Southern Energy Corp. ("Southern") (SOUC), a U.S.-focused, growth-oriented natural gas producer, is pleased to announce a proposed prospectus offering and placing of new common shares of no par value ("Common Shares") in the capital of the Company to raise aggregate gross proceeds of approximately US$30.0 million (approximately £24.5 million / C$38.9 million) (together, the "Offering"). In the event of excess demand, the Company reserves the right to increase the size of the Offering.
The Offering consists of:
- an underwritten bought deal prospectus offering of 26,060,000 million Common Shares (the "Prospectus Shares") at an issue price of C$0.87 (approximately 54.5 pence) per Prospectus Share (the "Prospectus Price"), for aggregate gross proceeds of C$22.7 million (approximately £14.3 million / US$17.5 million) to be led by Eight Capital (the "Prospectus Offering"); and
- a concurrent placing of approximately 18,692,661 million Common Shares (the "Placing Shares") at an offering price of 54.5 pence (approximately C$0.87) per Placing Share (the "Placing Price"), for aggregate gross proceeds of approximately £10.2 million (approximately US$12.5 million / C$16.2 million) to be conducted by way of an accelerated bookbuild (the "Placing").
The size of the Offering may be increased, at the Company's discretion, through the Placing and/or the Prospectus Offering.
The Company will use the net proceeds of the Offering for capital expenditures relating to extending and accelerating the planned drilling programme at Gwinville and for general working capital purposes, consistent with the Company's strategy of growing and developing an oil and natural gas exploration and development company through organic growth operations and synergistic acquisitions.
- Combined gross proceeds of approximately US$30.0 million to be raised via the issue of new Common Shares pursuant to the Offering
- Offering expected to provide additional liquidity to the Company's Common Shares on both AIM and the TSXV
- Net proceeds of the Offering to be primarily used to accelerate the initiation of a continuous organic drilling programme at Gwinville, as well as increasing financial flexibility for potential accretive acquisition opportunities
- Further drilling at Gwinville expected to begin in Q4 2022
All three of the horizontal wells from the Gwinville 19-3 padsite are now flowing to sales at highly restricted rates. The padsite is currently producing approximately 15.3 MMcf/d (2,550 boe/d) of natural gas and all three wells are meeting the company's early-time expectations for our Generation 3 completion design. The Company began flowing the new production through its 100% owned compression facilities on June 20, 2022 and the operations team is working quickly to further optimize gas flow rates and lower gathering system pressures from the padsite. The Company will update the performance of the new wells over the coming months as the Generation 3 type curve is established.
Ian Atkinson, President and CEO of Southern, commented :
"With all three Gwinville Selma Chalk wells now on production, we have more than doubled corporate production which illustrates the significant organic growth potential we can deliver to shareholders with our multi-year drilling inventory in Gwinville .
Following the encouraging test results of our ongoing operations at Gwinville, utilizing our improved Generation 3 completion design, we believe that this is an opportune moment to finance the business for further, operationally-driven growth through the Offering. In tandem, we continue to see significant opportunity for accretive acquisitions in our area of expertise and believe that this financing will allow us to continue to act nimbly and opportunistically as we execute our growth strategy. These are truly exciting times for Southern Energy and our shareholders."
The Prospectus Offering
Southern has entered into an agreement with Eight Capital, pursuant to which Eight Capital, as lead underwriter and sole bookrunner, together with a syndicate of underwriters (collectively, the "Underwriters") will purchase, on a bought-deal basis, 26.1 million Prospectus Shares at the Prospectus Price. The Underwriters will have an option to purchase up to an additional 15% of the Prospectus Shares issued under the Prospectus Offering at the Prospectus Price for market stabilization purposes and/or to cover over-allotments, exercisable in whole or in part at any time until 30 days after the closing of the Prospectus Offering.
