Mr. Ian Atkinson reports

SOUTHERN ENERGY ANNOUNCES FINANCINGS TO RAMP UP LIQUIDS-RICH GAS PRODUCTION ACROSS HIGH QUALITY GULF COAST ASSETS, FEEDING A GROWING DEMAND FOR U.S. NATURAL GAS AT PREMIUM PRICING

Southern Energy Corp. intends to conduct an equity financing to raise aggregate gross proceeds of approximately $6.0-million (U.S.) (approximately 4.8 million pounds sterling or $8.5-million (Canadian)) of units of the company, at a price of 4.3 pence (the placing price) or eight Canadian cents per unit (the prospectus price).

The financing consists of a placing of new units to new and existing institutional investors on the Alternative Investment Market (AIM) and a concurrent public offering of new units in Canada, including an intended subscription by certain directors and members of the company's senior management. Each unit will consist of one new common share and one-half of one common share purchase warrant. Each whole warrant will entitle the holder to subscribe for and purchase one common share at an exercise price of price of 5.3 pence (in the case of the placing) or 10 Canadian cents per common share (in the case of the prospectus offering) for a period of 36 months following closing of the financing.

The financing will launch immediately following the release of this news release. Research Capital Corp. (RCC) is acting as sole agent and sole bookrunner in connection with the prospectus offering. Tennyson Securities, a trading name of Shard Capital Partners LLP, and Hannam & Partners, a trading name of H&P Advisory Ltd. (H&P), are acting as joint bookrunners in connection with the placing.

Overview of the financing:

• Southern intends to conduct an approximate $6.0-million (U.S.) equity financing to accelerate the completion of its three drilled and uncompleted (DUC) wells, drilled as part of its Q1 (first quarter) 2023 drilling campaign on its Gwinville acreage, as well as fully financing (alongside cash flow) the drilling of two vertical Cotton Valley wells on its Mechanicsburg acreage.
• The company expects to benefit from strengthening U.S. natural gas prices in the near term, currently more than $4.40 (U.S.) per million British thermal units (mmBtu) (equivalent to $6.40 (Canadian) per mmBtu), further supporting the timing for completion of the DUC wells.
• The accelerated development program in Gwinville and Mechanicsburg is anticipated to be accretive to Southern through the addition of more than $20.0-million (U.S.) (1) in proved developed producing (PDP) NPV10 (net present value at 10 per cent) value.
• Based on type curve estimates, the company expects the Gwinville DUCs, once completed, to have initial production (IP30) rates of approximately 5.5 million cubic feet per day (mmcf/d) per well, with expected ultimate recovery per well of approximately 3.5 billion cubic feet equivalent (bcfe), while the Mechanicsburg wells are expected to have IP30 rates of approximately 4.2 mmcf/d plus 75 barrels per day (bbl/d) of liquids per well, with ultimate recovery per well of approximately 3.7 bcfe.
• The Gwinville DUCs are expected to have an internal rate of return (IRR) of 86 per cent (2) while the new Mechanicsburg wells are expected to have an IRR of 77 per cent.
• Completion of the Gwinville DUCs and Mechanicsburg drilling is expected to begin in Q2 (second quarter) 2025 and will provide Southern with a significant platform for organic growth, with production expected to reach more than 4,000 barrels of oil equivalent per day (boe/d) by year-end 2025, representing an approximately 100-per-cent growth.
• The company has identified over 100 additional horizontal drilling locations at Gwinville, which it will target for development in appropriate gas price environments. Future wells are expected to achieve an approximatley 30-per-cent IRR at a natural gas price of $3.75 (U.S.) per mmBtu.
• The net proceeds from the financing are expected to fully finance, alongside existing cash, cash flows and undrawn debt facilities, the completion of the Gwinville DUCs at a cost of approximately $2.5-million (U.S.) per well and the drilling of the Mechanicsburg wells at a cost of approximately $3.5-million (U.S.).
• The company has executed an amendment to the credit facility to reduce monthly principal amortization payments to approximately 15 per cent per annum, which is expected to free up more than $2.5-million over the remaining term of the loan to support continued organic growth.
• The company intends to seek the approval of the holders of its outstanding convertible unsecured subordinated debentures, by way of obtaining extraordinary resolutions of greater than 66.67 per cent of the aggregate principal amount of the debentures, to amend the terms of the indenture governing the debentures such that, subject to and concurrent with the completion of the financing, an amount equal to 102.5 per cent of the principal amount outstanding under the debentures plus all accrued and unpaid interest as of the closing date would convert into units at the prospectus price. The completion of the debenture amendment and the issuance of the units upon the conversion of the debentures remain subject to acceptance of the TSX-V. The units to be issued pursuant to the debenture amendment will be subject to customary lock-up provisions.

