Southern Energy arranges $23.5M (U.S.) in financings

Executive Summary

• Southern Energy Corp. has executed definitive agreements for a $23.5 million financing package involving senior secured convertible debentures, new common shares, and the sale of a gross overriding royalty (GORR).
• The transaction is designed to retire the company's existing high-cost senior credit facility, extend maturities, and provide development capital for the 2026 development plan on its Gulf Coast assets.
• Net proceeds are expected to be $22 million (U.S.), with closing anticipated on or about February 12, 2026.

Key Details

• Total Financing Value: $23.5 million (U.S.) gross, resulting in $22 million (U.S.) in net proceeds after an 8.8235% original issue discount (OID) of $1.5 million.
• Debenture Component:
  • Issuance of 17,000 senior secured convertible debentures with a face value of $1,000 (U.S.) each.
  • Gross proceeds from debentures: $17 million (U.S.).
  • Net proceeds from debentures: $15.5 million (U.S.).
  • Interest rate: 7% per annum, payable quarterly in arrears.
  • Maturity date: December 31, 2028.
  • OID repayment: The $1.5 million principal attributed to the OID will be repaid in cash.
  • Security: First-priority security interest over all present and after-acquired personal property of the company and subsidiaries.
• Equity Component:
  • Issuance of 30.0 million new common shares.
  • Price: 7 Canadian cents (5 U.S. cents) per share.
  • Gross proceeds: $2.1 million (Canadian) / $1.5 million (U.S.).
  • Listing: Application made for admission to the AIM (Alternative Investment Market) of the London Stock Exchange; shares will also be listed on the TSX Venture Exchange.
• GORR Component:
  • Sale of a 6% gross overriding royalty (GORR) on all revenue from existing and future developed production of petroleum substances on company lands as of the closing date.
  • Gross purchase price: $5 million (U.S.).
  • Terms: In perpetuity, payable monthly, calculated based on realized commodity prices.
  • Structure: Non-possessory fee-simple determinable interest in land.
• Conversion Terms:
  • Conversion price: 7.3 U.S. cents (10 Canadian cents) per share.
  • Ratio: 13,700 shares per $1,000 (U.S.) principal amount of the convertible portion.
  • Interest payment option: Investor may elect to receive interest in cash or shares (subject to TSX-V approval).
  • Ownership cap: Conversion restricted if it causes investor ownership to exceed 19.99% without prior TSX-V clearance and shareholder approval.
  • Change of control: Debentures redeemable for principal and accrued interest, though investor may convert prior to closing.
• Use of Proceeds:
  • Repayment and retirement of the existing senior credit facility in full.
  • Development capital, including completion of two drilled uncompleted wells in Gwinville and further drilling on the existing asset base.
  • General working capital and corporate purposes.
• Closing and Conditions:
  • Expected closing date: On or about February 12, 2026.
  • Conditions: Payout/discharge of existing senior credit facility and approval of the TSX Venture Exchange.
  • Hold period: Four months and one day under applicable Canadian securities laws and TSX-V rules.
• Share Count Impact:
  • Assuming full conversion of debentures (excluding OID portion), a maximum of approximately 212.35 million additional shares would be issuable.
  • Total common shares in issue post-admission (ceteris paribus): 366,254,953.

Notable Quotes

• "This transaction is a strategic reset of Southern's capital structure. By retiring our existing high-cost senior credit facility and extending maturities, we are significantly reducing our cost of capital, improving financial flexibility and creating a runway to execute our 2026 development plan." — Ian Atkinson, President and CEO
• "The structure of the transaction sees an existing shareholder step up as a long-term strategic partner through a combination of equity participation, disciplined convertible financing and non-dilutive capital tied directly to asset-level performance." — Ian Atkinson, President and CEO