Source: Stephane Foucaud
June 5, 2023 (Investorideas.com Newswire) Despite this progress, the Canadian firm will likely wait for the Henry Hub gas price to rebound before continuing its well work, noted an Auctus Advisors report.
Southern Energy Corp. (SOU:TSX; SOUTF:OTCMKTS; SOUC:AIM) lowered its well drilling and completion costs, but to return to growth, it still needs the Henry Hub gas price over US$3 per thousand cubic foot (US$3/Mcf), reported Auctus Advisors analyst Stephane Foucaud in a May 30 research note. The Canadian oil and gas producer can hold off until the price reaches this point.
"With available undrawn credit facilities of about US$14.5 million (US$14.5M) and corporate cash flow break-even of about US$1.80-1.90/Mcf (Henry Hub), the company is well positioned to wait for a rebound in gas prices," Foucaud wrote.
Possible 567% Gain
Auctus maintained its target price of £1.60 per share on Southern Energy, currently trading at about £0.24 per share.
The difference between these two prices implies a large potential return for investors of 567%.
Well Costs Reduced
Southern has four already-drilled wells ready for completion: two Lower Selma Chalk laterals, one City Bank lateral, and one Upper Selma Chalk lateral, Foucaud relayed. Now, after having effected cost efficiencies, it will run the company about US$3.4M to complete each well.
As such, it is expected Southern will hold off until the Henry Hub gas price, currently about US$2.25/Mcf, exceeds US$3/Mcf, purported Foucaud. Completion is now forecasted for potentially Q4/23.
"The acquisition of the Gwinville assets from PetroTx has provided Southern with additional access to the Florida Gas Transmission System that provides access to a market with much higher gas price premium than achieved by Southern in the past," Foucaud pointed out.
First Quarter in Brief
Also, in his report, Foucaud noted that during Q1/23, Southern produced 2,607 barrels of oil equivalent per day, as expected.
As of the quarter's end, March 31, 2023, the energy company had about US$12M of cash and US$19M of net debt, including working capital.
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