Mr. Ian Atkinson reports

SOUTHERN ENERGY CORP. ANNOUNCES FOURTH QUARTER AND YEAR END 2023 FINANCIAL AND OPERATING RESULTS

Southern Energy Corp. has released its fourth quarter and year-end Dec. 31, 2023, financial and operating results. Selected financial and operational information is outlined below and should be read in conjunction with the company's audited consolidated financial statements and related management's discussion and analysis (the MD&A) for the three and 12 months ended Dec. 31, 2023, as well as the company's annual information form for the year ended Dec. 31, 2023, all of which are available on the company's website and have been filed under the company's profile on SEDAR+.

All figures referred to in this news release are denominated in U.S. dollars, unless otherwise noted.

Fourth quarter and year-end 2023 highlights:

• Average production of 16,755 Mcfe/d (thousand cubic feet equivalent/day) (2,793 boe/d (barrels of oil equivalent/day)) (96 per cent natural gas) during Q4 2023 and 16,305 Mcfe/d (2,718 boe/d) (95 per cent natural gas) for the year ended Dec. 31, 2023, an increase of 4 per cent and 5 per cent from the same periods in 2022, respectively.
• On June 1, 2023, Southern completed a strategic and highly synergistic acquisition in Gwinville of assets producing approximately 400 boe/d (99 per cent natural gas) for cash consideration of $3.2-million.
• Generated $800,000 of adjusted funds flow from operations in Q4 2023 (one cent per share basic and diluted) and $3.2-million for the year ended Dec. 31, 2023 (two cents per share basic and diluted).
• Petroleum and natural gas sales were $5.1-million in Q4 2023 and $19.3-million for the year ended Dec. 31, 2023, a decrease of 48 per cent and 57 per cent from the same periods in 2022, respectively, largely due to a significant depreciation in the natural gas price.
• Average realized natural gas and oil prices for Q4 2023 of $2.95/Mcf and $76.97/barrel compared with $6.35/Mcf and $81.98/bbl in Q4 2022.
• Net loss of $39.6-million (26 cents per share basic and diluted) and $46.8-million (33 cents per share basic and diluted) for the three and 12 months ended Dec. 31, 2023, respectively, due to a $38-million non-cash impairment charge recorded at Dec. 31, 2023.
• Year-end 2023 proved developed producing (PDP) reserves were 7.5 MMboe (million barrels of oil) and total proved plus probable (2P) reserves were 29.6 MMboe, an increase of 21 per cent and 16 per cent from year-end 2022 and reflecting a reserve life index of eight years and 31 years, respectively.
• Reserve replacement of 229 per cent in PDP, 96 per cent in total proved (1P) and 521 per cent in 2P 2023 reserve categories.
• Drilled six net wells at Gwinville in Q1 2023 from three pad sites, with each subsequent pad drilling operation resulting in fewer drilling days per well depth adjusted.
• On Nov. 9, 2023, successfully closed an equity financing raising aggregate gross proceeds of $5-million.
• In December 2023, Southern successfully completed the first of its four high quality uncompleted horizontal wells (DUCs) from the Q1 2023 drilling program -- the GH 14-06 No. 3 wellbore. The operation was completed safely and under budget.

Subsequent events:

• On Feb. 28, 2024, entered into the sixth amendment to the company's senior secured term loan, which, among other amendments, included extending the term of the credit facility from Aug. 31, 2025, to Dec. 31, 2026.
• Southern monetized its fixed-price swap derivative contracts to take advantage of the positive unrealized gain position, realizing net proceeds of $1.1-million.
• Entered into a fixed-price swap derivative contract of 5,000 MMBtu/d (million British thermal units per day) for the period of May, 2024, to December, 2026, at a price of $3.40/MMBtu.

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

"Looking at 2023, Southern is pleased to have made significant progress redeveloping its large scale Gwinville asset, highlighted by the recent completion of the GH 14-06 No. 3 well, which achieved an IP30 rate of 5.2 MMcf/d, while deploying 40 per cent less capital than early 2023 completion costs. We have three remaining high-impact DUCs at Gwinville that we plan to complete and bring on-line as natural gas prices are expected to continue to recover into Q3 and Q4 of 2024. Completing the highly accretive acquisition at Gwinville in Q2 2023 illustrates our ability to execute on the inorganic focus of our business plan in lower commodity price cycles. Southern believes the strategy of accretive acquisitions in commodity price troughs, coupled with cost-effective organic growth heading into commodity price peaks, strikes a balance to create long-term shareholder value in volatile commodity price environments.

"We continue to be encouraged by the outlook of supply and demand dynamics for U.S. natural gas as the new Gulf Coast LNG export facilities will start accepting feed gas later this summer, significantly increasing demand for natural gas in the region. Additionally, we are now seeing some material increases in domestic power demand through artificial intelligence (AI) data centre buildout, cryptocurrency mining and the electrification of transportation which will add to the overall demand for gas-fired power generation. The supply dynamic is also changing as we are starting to see the effects of large U.S. natural gas producers' willingness to both curtail current production and significantly reduce drilling and completion activity. This is manifesting into the supply side of the equation with U.S. production below 100 bcf/d at the start of April, 2024, down from the Q4 2023 peak of 106 bcf/d.

"Southern is well positioned to capitalize on rising natural gas prices with production behind pipe which can be brought on stream in a short time frame and we are excited to continue to grow the business with our new and long-standing shareholders."