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

"I am pleased to announce the launch of our proposed financing today, which will accelerate Southern's work program, starting with the completion of the three DUC wells in our Gwinville acreage in Mississippi. After pausing our previous development program at the end of Q1 2023, we are excited to resume operations at Gwinville to capitalize on the significant uptick in Henry Hub natural gas pricing and bring this high-impact production on-line. Current Henry Hub natural gas pricing is very supportive with balance of 2025 and calendar year 2026 averaging greater than $4.80 (U.S.) per mmBtu and $4.40 (U.S.) per mmBtu, respectively. In addition, Southern continues to receive strong basis premium pricing that was approximately 15 per cent higher on average than Henry Hub in January and February, 2025. We've made a significant capital investment in these wells and we are now positioned to realize substantial cash flow generation as we rapidly ramp up production in a short time frame alongside a very constructive natural gas price.

"We continue to see an increasingly positive macro environment for the U.S. natural gas market, and we believe that Southern is firmly positioned to capitalize on the opportunity presented to us through this structural imbalance. Today's capital raise will enable us to increase our exposure to the opportunity, as we see gas prices react to increasing LNG export capacity from the U.S. Gulf Coast region, increasing natural gas fired power consumption and seasonal demand factors. I look forward to allocating the raised capital to our portfolio of highly productive and profitable assets, and increasing shareholder value as we enter a resurgent U.S. natural gas market."

Summary on financing:

• A placing of new units to new and existing institutional investors at the placing price. The placing will be conducted through an accelerated bookbuild process, which will launch immediately following the release of this news release. The placing is subject to the terms and conditions.
• A concurrent prospectus offering of new units on a best efforts agency basis at the prospectus price. The prospectus offering will be conducted pursuant to the terms and conditions of an agency agreement to be entered into between the company, RCC as sole bookrunner and sole agent. The size of the prospectus offering will be determined in the context of the market at the time of entering into a definitive agency agreement between the company and the agent.
• Certain directors and members of senior management of the company forming part of a president's list are expected to subscribe into the financing alongside investors.
• The prospectus offering will be conducted pursuant to the company's Canadian base shelf prospectus dated Nov. 28, 2024. A prospectus supplement relating to the prospectus offering will be filed in each of the provinces of Canada, other than Quebec. Copies of the prospectus supplement and accompanying base shelf prospectus, when available, can be obtained free of charge under the company's profile on SEDAR+. Delivery of the base shelf prospectus and the prospectus supplement and any amendments thereto will be satisfied in accordance with the access equals delivery provisions of applicable Canadian securities legislation, such that the company intends to file the prospectus supplement within two business days. The base shelf prospectus and the prospectus supplement will contain important detailed information about the company and the prospectus financing. Prospective investors should read the prospectus supplement and accompanying base shelf prospectus and the other documents the company has filed on SEDAR+ before making an investment decision. The prospectus offering is expected to close on or around March 24, 2025, and is conditional on the company obtaining the extraordinary resolutions in connection with the debenture amendment, and subject customary closing conditions, including the approval of the TSX Venture Exchange.
• The number of placing units and prospectus units to be issued will be determined by the company following completion of the bookbuild in consultation with the joint bookrunners and RCC.
• The bookbuild is currently expected to close no later than 4 p.m. GMT on March 14, 2025, but the joint bookrunners and the company reserve the right to close the bookbuild earlier or later, without further notice, and is conditional on the company obtaining the extraordinary resolutions in connection with the debenture amendment.

