Southern Energy Share Discussion Threads

[king suarez] 25/8/2023 09:30

Croas - yes, you're right, sorry. I guess they spent a chunk of capital drilling/completing wells in the last quarter.

[croasdalelfc] 25/8/2023 07:53

Southern still has approximately $14.5 million of capacity remaining on the Credit Facility after closing the Transaction, which provides ample funds to complete the four drilled but uncompleted wells from the Gwinville drilling program when natural gas prices are supportive. RNS 6th JuneRNS 18th August says they have $11.5m left

[bountyhunter] 23/8/2023 14:09

Very good point KS, that adds up exactly.

[king suarez] 23/8/2023 09:49

Croas,

SOUC spent $3.2m on the acquisition on 1 June, so that accounts for the change in credit facility?

"On June 1, 2023, Southern completed a strategic and highly synergistic acquisition in Gwinville of approximately 400 boe/d (99% natural gas) for cash consideration of $3.2 million (the "Gwinville Acquisition")"

Otherwise they were more or less cash flow neutral in the quarter:

"Generated $0.2 million of adjusted funds flow from operations[1] in Q2 2023, excluding $0.5 million of one-time transaction costs and general and administrative costs"

[croasdalelfc] 23/8/2023 08:37

Keep an eye on cash via credit facility will become imperative after it drops below $10m. They will need at least $5m for headroom and working capital and yet further capex is required this Q for workovers/ gas infrastructure etc It was $14.5m in June and $11.5m last week . The interest on the loan rubs out any profit going ahead even at $3.5 HH

[croasdalelfc] 23/8/2023 08:12

HH isn't going to move far until mid 2024 imo.Inventories are still way above 5 yr average and likely to remain so for the rest of the year baring a huge prexmas winter storm .Rigs are down but production fall off lags that by 6 months. Rigs need to fall below 100 to have a big impact - I think it is 116 now. During early covid it dropped to 69.LNG - new LNG plant isn't due online until mid 2024 and LNG exports overall is expected to rise only 1.3BCF/d in 2024For comparison production is up 5BCF/d in 2023.

[bountyhunter] 21/8/2023 18:13

Or it might go back up to 30p if the gas price rises as winter approaches, it's largely dependent on the gas price as to where this goes from here.

[little minx] 21/8/2023 10:11

This might go below 10p at this rate. Such a shame.

[the_gold_mine] 21/8/2023 09:30

SOS100. Of the 6x wells drilled and completed to date only one of them has achieved the type curve for type 2 wells... 1x well needs remedial work, the latest city bank well is a failure, and there was 3 wells which I would class as "half-wells".

Unless a significant improvement in drilling/completion success rate is achieved I don't see how their proposed expansion plans will be economically viable.

I don't have concerns about depletion rates, and as as bet against henry hub moving up over winter it could pan out...

As I say I haven't ruled these guys out and will be keeping an eye on things in the hope of signs of improvement

[little minx] 21/8/2023 09:00

As I said sold my last few Friday. Previously sold months ago and put it into STX and doing ok with it.I read Stockhouse and somebody said TSX won't be interested in the company as drilling in the US. Sorts of make sense too.

[croasdalelfc] 21/8/2023 08:56

Thanks for the apology - rare on advfnThe hyped preplacing and pre Gwinville 19-3 results presentations have been removed from the company website - convenientThey have always done this - something I found annoying and then suspicious I have no shares - sold last ones in August 22 - just concerned investors don't get takes for a ride - I would wager a placing within the next 6 months.Good luck with your investment

[sos100] 21/8/2023 08:49

The gold mine - that was a quick change of mind!

[the_gold_mine] 21/8/2023 08:40

Have sold out here based on the results of the latest City Bank 18-10 #1 well,

These guys don't seem to be having much luck with the drilling,

I'll keep an eye on them and see how they get on over the winter as the gas price picks up and the remaining DUCs are brought online,

In the meantime, I wish good luck to all remaining holders,

[spangle93] 20/8/2023 10:31

" are the wells periodically fracced, to enhance production? "

They could be, but it's not often done, because returns aren't usually that stellar to justify the cost of bringing back a rig and a frac spread.

You can't make existing fracs bigger, because you've isolated the frac tip from the pressure by filling the crack behind it with sand. And frac's only open perpendicular to the minimum stress direction, so in theory, they are all parallel.

[king suarez] 19/8/2023 20:59

I'm not sure. That particular graph (p7 not p15?) shows the expected production per 1,000 ft of 'effective lateral' - therefore not an absolute production rate?

P8 shows the average lateral for the GH19-3 PAD as being around c4,200ft (by my eye). It also shows the 'effective lateral ft' of what looks about c2,500ft avg (again by my eye).

What this says (and also the in zone lateral chart shows) is that these 3 wells only averaged about c60% of the targeted lateral extent of the reservoir on average, and so performance is not optimal.

Take for example the best 19-3 well - as Croas pointed out, it has done just shy of 0.6bcf in 12 months - the graph on p7 shows somewhere between 0.25 and 0.3bcf as the rate over 12 months 'per effective 1,000 ft lateral' so if the well only achieved around, say, 2,200 ft of effective lateral then that is about right as per the graph?

p6 shows the latest 4 wells all have hit much greater % of the lateral extent, so potential to flow much better. They all have a lateral length of 5,400ft, with 95% effective lateral, so I assume have almost twice the potential flow rate of the GH19-3 pad wells? They have been drilled across a greater area, and much more of the sweet spot has been hit. I do remember an interview saying something about 'new technology' guiding them better?

