Base US Gulf Coast natural gas assets with significant growth opportunities

The Market Online

05-05-2025

Southern Energy Corp., a growth focused natural gas producer making waves in the US Gulf Coast has significant growth opportunities with new wells to bold capital moves. Lyndsay Malchuk recently caught up with Ian Atkinson, President and CEO to unpack more of that.
LYNDSAY: Southern Energy's core story has always been about value in overlooked basins, but let's fast forward to this year. I mean, what changed in your DNA? For investors not up to speed, how would you define Southern today? Are you looking for opportunity, are you aggressive? Or are you something else entirely?
IAN:Good question. You know, and I would start off with people who maybe don't know us well is our DNA has not changed since inception. You're right, we are operating in the US Gulf Coast area. So much different than Canadian companies that some of these viewers and listeners might be more accustomed to.
Our strategy has always been to consolidate and develop assets in these areas that have been largely overlooked and frankly, historically undercapitalized by US companies, which even to this day remain very focused on developing shale plays like the Permian and the Marcellus.
Maybe to use one of your adjectives, Lyndsay, I would combine two of them and say we're opportunistically aggressive. You know, we've shown we can be patient through poor pricing like we've had in the last 18 months.
And we've also shown the markets we can be aggressive like we were back in late 2022, early 2023 when gas prices were $7, $8, $9 US per BTU.
We do have the base assets with significant growth opportunities embedded in them. And at the same time, we're always looking for that right fit for that step function change in scale through an opportunistic acquisition.
LYNDSAY: Now you're drilling in the heart of the Gulf Coast that we mentioned arguably one of the most strategically placed in premium price markets in North America. So is this a no-brainer or are there risks here that others aren't even talking about then?
IAN: It really is the heart of the commodity space in North America. You want to be at the market like this is. I would say it was certainly a purposeful decision to set up shop here in the US Gulf Coast. You know, the combination of that premium commodity pricing and underdeveloped assets in this basin do make it a no brainer for a company like us, which is growth oriented.
To expand on that a little bit, due to our assets location and owning the majority of our own infrastructure, we receive sometimes a 10% to 15% premium to NYMEX for our natural gas pricing, which is quite unique, especially when you compare it to the Western Canadian Sedimentary Basin and most other basins in the US where they receive sometimes a quite large discount to NYMEX for their pricing.
Also, this jurisdiction is very interesting for us because it is where the LNG or the liquified natural gas export business has really taken off in the US. They have the ability right now to export 17 billion cubic feet a day of liquified natural gas, and we'll be reaching over 35 BCF a day in 2030. So, a massive increase in export scale, which makes the US the largest exporter of LNG in the world and obviously when we look to the future, making a very supportive case for the future of US gas pricing and especially in the area of the US Gulf Coast where we are operating.
LYNDSAY: Now. Let's peel back your project just a little bit further. You just closed a $7.2 million equity raise. Tight market, shaky sentiment where tariffs are the topic of this discussion across the board. What gave you the confidence to tap the markets now and more importantly, how should investors read that move?
IAN: It always has to be a very calculated decision for companies like us to go into the equity markets because they are tough. But we can see the supply and demand dynamics for natural gas are fundamentally changing in the US and I think a lot of our investors can as well.
Our assets are located within the US which means obviously they're not part of any tariff discussions compared to other countries. Canada being one of them. And the equity raise timing for us was 100% to be offensive.
Initiating our growth again heading into summer where we typically see higher premiums for our natural gas pricing than we do in the winter. As an example, the summer coming up right now, the gas prices are trading at US$3.70 for MMBtu. Our basis premium is about $0.50 on top of that. So, we're selling gas into a US$4.20 US market, which is equivalent to about a $6.00 Canadian price if you compare it to the Canadian base.
So, we certainly have that opportunity for us here in the summer and frankly why we hit the trigger on the equity raise.
LYNDSAY: Let's talk about your wells. You've got three new ones online soon, but soon can actually mean a lot of things in this business. So can you give us a real world timeline here?
IAN: Yes, and for those who don't know the company, that aren't familiar. We were in the middle of a major capital program that we paused back in the end of 2023 because of the fall of natural gas prices. But what that did leave us with these three horizontal wells that are drilled and ready for completion at one of our large natural gas assets named Gwinville.
A little bit of a history lesson, Gwinville has been historically one of Mississippi's largest producing gas fields. It has produced over 1.2 trillion cubic feet of gas and over 12 million barrels of oil. What we are redeveloping here at that field is three zones that have up to 600 to 700 billion cubic feet of remaining gas. So a lot of gas when you look at the context of a small company like ours.
But more succinct to the timing, we are planning to complete this first well, in late May. We have a date with the pumping services already booked, and that means we'll be bringing this well into production here in early June. The plan from there is to complete the next two horizontal wells, kind of one every three months, which is more around our facilities capacity, et cetera. But investors should expect to see a steady stream of results that will actually grow our production and cash flow and prove up over 120 remaining locations at Gwinville.
Also in the program this year, and part of this equity raise was we are planning to drill into some of our higher liquids weighting assets outside of Gwinville starting in Q3 and Q4 of this year.
LYNDSAY: So, you've really ramped up on financing then you've got the wells ready to go and you're sitting in a prime pricing corridor. So what's the real upside here? What can investors genuinely look forward to in the back half of 2025 that isn't just baked into the share price already?
Ian: You know, historically people look back at our share price chart, it's been up and down, and we tend to trade very succinctly with the price of natural gas. So we have shown the markets that the torque we have to increasing gas prices. But on the flip side of that, as gas prices fell, so did our share price. So for example, if you look back in 2022, 2023, our shares were trading over a dollar and as gas prices increased, so that $5, $6, $7 and in that year we were named the best performing stock on the TSX Venture increasing from 10 cents per share to over a $1.40 per share at its peak.
You know, I do feel we're in a bit of a better position now even than we were back in 2022 with these wells that we've discussed here today that are already drilled and waiting for completion so quicker for us to bring them into production and cash flow.
So I think we're poised for a comeback after 18 months of what have been painfully low gas prices and very little capital spending. We're very excited to be back on the growth trajectory now.
Again, that was Ian Atkinson, President and CEO of Southern Energy. You can learn more about them over on their website at southernenergycorp.com and you can find them on the Venture under the ticker symbol, SOU.
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