Amendment to the credit facility

On Jan. 31, 2025, Southern repaid principal amount $1.45-million (U.S.), resulting in a current net principal balance outstanding of $14.7-million (U.S.). In conjunction with the financing, Southern has executed an amendment to the credit facility revising monthly principal amortization to approximately 15 per cent per annum and modifying asset coverage financial covenant to 1.75 times until Jan. 1, 2026, and 2.0 times thereafter, with such amendments to be made effective upon the completion of the financing for aggregate gross proceeds of at least $6.0-million (U.S.).

Additional details of the financing

The placing is being conducted through an accelerated bookbuild process to eligible institutional investors and will launch immediately following this news release. The company expects to close the bookbuild no later than 4 p.m. GMT on March 14, 2025, but the joint bookrunners and the company reserve the right to close the bookbuild earlier or later, without further notice.

Details of the results of the placing will be announced as soon as practicable after the close of the bookbuild. The placing is not being underwritten. The placing is conditional on minimum gross proceeds of $6.0-million (U.S.) being raised pursuant to the financing. The common shares and warrants underlying the placing units, when issued, will be fully paid and such common shares will rank pari passu in all respects with the company's existing common shares.

The company has granted to the agent an option, exercisable, in whole or in part, in the sole discretion of the agent, to purchase up to an additional number of units, and/or the components thereof, that in aggregate would be equal to 15 per cent of the total number of units to be issued under the prospectus offering, to cover overallotments, if any, and for market stabilization purposes, exercisable at any time and from time to time up to 30 days following the closing of the prospectus offering.

This news release should be read in its entirety. Investors' attention is drawn to the detailed terms and conditions of the placing. By choosing to participate in the placing and by making an oral and legally binding offer to acquire placing units, investors will be deemed to have read and understood this news release in its entirety, and to be making such offer on the terms and subject to the conditions of the placing contained here, and to be providing the representations, warranties and acknowledgements contained in the terms and conditions.

The company intends that the placing will be conducted in conjunction with the prospectus offering.

Certain of the directors and members of the company's senior management team have indicated their intention to participate in the financing.

Application will be made to: (a) the London Stock Exchange PLC for admission of the common shares (including the common shares issuable upon the exercise of the warrants) underlying the placing units and the prospectus units to trading on the AIM; and (b) the TSX-V for listing of the common shares (including the common shares issuable upon the exercise of the warrants) underlying the placing units and the prospectus units for trading on the facilities of the TSX-V. Expected timing for admission of the common shares underlying the placing units to trading on the AIM and the common shares underlying the prospectus units to trading on the TSX-V is as set out in the expected timetable of principal events. Final confirmation of the expected timing for admission of such common shares will be confirmed in due course and is subject to a number of conditions, including, without limitation, the entering into of a definitive agency agreement and receipt of all regulatory approvals, including the approval of the TSX-V.

Without prior written approval of the TSX-V and compliance with all applicable Canadian securities laws, the common shares and warrants underlying the placing units may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of TSX-V or otherwise in Canada, or to or for the benefit of a Canadian resident, until the date that is four months and a day after the date of issuance.

The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada; no prospectus has been lodged with or registered by, the Australian Securities and Investments Commission, the Japanese Ministry of Finance, or the South African Reserve Bank; and the placing units have not been, nor will they be, registered or qualified for distribution, as applicable under or offered in compliance with the securities laws of any state, province or territory of United States, Australia, New Zealand, Canada, Japan or South Africa. Accordingly, the common shares and warrants underlying the placing units may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into the U.S., Australia, New Zealand, Canada, Japan or South Africa, or any other jurisdiction in which such offer, sale, resale or delivery would be unlawful.

Qualified person's statement

Gary McMurren, chief operating officer, who has over 24 years of relevant experience in the oil industry, and has reviewed and approved the technical information contained in this news release. 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.

(1) Figures based on March 3, 2025, strip pricing and assuming a 100-per-cent working interest.

(2) Figures based on flat commodity pricing of $3.50 (U.S.) per mmBtu for natural gas and $75 (U.S.) per barrel for WTI (West Texas Intermediate).

We seek Safe Harbor.