Another flash blog today as I’m in the smoke mainly talking the Orange Basin. Great to see everyone yesterday and so many blog readers including half of Westy’s golf club…

Southern Energy Corp

Southern has announced that it has agreed to amend the terms of its previously announced equity fundraise to raise aggregate gross proceeds of approximately US$6.0 million (approximately £4.8 million / C$8.5 million) of units of the Company (“Units”), as follows: (i) to reduce the price from 4.3 pence to 3.8 pence (the “Placing Price”) or from C$0.08 to C$0.07 per Unit (the “Prospectus Price”); (ii) to increase the amount of Warrants per Unit from one half of one Common Share purchase Warrant to one whole Warrant per Unit; and (iii) to reduce the exercise price of such Warrants from 5.3 pence to 4.8 pence (in the case of the Placing) or from C$0.10 to C$0.09 per Common Share (in the case of the Prospectus Offering).

The remainder of the terms of the fundraising, which consists of a placing of new Units to new and existing institutional investors on AIM (the “Placing”) and a concurrent public offering of new Units in Canada (the “Prospectus Offering” and, together with the Placing, the “Fundraising”), will continue without further amendment, other than the revision to the expected timetable for the Fundraising, as further detailed below.

Research Capital Corporation (“RCC”) is acting as sole agent and sole bookrunner (the “Agent”) in connection with the Prospectus Offering. Tennyson Securities, a trading name of Shard Capital Partners LLP (“Tennyson Securities”) and Hannam & Partners, a trading name of H&P Advisory Limited (“H&P”) are acting as joint bookrunners (the “Joint Bookrunners”) in connection with the Placing.

Overview of the Fundraising

·    Southern intends to conduct an approximate US$6.0 million equity fundraise to accelerate the completion of its three drilled and uncompleted (“DUC”) wells, drilled as part of its Q1 2023 drilling campaign on its Gwinville acreage, as well as fully funding (alongside cashflow) the drilling of two vertical Cotton Valley wells on its Mechanicsburg acreage;

·    The net proceeds from the Fundraising are expected to fully fund, alongside existing cash, cash flows and undrawn debt facilities, the completion of the Gwinville DUCs at a cost of approximately US$2.5 million per well and the drilling of the Mechanicsburg wells at a cost of approximately US$3.5 million;

·    The Company is seeking the approval of the holders of its outstanding convertible unsecured subordinated debentures (the “Debentures”), by way of obtaining extraordinary resolutions of greater than 66.67% of the aggregate principal amount of the Debentures, to amend the terms of the indenture governing the Debentures such that, subject to and concurrent with the completion of the Fundraising, an amount equal to 102.5% of the principal amount outstanding under the Debentures plus all accrued and unpaid interest as of the closing date would convert into Units at the revised Prospectus Price (the “Debenture Amendment”). The completion of the Debenture Amendment and the issuance of the Units upon the conversion of the Debentures remain subject to acceptance of the TSXV. The Units to be issued pursuant to the Debenture Amendment will be subject to customary lock up provisions.

Summary on Fundraising

o  A Placing of new Units (the “Placing Units”) to new and existing institutional investors at the Placing Price. The Placing will be conducted through an accelerated bookbuild process (the “Bookbuild”) which will launch immediately following the release of this Announcement. The Placing is subject to the terms and conditions set out in the Appendix to this Announcement (which forms part of this announcement);

o  A concurrent Prospectus Offering of new Units (the “Prospectus Units“) on a best efforts agency basis at the Prospectus Price. The Prospectus Offering will be conducted pursuant to the terms and conditions of an amended agency agreement to be entered into between the Company and the Agent. The size of the Prospectus Offering will be determined in the context of the market at the time of entering into the amended agency agreement between the Company and the Agent; and

o  Certain directors and members of senior management of the Company forming part of a president’s list are expected to subscribe into the Fundraising alongside investors. 

·    The Prospectus Offering is being conducted pursuant to the Company’s Canadian base shelf prospectus dated 28 November 2024 (the “Base Shelf Prospectus”). An amended and restated prospectus supplement amending and restating the prospectus supplement dated 14 March 2025 (as amended, the “Prospectus Supplement”) relating to the Prospectus Offering will be filed in each of the provinces of Canada, other than Quebec. Copies of the Prospectus Supplement and accompanying Base Shelf Prospectus, when available, can be obtained free of charge under the Company’s profile on SEDAR+ at www.sedarplus.ca. Delivery of the Base Shelf Prospectus and the Prospectus Supplement and any amendments thereto will be satisfied in accordance with the “access equals delivery” provisions of applicable Canadian securities legislation, such that the Company intends to file the Prospectus Supplement within two business days. The Base Shelf Prospectus and the Prospectus Supplement will contain important detailed information about the Company and the Prospectus Financing. Prospective investors should read the Prospectus Supplement and accompanying Base Shelf Prospectus and the other documents the Company has filed on SEDAR+ at www.sedarplus.ca before making an investment decision. The Prospectus Offering is expected to close on or around 31 March 2025, and is conditional on the Company obtaining the extraordinary resolutions in connection with the Debenture Amendment, and subject customary closing conditions, including the approval of the TSX Venture Exchange (the “TSXV”). The Company will use commercially reasonable efforts to obtain the necessary approvals to list the Warrants issuable pursuant to the Prospectus Offering.

·    The number of Placing Units and Prospectus Units (and the underlying Common Shares and Warrants) to be issued will be determined by the Company following completion of the Bookbuild in consultation with the Joint Bookrunners and RCC.

·    The Bookbuild is currently expected to close no later than 8.00 a.m. (GMT) on 31 March 2025, but the Joint Bookrunners and the Company reserve the right to close the Bookbuild earlier or later, without further notice, and is conditional on the Company obtaining the extraordinary resolutions in connection with the Debenture Amendment.

·    Certain directors and officers of the Company will participate in the Prospectus Offering under the president’s list, which is considered a “related party transaction” pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Company is relying on exemptions from the formal valuation and minority shareholder approval requirements provided under sections 5.5(a) and 5.7(1)(a) of MI 61-101 on the basis that the fair market value of the aggregate participation of the insiders in the Prospectus Offering will not exceed 25% of the market capitalization of the Company, as determined in accordance with MI 61-101.

A modest change in the previously announced terms for the raise, not unusual and as Southern have some exciting assets to bring on this financing is important.