LLP (“Auctus”). Auctus receives, and has received in the past 12 months, compensation for providing corporate broking and/or investment banking services to the Company, including the publication and dissemination of marketing material from time to time.
MiFID II Disclosures This document, being paid for by a corporate issuer, is believed by Auctus to be an ‘acceptable minor non-monetary benefit’ as set out in Article 12 (3) of the Commission Delegated Act C(2016) 2031 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. It is produced solely in support of our corporate broking and corporate finance business. Auctus does not offer a secondary execution service in the UK. This note is a marketing communication and NOT independent research. As such, it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and this note is NOT subject to the prohibition on dealing ahead of the dissemination of investment research. Author The research analyst who prepared this research report was Stephane Foucaud, a partner of Auctus.
Not an offer to buy or sell Under no circumstances is this note to be construed to be an offer to buy or sell or deal in any security and/or derivative instruments. It is not an initiation or an inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000. Note prepared in good faith and in reliance on publicly available information Comments made in this note have been arrived at in good faith and are based, at least in part, on current public information that Auctus considers reliable, but which it does not represent to be accurate or complete, and it should not be relied on as such. The information, opinions, forecasts and estimates contained in this document are current as of the date of this document and are subject to change without prior notification. No representation or warranty either actual or implied is made as to the accuracy, precision, completeness or correctness of the statements, opinions and judgements contained in this document. Auctus’ and related interests The persons who produced this note may be partners, employees and/or associates of Auctus. Auctus and/or its employees and/or partners and associates may or may not hold shares, warrants, options, other derivative instruments or other financial interests in the Company and reserve the right to acquire, hold or dispose of such positions in the future and without prior notification to the Company or any other person. Information purposes only This document is intended to be for background information purposes only and should be treated as such. This note is furnished on the basis and understanding that Auctus is under no responsibility or liability whatsoever in respect thereof, whether to the Company or any other person.
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Disclaimer This note has been forwarded to you solely for information purposes only and should not be considered as an offer or solicitation of an offer to sell, buy or subscribe to any securities or any derivative instrument or any other rights pertaining thereto (“financial instruments”). This note is intended for use by professional and business investors only. This note may not be reproduced without the prior written consent of Auctus. The information and opinions expressed in this note have been compiled from sources believed to be reliable but, neither Auctus, nor any of its partners, officers, or employees accept liability from any loss arising from the use hereof or makes any representations as to its accuracy and completeness. Any opinions, forecasts or estimates herein constitute a judgement as at the date of this note. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied is made regarding future performance. This information is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company and its subsidiaries. Auctus is not agreeing to nor is it required to update the opinions, forecasts or estimates contained herein. The value of any securities or financial instruments mentioned in this note can fall as well as rise.
Foreign currency denominated securities and financial instruments are subject to fluctuations in exchange rates that may have a positive or adverse effect on the value, price or income of such securities or financial instruments. Certain transactions, including those involving futures, options and other derivative instruments, can give rise to substantial risk and are not suitable for all investors. This note does not have regard to the specific instrument objectives, financial situation and the particular needs of any specific person who may receive this note. Auctus (or its partners, officers or employees) may, to the extent permitted by law, own or have a position in the securities or financial instruments (including derivative instruments or any other rights pertaining thereto) of the Company or any related or other company referred to herein, and may add to or dispose of any such position or may make a market or act as principle in any transaction in such securities or financial instruments. Partners of Auctus may also be directors of the Company or any other of the companies mentioned in this note. Auctus may, from time to time, provide or solicit investment banking or other financial services to, for or from the Company or any other company referred to herein. Auctus (or its partners, officers or employees) may, to the extent permitted by law, act upon or use the information or opinions presented herein, or research or analysis on which they are based prior to the material being published.