Southern Energy Corp., an established producer with natural gas and light oil assets in Mississippi, announces its first quarter financial and operating results for the three months ended March 31, 2026. 

FIRST QUARTER 2026 HIGHLIGHTS

• On February 12, 2026, the Company completed a financing and royalty transaction with certain arm’slength investors pursuant to which it issued the 2026 Debentures (as defined below) and new common shares in the capital of the Company and granted a 6% gross overriding royalty (“GORR”) on its existing and future developed production (collectively, the “February Financing”). The Company issued 17,000 $1,000 face value senior secured convertible debentures (the “2026 Debentures”) for gross proceeds of $17.0 million, 30.0 million new Common Shares at a price of CAD$0.07 ($0.05) per Common Share for gross proceeds of CAD$2.1 million ($1.5 million) and received $5.0 million of proceeds from the sale of the gross overriding royalty. The February Financing generated aggregate net proceeds of approximately $22.0 million, which were used in part to repay and retire the Company’s senior credit facility (the “Credit Facility”), with the remainder intended to fund development capital and general corporate purposes. The 2026 Debentures mature on December 31, 2028, and bear interest at 7% per annum.
• Following the February Financing, Southern exited Q1 2026 with no senior bank debt, extended maturities to December 31, 2028, and materially reduced its annual cash interest burden from 15% to 7%
• Average realized natural gas and oil prices for Q1 2026 of $5.82/Mcf and $66.99/bbl, compared to $4.14/Mcf and $71.19/bbl in Q1 2025. Southern achieved an average premium of $0.78/Mcf (approximately 16% above the NYMEX Henry Hub benchmark) in Q1 2026
• Petroleum and natural gas sales of $5.5 million during Q1 2026, an increase of 8% from the same period in 2025
• Generated $1.4 million of Adjusted Funds Flow from Operations in Q1 2026 ($0.00 per share basic and diluted), an increase of 115% from the same period in 2025
• Average production of 10,167(1) Mcfe/d (1,695 boe/d) (96% natural gas) during Q1 2026, a decrease of 21% from the same period in 2025, primarily reflecting the voluntary shut-in of approximately 400 boe/d of production from the Mechanicsburg and Greens Creek Fields in May 2025 due to an ongoing transportation dispute with a third party pipeline operator  
• Net loss of $1.3 million ($0.00 per share basic and diluted), compared to a net loss of $3.9 million in Q1 2025 

(1) Comprised of 46 bbl/d light and medium crude oil, 22 bbl/d of condensate, nil bbl/d NGLs and 9,759 Mcf/d conventional natural gas 

Ian Atkinson, President and Chief Executive Officer of Southern, commented: 
“Southern delivered a strong start to 2026, supported by improved natural gas pricing, premium Gulf Coast market exposure and the successful completion of the refinancing transactions earlier this year, leaving the Company with no senior bank debt. During the quarter, we continued to strengthen our financial position, maintain disciplined capital allocation and execute on our strategy of growing funds flow per share through high-return development opportunities. 

The retirement of our senior Credit Facility and the establishment of a simplified, more flexible capital structure have significantly enhanced our liquidity profile and reduced financing costs. With the Company funded for currently planned near-term development activity and no near-term bank debt maturities, Southern is well positioned to responsibly advance its inventory of Drilled Uncompleted Wells (“DUC”) and oil and liquids-focused opportunities while continuing to maximize the value of its existing asset base. 

Our strategic Gulf Coast positioning continues to deliver a meaningful premium to NYMEX pricing, achieving a 16% premium in Q1 2026, while our fixed-price natural gas hedge program provides additional downside protection and cash flow stability through 2026. As market fundamentals continue to improve, driven by increasing LNG export demand, power generation requirements and broader structural demand growth for natural gas, we believe Southern is well positioned to improve free cash flow generation and long-term shareholder value. 

We remain focused on disciplined execution, operational efficiency and prudent risk management as we continue building momentum throughout 2026.”

Operations Update 

Southern is pleased to announce that it has executed a Joint Venture Wellbore Participation Agreement (the “Agreement”) in the Williamsburg area with a strategic partner (the “Partner”) to evaluate the Cotton Valley oil prospect. The intent of the partnership for Southern is to reduce our capital exposure on the first two wells and to test this significant resource opportunity at multiple locations. Highlights of the proposed structure include:  

• Minimum drilling commitment of two wells; 
• The Partner will pay $1.95 million of the drilling and completion capital to earn a 50% working interest in each well; Southern will pay the remaining 50% of the well cost to retain operatorship and the remaining 50% working interest; 
• Earned working interest is effective immediately, and inclusive of all potential productive zones in the wellbore; and 
• The Partner will retain a 5% working interest participation right in each follow-up Cotton Valley well on the established drilling spacing units following the two commitment wells. 

Southern has secured a drilling rig for the operation and is expecting to spud the first commitment well (Terrible Creek 21-2 #2) in late July. Well permitting and lease construction is anticipated to begin in late May. The Board of Southern has approved the capital spending of 50% of the gross drill and completion costs of $3.9 million for the first commitment well. Following the successful execution and results of the first commitment well, Southern intends to drill the second commitment well likely in Q4 2026. 

Outlook

Southern remains focused on disciplined capital allocation and maximizing funds flow per share through targeted investment in high-return oil and liquids-weighted opportunities across its existing asset base. Following completion of the refinancing transactions earlier this year and the retirement of the Company’s Credit Facility, Southern is now positioned to advance its operational development plans with increased financial flexibility and liquidity. The Company expects development activity to increase during the remainder of 2026, including plans to complete the final City Bank DUC at Gwinville, further enhancing its production profile and operational flexibility. Southern also continues to evaluate additional recompletion and development opportunities across its existing asset base. 

The Company continues to benefit from its fixed-price natural gas swap covering 5,000 MMBtu/d at $3.40/MMBtu through December 2026, providing meaningful downside protection and enhanced cash flow stability. Combined with stronger regional pricing and the Company’s improved financial position, Southern believes it is well positioned to execute a disciplined capital program focused on sustainable growth and long-term shareholder value creation. 

Southern will continue to actively monitor NYMEX pricing and basis differentials and remains prepared to opportunistically hedge additional production volumes as market conditions evolve. The Company appreciates the continued support of its stakeholders and looks forward to providing further updates as it advances its operational and financial objectives throughout 2026.

KeyFacts Energy Industry Directory: Southern Energy