Southern Energy Corp. Completes US$23.5 Million Financings and Royalty Sale

Executive Summary

• Southern Energy Corp. completed a non-brokered private placement raising aggregate net proceeds of US$22.0 million through the issuance of senior secured convertible debentures, common shares, and a newly-created gross overriding royalty (GORR).
• The transaction includes the retirement of the Company’s existing US$12.9 million senior credit facility in full, with remaining proceeds allocated to development capital, including completing two drilled uncompleted wells and further drilling.
• The Investors (Treelawn Group Inc., TCC 1 Corp., and TCC Royalty Corp.) now hold approximately 9.32% of shares on an undiluted basis and up to 42.60% on a fully diluted basis, triggering early warning report requirements.

Key Details

• Total Net Proceeds: US$22.0 million (after an 8.8235% Original Issue Discount of US$1.5 million on the Debentures).
• Debentures Issued:
  • 17,000 US$1,000 face value senior secured convertible debentures.
  • Issued at a price of US$911.76 per Debenture.
  • Gross proceeds from Debentures: US$17.0 million (Net: US$15.5 million).
  • Interest rate: 7% per annum, payable quarterly.
  • Maturity: December 31, 2028.
  • Conversion: Convertible into Shares at any time prior to maturity. Interest may be paid in cash or Shares at Investor's option.
  • Default Interest: Increases to 15% per annum from January 1, 2027, if Investors are not approved as a "Control Person" by December 31, 2026.
  • Security: First-priority security interest over all present and after-acquired personal property.
• Common Shares Issued:
  • 30,000,000 new common shares.
  • Price: CAD$0.07 (US$0.05) per share.
  • Gross proceeds: CAD$2.1 million (US$1.5 million).
  • Admission to trading on the London Stock Exchange AIM expected around February 16, 2026.
• Gross Overriding Royalty (GORR):
  • Sale of a 6% GORR on all revenue from all existing and future developed production of petroleum substances on Company lands as of February 12, 2026.
  • Calculated based on realized price, payable monthly in perpetuity.
  • Gross proceeds: US$5.0 million.
• Use of Proceeds:
  • US$12.9 million used to repay and retire the existing senior credit facility in full.
  • Balance used for development capital (completion of two drilled uncompleted wells in Gwinville, further drilling), general working capital, and corporate purposes.
• Ownership Impact:
  • Treelawn Group Inc., TCC 1 Corp., and Jeff Wood (Joint Actor) own 34,140,800 Shares (9.32% undiluted).
  • On a fully diluted basis (assuming full conversion of debentures), ownership rises to 246,469,567 Shares (42.60%).
  • Maximum additional shares issuable upon full conversion of Debentures: ~212.35 million Shares.
• Hold Period: Four months and one day for Debentures and Shares under Canadian securities laws and TSXV rules.
• Regulatory Status: Transaction conditionally accepted by TSXV; subject to final acceptance. Early warning reports filed by Investors.

Notable Quotes

• "We are pleased to have completed this financing, which meaningfully strengthens Southern's balance sheet and positions the Company for disciplined execution of our development program. With the retirement of our prior higher cost senior credit facility and the addition of a supportive long-term capital partner, Southern is well positioned to advance its Gulf Coast assets and focus on operational delivery and value creation for shareholders." — Ian Atkinson, President and Chief Executive Officer