Southern Energy swings to net loss as energy prices retreat

Mississippi-focussed natural gas and light oil producer Southern Energy reported adjusted funds flow from operations of $0.2m in its second quarter update on Friday.

The AIM-traded firm said that excluded one-time transaction costs and general and administrative expenses, which amounted to $0.5m.

It recorded a net loss of $3.8m for the period, equating to a three cent net loss per share, both basic and diluted.

That stood in contrast to the second quarter of 2022, during which the company had net earnings of $2.8m.

For the six months ended 30 June, petroleum and natural gas sales totalled $8.9m, with $3.7m of that coming in the second quarter.

On the strategic front, Southern noted that it sealed the acquisition in Gwinville of around 400 barrels of oil equivalent per day, 99% of which is natural gas, on 1 June for cash consideration of $3.2m.

Looking at production, Southern said the second quarter’s average rate was 15,907 million cubic feet equivalent, or 2,651 barrels of oil equivalent, per day, of which 96% was natural gas.

That was a 12% uplift from the same quarter in the prior year.

It said that currently, field sales production was around 2,900 equivalent daily barrels, with four new horizontal wellbores poised for completion.

The company forecast that once those two pad sites were complete, all four wells should be operational within roughly eight weeks.

It said the average realised prices for natural gas and oil during the quarter were $2.18 per million cubic feet and $72.83 per barrel, respectively, down from $7.53 for natural gas and $109.01 for oil in the same period last year.

Meanwhile, the NYMEX strip price projection for the rest of 2023 was averaging around $3.10 per million British thermal units, making for a 47% upsurge compared to the benchmark price in the second quarter.

“Our focus for the second quarter was primarily on completing and integrating the Gwinville acquisition,” said president and chief executive officer Ian Atkinson.

“We have started and will continue, to maximise operational synergies of the assets, as well as position the company for the return to growth as commodity prices continue to improve.

“In addition to considerable synergistic value and high-quality drilling inventory, the Gwinville acquisition provides Southern with access to sell gas into the Florida Gas Transmission system where, similar to Transco Zone 4, we are realising continuous premium pricing to the NYMEX natural gas price.”

Atkinson said that, as the warm summer temperatures in the southern United States had elevated natural gas power demand and the sector now headed into a period of slowing production growth due to a lack of capital spending by the industry and incremental demand from additional LNG export capacity, Southern was “encouraged” by the outlook of supply and demand dynamics for US natural gas.

“Southern is well-positioned to capitalise on natural gas prices with production behind pipe which can be brought on stream in a short time frame.

“We remain committed to reaching our goal of 25,000 barrels of oil equivalent per day, and continue to assess opportunities to grow inorganically further building shareholder value as commodity prices continue to recover to a point where we plan to re-launch our organic growth programme.”

At 1600 BST, shares in Southern Energy Corporation were down 8.7% at 21p.

Reporting by Josh White for Sharecast.com.