- Southern Energy has completed a US$23.5 million financing and royalty sale, reducing debt costs and strengthening its balance sheet
- The company is targeting production growth across its Gulf Coast assets, including new wells and oil opportunities
- Rising U.S. natural gas demand could support higher prices and improved cash flow in 2026
Natural gas producer positions for next phase of growth
Southern Energy (TSXV:SOU)(OTC:SOUTF) is positioning for growth after completing a US$23.5 million financing and royalty transaction aimed at strengthening its balance sheet and improving financial flexibility.
Operating across Mississippi, Louisiana and East Texas, the company is focused on natural gas production, with additional exposure to oil opportunities across its asset base. With infrastructure already in place, management is targeting capital-efficient development and production growth.
In this episode of The Capital Compass, Stockhouse host Ricki Lee speaks with Ian Atkinson, President and CEO of Southern Energy, about the company’s operations, recent financing and what investors should be watching next.
Watch the full video above or read the transcript below.
Southern Energy strengthens balance sheet to drive growth
Ricki: And it’s a pleasure to have you with us, Ian, but let’s start with the company itself. For viewers who may be new to Southern Energy, can you give us an overview of the business and your operations across Mississippi, Louisiana, and east Texas?
Ian: Yes, certainly. For those who don’t know Southern as the company, we are an upstream energy company that is dual listed in both Canada on the TSX Venture Exchange and the AIM market of the London Stock Exchange in the UK.
As you pointed out Ricki, the assets are on the US Gulf Coast with the majority of these assets in the state of Mississippi and Louisiana and East Texas is more of a focus area of expansion. I would describe our assets as large company assets within a small company.
So those who are familiar with EOG or Enron Oil and Gas, they were one of the previous owners of these assets and they heavily invested in de-risking the assets and installing the necessary infrastructure for full scale development.
So now we come in and we can direct our capital spending on drilling and adding cash flow and production so that spending is done versus having to spend money on the infrastructure, like a lot of the resource plays out today.
So, it’s important to note that although historically we have focused on our dry gas assets, we do have optionality within our assets to focus on oil and obviously with oil peaking at a hundred dollars right now, it’s a good time for us to look at that kind of capital spending.
I will add as I’m introducing the company, the Gulf Coast is unique as far as commodity pricing in the sense that we get a premium to both natural gas pricing posted at NYMEX and oil pricing posted at WTI and I just checked this morning and for the first few months here in 2026, we’ve averaged just under a 20% premium to the NYMEX gas pricing.
So it’s unique kind of competitive advantage for us in this area.
Ricki: And you also recently completed a $23.5 million US dollar financing and royalty sale. Can you walk us through the significance of that transaction and why it was an important step for the company at this stage?
Ian: Yes, the financing itself was completed with the focus on reducing our carrying costs of our previous credit facility, bringing some cash to the balance sheet, all the while not being dilutive to our share price as we still feel that’s currently undervalued in the market.
Frankly, our previous credit facility was out of date, and we were successful in reducing the debt service costs with this financing by more than 70%, which leaves $3.5 to $4 million US more annual free cash flow within the company. We’re also successful in extending that credit facility by three years.
So now that gives us a lot of room here to grow with the cash we have on the balance sheet. The royalty sale was unique. A lot of companies do look at that kind of instrument as they’re looking to raise money, and it was a way for us to accelerate development without being dilutive to our current shareholders on a per share basis.
So now, as I mentioned previously, with commodity prices on the rise, it’s a good time for us to be able to accelerate our growth now with this financing closed.
Ricki: And what does that additional capital now allow Southern Energy to do both operationally and strategically, that maybe wasn’t possible before?
Ian: Good question. We operationally have some low hanging fruit that we can now capitalize on. As an example, we have two horizontal wells in one of our main assets named Gwinville that we have drilled but had not brought on production yet due to the low commodity prices in the last few years and having to wait to accumulate cash flow to execute on that.
We also, as I mentioned, have some significant oil opportunities in another one of our main assets called Williamsburg, which we plan to start drilling a well here in early Q3 2026, so early to mid-June.
And interesting thing there is directly offsetting us. There has been another operator who has had tremendous recent success in drilling in the same area and bringing on oil wells at a rate of more than 300 to 400 barrels a day and paying out those capital expenditures in mere months.
And we have those same opportunities at Williamsburg, so we’re excited about that. Strategically as you ask, we’re always looking for opportunities to look at opportunistic acquisitions in our focus area where we can add scale to the base production and cash flow of the company, as well as obviously add more deep inventory and drilling opportunities.
And now with this financing done and our balance sheet reset, I think we’re in a good position to capitalize on that type of growth as well.
Ricki: And then, turning to your most recent financial results, what were the key takeaways from the third quarter and what did they tell you about the business heading into 2026?
Ian: That’s a good question because as a small company we’re not always on people’s radar on a day-to-day basis, like some of the bigger companies. Q3 I think was a good example of how we are a low cost operator and how we can survive the volatility of commodity prices and specifically natural gas prices that we’ve seen in the recent past.
When you look into Q4 that will be coming out, we can show how higher commodity prices go right to the bottom line of corporate cashflow. Then leading into Q1, you really start to see the effect of this financing we’ve just been discussing the lower cost of credit and getting into growth mode again as shareholders look at potentially investing in a company like Southern.
Ricki: So, continuing to look ahead than what should investors be watching out for next in terms of execution growth and broader milestones across the business?
Ian: I’m glad you asked that question. There’s a few things here. I think number one, historically our share price has been very much tied to the price of US natural gas. When you look at our historical trading metrics, for example, in 2020 when natural gas prices reached an excess of $6 US per MMBtu, our share price traded up over a dollar per share.
We’re trading at 7 cents right now. So, what’s coming down the line here in the Gulf Coast with US gas is there’s a massive supply demand shift happening where the US is substantially increasing the demand in the area through a few things like liquified natural gas exports out of the Gulf Coast, AI data centers, which seems to be very topical of the day.
More gas getting to Mexico, all the while supply seems to be leveling off, not growing at the same pace.
So, this is expected to increase natural gas prices in the near future, and we’re already into this dynamic changing. And if it gets anywhere close to where it was in 2022, I think our share price should move along with that. Second I would say look for us to announce some results of these two horizontal wells I discussed at Gwinville.
These wells should be coming online in the next few quarters, and that helps us unlock the value of the next probably a hundred to 120 locations in that asset. I would say the next is the results from our Williamsburg oil drilling that I mentioned. So now the oil prices are around a hundred dollars a barrel. It’s a great time for this opportunity.
I think if we do get something similar to what the offset operator was achieving, then that’ll be very significant for us, and that would add 30 to 40 new locations as well. And lastly, you touched on it when you asked about how does this financing affect our strategies, and we’ve always had acquisitions as part of our strategy, and I think we we’re always looking at acquisitions and hopefully in 2026 we’re able to get one of those transactions across the line.
So, there’s a multitude of things here investors should be looking for from Southern as they’re contemplating a potential investment.
Ricki: Well, Ian, thank you so much for joining us and walking us through the Southern Energy story today.
Ian: Great. Thanks for the time, Ricki. I look forward to speaking with you again.
Ricki: And we look forward to having you back on the Capital Compass. For more information, you can visit southernenergycorp.com. I’m Ricki Lee and this has been the Capital Compass. Thank you for watching and we’ll see you again next time.
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