The Prospectus Shares to be issued pursuant to the Prospectus Offering will be distributed by way of a short form prospectus in all provinces of Canada (excluding Québec) and may also be placed privately in the United States to Qualified Institutional Buyers (as defined under Rule 144A under the United States Securities Act of 1933, as amended (the "U.S. Securities Act")) pursuant to an exemption under Rule 144A, and may be distributed outside Canada and the United States on a basis which does not require the qualification or registration of any of the Company's securities under domestic or foreign securities laws.
Closing of the Prospectus Offering is expected to occur on or about July 7, 2022.
The Placing will be conducted by way of an accelerated bookbuild (the "Bookbuild") which will open immediately following the release of this Announcement and the Placing is subject to the terms and conditions set out in the Appendix to this Announcement.
Canaccord Genuity Limited and H&P Advisory Limited are acting as joint brokers and joint bookrunners (the "Joint Brokers" or "Joint Bookrunners") in relation to the Placing. Strand Hanson Limited is acting as Nominated & Financial Adviser to the Company.
The Placing will only be made available to invited eligible institutional and professional investors in certain specified jurisdictions and the timing for the close of the Bookbuild will be determined by the Joint Brokers and the Company. A further announcement confirming the number of new Placing Shares to be issued pursuant to the Placing and final details of the Bookbuild is expected to be made in due course after the close of the Bookbuild.
The Joint Brokers will commence the Bookbuild with immediate effect. The Joint Brokers have entered into the conditional placing agreement with the Company (the "Placing Agreement") under which, subject to the conditions set out therein, the Joint Brokers have agreed to use their respective reasonable endeavours to procure subscribers for the Placing Shares at the Placing Price and as set out in the Placing Agreement.
The Placing Shares, upon issue, will rank equally in all respects with the existing Common Shares and the Prospectus Shares.
Attention is drawn to the Appendix to this Announcement containing, inter alia, the terms and conditions of the Placing, which are applicable to Placees only.
By choosing to participate in the Placing and by making a legally binding offer (including orally) to acquire Placing Shares in the Placing, Placees will be deemed to have read and understood this Announcement in its entirety (including the Appendix) and to be making such offer on the terms and subject to the conditions in it, and to be providing the representations, warranties, undertakings and acknowledgements contained in the Appendix. The results of the Placing are expected to be announced on 24 June 2022, and the Placing Shares are expected to be admitted to trading on AIM on or around 5 July 2022.
Further details of the Offering
The Company intends that the Placing will be conducted in conjunction with the Prospectus Offering but is not inter-conditional with the Prospectus Offering.
Application will be made to: (a) the London Stock Exchange for Admission of the Placing Shares and the Prospectus Shares to trading on AIM; and (b) the TSX Venture Exchange (the "TSXV") for listing of the Placing Shares and the Prospectus Shares for trading on the facilities of the TSXV.
Completion of the Offering is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange. In addition, the Placing is conditional upon the Placing Agreement becoming unconditional and not having been terminated in accordance with its terms. Further details of the respective conditions and termination rights applicable to the Placing and the Prospectus Offering are set out in the Appendix.
Without prior written approval of the TSXV and compliance with all applicable Canadian securities laws, the Placing Shares may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of TSXV 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 or the Japanese Ministry of Finance or the South African Reserve Bank; and the Placing Shares 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 Placing Shares 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 United States, Australia, New Zealand, Canada, Japan or South Africa or any other jurisdiction in which such offer, sale, resale or delivery would be unlawful.
The securities described herein have not been, and will not be, registered under the U.S. Securities Act or any state securities laws, and accordingly, may not be offered or sold within the United States except in compliance with the registration requirements of the U.S. Securities Act and applicable state securities requirements or pursuant to exemptions therefrom. This Announcement shall not constitute an offer to sell or the solicitation of an offer to buy any of the Company's securities to, or for the account or benefit of, persons in the United States, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. There has been and will be no public offer of the Company's securities in Australia, Japan, South Africa, the United States or elsewhere, other than the Prospectus Offering in each of the provinces of Canada, except Québec.