That said, the 18-10 wells both hit 80%+ of the target area and both have problems (as referred to on p6). We can only hope management are learning fast as they go along.

An additional thought - and I don't know much about this - but are the wells periodically fracced, to enhance production? Looking at the well production data each month shows a decline, so is it possible management have held off on re-fraccing the wells due to the gas price and hence declines are a bit worse than they ordinarily would be? Perhaps wishful thinking!

[the_gold_mine] 19/8/2023 20:16

KS - Thanks for the correction, I stand corrected and apologise to both Tag57 and Croasdalefc on that point.

However I am then wondering how to explain the chart in page 15 of the latest presentation showing the wells performing similarly against the type 2 curve?



Is the allegation then that the company is putting false information into the investors presentation which doesn't match up against reality?

To be honest that would be a fairly serious allegation, possible even fraud?

Whilst I expect AIM companies to cherry pick what data they present, actually lying about well performance would be something that would surprise me.

[king suarez] 19/8/2023 19:52

TGM - the production rates you've posted for the #4 and #3 rates in June 22 were for 15 days production only - if you look at the following month figures you will see they are much higher and hence, unfortunately, Cros was correct with the calculation of 80%+ decline rates over 12 months.

This is referenced in the Q2 2022 production RNS:

"Q2 2022 average production of 14,169 Mcfe/d[2] (2,362 boe/d) (95% natural gas), which included only a partial month of June from the three new Gwinville wells, an increase of 14% from the same period in 2021"

[tag57] 19/8/2023 17:58

.THM, thanks for your comments, probably just coloured by my overall disappointment.
BTW Croas does not seem the type to deramp from other messages I have seen across the boards.

[the_gold_mine] 19/8/2023 16:40

My opinion, now is the time to be accumulating SOUC shares, not selling.

SOUC is highly torqued to henry hub, and henry hub is expected to pick up dramatically over the next 7-8 months.

I suspect Croasedalefc is in agreement and is trying to flush out weak hands by posting fraudulent scare stories and outright fabrications to accumulate on the cheap.

[the_gold_mine] 19/8/2023 16:31

Tag57: Average decline rate for the three GH 19-3 wells according to the Mississippi O&G website is 63% ;- e.g. approximately in-line with what Southern Energy were expecting for type 2 curve of around 66% (as published on their website).

This correlates with the data Southern are showing on their latest presentation page 8 showing actual well performance "close to" type 2 well



I don't see how you can be unhappy with the decline rates if they are in-line with stated expectations and previously published data? But I guess that is what makes a market.

[tag57] 19/8/2023 16:02

TGM, even those decline rates don’t inspire confidence, but my aim is similar to yours, hopeful the US LNG market rates will continue to improve into winter and see if the additional volume and pricing can significantly improve the results, main aim just to reduce my losses as I am very doubtful I will now see a profit given my average price paid.

[the_gold_mine] 19/8/2023 15:34

Croasdalefc:

Regarding your post 2661 stating

“ Management hyped the results of the the 3 wells last Summer with talk of 3000boepd for EACH well and 30% declines. ”

This statement is a blatant lie, all the type 2 curve data Southern have published have shown a 1 year decline rate of about 66% for type 2 wells (refer to the September 2022 presentation page 16 showing production dropping from about 6,000 mmcf/d to 2,000mmcf/d for type 2 wells)



Regarding your posts 2666 and 2664 stating decline rates on the three GH 19-3 wells of 83%, 80% and 85%, again this data appears to be emphatically false compared to the actual data on the MSOGB Well Data Website:

Well GH 19-3 #4:-
Production June 2022:- 40702
Production June 2023:- 19081
Decline: 53%


Well GH 19-3 #3:-
Production June 2022:- 45963
Production June 2023:- 21419
Decline: 53%


Well GH 19-3 #2:-
Production June 2022:- 155136
Production June 2023:- 23444
Decline: 84%

[the_gold_mine] 19/8/2023 12:30

Southern Energy still have it all to prove. But I’m going to hang off and give them a shot. Sentiment here is at rock bottom. But I believe in the US LNG story. If you believe in a recovery of the US natural gas price across the medium term (as I do) then selling now does not make sense (to me). It would make more sense to sell in the winter when gas prices have spiked (potentially as high as $4 according to the futures curve).



A lot depends on how the four remaining DUCs perform when completed and put on production. And the remediation work on the 18-10 #3 Upper Selma Chalk well. As we know Southern have informed that $3 is the point at which they start making a decent internal rate of return on drilling.

For me I can envision a route for things to get back on track here from November onwards as follows:-
- Carry out remedial work on 18-10 #3 Upper Selma Chalk well
- Bring on the four DUCs and achieve good performance (type 2 curve performance or better)
- Henry hub moves sustainably back above $3 and stays there

If Southern can carry out the above (with the key points being the DUCs performance and henry hub price) then they can turn things around, if the four DUCs are a busted flush then it will be hard to see a route back to sustainable growth for this outfit.