Southern Energy sales slide in third quarter

The AIM-traded firm said average production fell 17% year-on-year to 14,018 thousand cubic feet equivalent per day, or 2,336 barrels of oil equivalent per day, with natural gas comprising 97% of output.

It posted a net loss of $2.1m, or one cent per share, for the quarter, narrowing slightly from the $2.4m loss recorded in the third quarter of 2023.

Adjusted funds flow from operations was $0.6m, translating to $0.00 per share on a basic and fully diluted basis.

Average realised prices in the quarter were $2.40 per thousand cubic feet for natural gas, and $73.78 per barrel for oil, down from $2.83 and $82.65 respectively in the prior year, reflecting weaker market pricing.

Despite the challenges, Southern Energy said it continued to strengthen its financial position, monetizing $3.4m in excess inventory equipment during the first nine months of 2024 and reducing net debt by $1.4m from the second quarter of the year, and by $3.9m since the fourth quarter of 2023.

“Southern remains steadfast in preserving its balance sheet amid the challenging natural gas price environment of 2024,” said president and chief executive officer Ian Atkinson.

“With natural gas prices on track to be the second-lowest in 24 years, we have proactively focused on optimising our value chain.

“This includes generating $3.4m in proceeds through the sale of excess equipment inventory in 2024 and reducing our abandonment liabilities by divesting non-core, non-producing wellbores during the third quarter.”

Atkinson said that despite the market challenges, Southern had leveraged the strategic locations of its assets and sales points, achieving a 24 cents-per-thousand cubic feet premium over Henry Hub benchmark pricing in the third quarter.

“Additionally, our financial hedge of 5,000 million British thermal unis per day at $3.40, which was initiated in the second quarter, has provided stable cash flows, enabling us to navigate ongoing volatility.

“Looking ahead, there are encouraging signs of price improvement as we enter winter and progress into 2025.

“Increased feed gas demand from Corpus Christi and Plaquemines LNG export facilities, coupled with rising domestic consumption driven by gas-fired power demand for artificial intelligence data centers and vehicle electrification, are expected to tighten the supply-demand balance.”

The longer-term structural case for natural gas also looked promising, Ian Atkinson added, as the lack of new storage capacity built would continue to tighten markets, while geopolitical events in Europe were expected to make US LNG more attractive.

“We remain committed to leveraging our strategic advantages and maintaining operational efficiencies to drive growth and shareholder value.”

At 0940 GMT, shares in Southern Energy Corporation were up 0.43% at 5.9p.

Reporting by Josh White for Sharecast.com.