2023 year-end reserves update

The company is pleased to announce selected highlights of Southern's year end independent oil and gas reserves evaluation as of Dec. 31, 2023.

Estimates of the company's reserves and related estimates of net present value of future net revenues as at Dec. 31, 2023, are based upon reports prepared by Southern's independent qualified reserves evaluator, Netherland, Sewell and Associates Inc. (NSAI). All currency amounts are in United States dollars (unless otherwise stated) and comparisons refer to Dec. 31, 2022.

Highlights:

• Relative to year-end 2022, the NSAI report states:
  • An increase in PDP reserves of 21 per cent to 7.5 MMboe;
  • Unchanged 1P reserves of 14 MMboe;
  • An increase in 2P reserves of 16 per cent to 29.6 MMboe;
  • A PDP reserve life index of eight years and 31 years for 2P reserves based on the 2024 production forecast.
• Southern replaced 229 per cent, 96 per cent and 521 per cent of 2023 production in the PDP, 1P and 2P reserve categories, respectively.
• Before-tax net present value (NPV) of reserves, discounted at 10 per cent (NPV10), is $39.9-million on a PDP basis, $63.4-million on a 1P basis and $119.3-million on a 2P basis evaluated using the average forecast pricing of four independent reserve evaluators as at Jan. 1, 2024.
• New PDP reserves and additional probable drilling locations booked at Gwinville following the synergistic acquisition of the remainder of the field in 2023.

In addition to the summary information disclosed in this press release, more detailed information regarding Southern's oil and gas reserves can be found in the annual information form, which is available on the company website and has been filed on SEDAR+.

Gary McMurren, chief operating officer of Southern, commented:

"We are excited to report another year of material reserves growth for the company, highlighted by conservative additions to our Gwinville assets following our strategic 2023 acquisition and consolidation.

"With the three remaining, high-quality DUC locations in Gwinville (two Lower Selma Chalk and one City Bank) waiting on more supportive natural gas pricing before completion operations, our producing reserve bookings will be strengthened even further. The company has yet to book any future horizontal locations in the City Bank formation, so success from that modern completion design is expected to be extremely impactful to continued reserves growth in the Gwinville field for years to come.

"The NSAI report continues to highlight the extensive running room and future development potential of only one of our existing core assets which could deliver long term sustainable free funds flow and organic growth for Southern shareholders."

Summary of reserves volumes as at Dec. 31, 2023

The company's reserve volumes and undiscounted future development capital costs are summarized herein as at Dec. 31, 2023.

Southern's total 2P reserves increased by 16 per cent to 29.6 MMboe, resulting in a 2P reserve life index of 30.9 years on projected annual PDP production for 2024. Southern's Gwinville horizontal well development program and the Gwinville asset acquisition in 2023 helped the company achieve a 21-per-cent increase in PDP reserves to 7.5 MMboe.

Gwinville development update

In late December, 2023, the company brought on-line the first of its four DUC wells from the Q1 2023 drilling program, the GH 14-06 No. 3 wellbore. This lateral hole was drilled and completed in the Upper Selma Chalk reservoir and achieved an IP30 natural gas rate of 5.2 MMcf/d, in line with predrill expectations.

Southern implemented a number of stimulation design changes for this latest Upper Selma Chalk horizontal completion that improved the predictability and efficiency of the fracture operation and, more importantly, reduced the overall completion cost down to $2.1-million, well below budget estimates. Costs for this completion operation were approximately 40 per cent lower than the two previous 18-10 pad Upper Selma Chalk wells that were completed earlier in 2023.

Outlook

Southern is planning to delay the completion timing of the remaining three DUC wells into the second half of 2024 when the company expects natural gas pricing to be significantly elevated from current levels to maximize returns. These DUCs can be quickly completed and brought on-line through Southern's 100-per-cent-owned equipment. The remaining DUC wellbores have been drilled in the Lower Selma Chalk (two) and City Bank formations. Southern currently has $10-million of unused capacity on its credit facility, which can be utilized to complete the DUCs at higher natural gas prices or can be used to be opportunistic with countercyclical inorganic growth opportunities.

As part of its risk management and sustainability strategy, Southern continuously monitors both the price of New York Mercantile Exchange (NYMEX), as well as the basis differentials, in order to mitigate some of the volatility of natural gas prices. With the extended term provided by the sixth amendment of the credit facility, Southern has taken advantage of the contango in the natural gas future strip by entering into a fixed-price swap contract of 5,000 MMBtu/d for the period of May, 2024, to December, 2026, at a price of $3.40/MMBtu, which is approximately 106 per cent above the current May, 2024, contract price.

Southern will continue to monitor NYMEX prices and the basis differential prices and is prepared to hedge additional volumes in a tactical manner going forward.

Southern thanks all of its stakeholders for their continuing support and looks forward to providing future updates on operational activities and continuing to create shareholder value.

Corporate presentation

A new corporate presentation dated April, 2024, is now available on the company website.

Qualified person's statement

Mr. McMurren, chief operating officer, who has over 23 years of relevant experience in the oil industry, has approved the technical information contained in this announcement. Mr. McMurren is registered as a professional 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.

About Southern Energy Corp.

Southern Energy is a natural gas exploration and production company characterized by a stable, low-decline production base, a significant low-risk drilling inventory and strategic access to premium commodity pricing in North America. 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. Its 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.

We seek Safe Harbor.