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

Executive Summary

• Southern Energy Corp. entered into definitive subscription and purchase‑sale agreements with three private investors for a $22 million financing package consisting of senior secured convertible debentures, new common shares, and a 6% gross overriding royalty (GORR).
• Net proceeds will be used to retire the existing high‑cost senior credit facility, fund development of two drilled uncompleted wells in Gwinville and additional drilling on its Gulf Coast asset base, and provide general working capital.
• The debentures carry a 7% annual coupon (15% if conversion control not approved by 31 Dec 2026), mature 31 Dec 2028, and are convertible at US$0.073 per share (13,700 shares per $1,000 principal).

Key Details

• Transaction Structure – Aggregate net proceeds of US$22.0 million after an 8.8235% original issue discount (OID) of US$1.5 million on the debentures.
• Debentures – 17,000 units, $1,000 face value each; issued at US$911.76 per debenture → gross proceeds US$17.0 million, net US$15.5 million.
• Coupon: 7% per annum, payable quarterly in arrears.
• Maturity: 31 Dec 2028; OID principal of US$1.5 million repaid in cash.
• Conversion price: US$0.073 per share (13,700 shares per $1,000 principal).
• Ownership cap: conversion prohibited if investor ownership would exceed 19.99% without TSXV clearance and shareholder approval.
• Common Shares Issuance – 30.0 million shares at CAD$0.07 (US$0.05) per share → gross proceeds CAD$2.1 million (≈ US$1.5 million).
• Application to list the new shares on TSXV and admit them to AIM (London Stock Exchange).
• Gross Overriding Royalty (GORR) – Purchase price US$5.0 million for a 6% royalty on all revenue from existing and future developed production on Southern’s lands, payable monthly in perpetuity, calculated on realized commodity prices.
• Use of Proceeds –
• Repay/retire existing senior credit facility in full.
• Development capital for completion of two drilled uncompleted wells in Gwinville and further drilling on existing assets.
• General working capital and corporate purposes.
• Conversion & Interest Flexibility – Investor may elect to receive interest in cash or shares; if not approved as a “Control Person” by 31 Dec 2026, interest rate rises to 15% per annum from 1 Jan 2027.
• Security – Debentures secured by first‑priority security interest over all present and after‑acquired personal property of Southern and subsidiaries (Alberta law general security agreement, charges over subsidiary shares).
• Closing – Expected on or about 12 Feb 2026, subject to customary conditions including discharge of existing senior credit facility and TSXV approval.
• Hold Period – Shares and debentures subject to a four‑month‑plus‑one‑day hold period under Canadian securities laws and TSXV rules.
• Potential Dilution – Assuming full conversion (excluding OID portion), up to ≈212.35 million additional shares could be issued, on top of the 30 million newly issued shares.

Notable Quotes

“This transaction is a strategic reset of Southern's capital structure… significantly reducing our cost of capital, improving financial flexibility and creating a runway to execute our 2026 development plan.” – Ian Atkinson, President & CEO

The release contains forward‑looking statements; see the full disclaimer in the original announcement.