Corporate Presentation...Corporate Presentation May 2020 TSXV: SOU Disclaimers 1 This presentation...

TSXV : SOU

Corporate PresentationMay 2020

TSXV: SOU www.southernenergycorp.com

Disclaimers

1

This presentation contains information that may be considered to be forward-looking information within the meaning of applicable securities laws. Such forward-looking information relates to internal projections, expectations, estimates or beliefsrelating to future events or future performance . All statements contained herein, other than statements of historical fact, maybe forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", “propose”, "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. These statements are only predictions and actual events or results may differ materially. Although the recapitalized corporation believes that the expectations reflected in the forward-looking information contained in this investor presentation are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic,competitive, political and social uncertainties and contingencies. Therefore, investors should not unduly rely on the forward-looking information contained in this investor presentation as actual results may vary.

With respect to forward-looking information contained in this presentation, the recapitalized corporation has made assumptions regarding, among other things: the legislative and regulatory environment in the jurisdiction where it intends tooperate, the impact of increasing competition, costs related to exploration, drilling, seismic and the development of oil and gas properties will remain consistent with historical experiences, anticipated results of exploration and drilling activities and the price of oil and gas. The forward-looking information contained in this investor presentation involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information.

Actual results could differ materially from those anticipated in the forward-looking information contained in this presentation as a result of the following risk factors: volatility in the market prices for oil and natural gas, unanticipated changes in anyapplicable royalty regime, uncertainties associated with estimating resources and reserves, geological problems, technical problems, drilling and seismic problems, liabilities and risks including environmental liabilities and risks inherent in oil andnatural gas operations, fluctuations in currency and interest rates, incorrect assessments of the value of acquisitions, unanticipated results of exploration and development drilling and related activities, competition for capital, competition for acquisitions of reserves and resources, competition for undeveloped lands, competition for skilled personnel, unpredictable weather conditions, the impact of general economic conditions and political conditions, industry conditions including changesin laws and regulations including adoption of new environmental laws and regulations, the possibility of future financings and divestitures, expectations regarding future production and obtaining required approvals of regulatory authorities.

The forward-looking information contained in this investor presentation speaks only as of the date of this investor presentation and is expressly qualified, in its entirety, by this cautionary statement and the recapitalized corporation disclaims any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws. This information is confidential and is being presented to potential investors solely for information purposes. These materials do not and are not to be construed as an offering memorandum. An investment in securities involves a high degree of risk and potential investors are advised to seek their own investment and legal advice.

BOE Disclosure The term barrels of oil equivalent (“BOE”) may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel (6Mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

US DisclaimerThis presentation is not an offer of the securities for sale in the United States. The securities have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration. This presentation shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would beunlawful.

Non-GAAP MeasuresIn this presentation, certain key performance indicators and industry benchmarks such as netback are used to analyze financial and operating performance. These key performance indicators and benchmarks are key measures of profitability and provide investors with information that is commonly used by other oil and gas companies. These key performance indicators and benchmarks as presented do not have any standardized meaning prescribed by Canadian generally accepted accounting principles and therefore may not be comparable with the calculation of similar measures for other entities.

Information Regarding Disclosure on Reserves and ResourcesThe reserve and resource estimates contained herein are estimates only and there is no guarantee that the estimated reserves or resources will be recovered. Where discussed herein "NPV 10“ or similar expressions represents the net present value (net of capex) of net income discounted at 10%, with net income reflecting the indicated oil, liquids and natural gas prices and IP rate, less internal estimates of operating costs and royalties.

All figures in USD unless otherwise specified


About Southern Energy

1) Market capitalization is calculated as of May 1, 2020 using a share price of CAD $0.015/share2) Includes CAD $8.1 MM of convertible debentures and CAD $18.2 MM of reserves-based lending bank debt3) Enterprise value is the sum of market capitalization, convertible debentures and bank debt4) Estimated working interest sales production capacity at May 20205) Based on reserve report by Netherland, Sewell and Associates, Inc., estimated at December 31, 2019 using average CDN engineering consultants January 1, 2020 price forecast

2

• Management and Board has extensive operating experience in the United States with a track record of creating shareholder value

• Positioned to premium commodity pricing in North America

• Exposure to structural demand growth in U.S. power generation and Gulf Coast LNG

• Targeting growth in excess of 10,000 boe/d through consolidation and development

• Multiple recent accretive acquisitions provide stable production and cash flow base

• Assets characterized by multi-zone, large resource in place with low recovery

• Significant low-risk drilling inventory with optionality to both oil and gas projects

Company Profile

Capitalization CAD $

Trading Symbol (TSX-V) SOU.V

Common Shares Outstanding (Basic / FD) 220.8/ 307.7

Insider Ownership (Basic / FD) 21% / 35%

Market Capitalization (1) $3.3 MM

Convertible Debenture and Bank Debt (2) $26.3 MM

Enterprise Value (3) $29.6 MM

Metrics CAD $

Land > 39,000 acres

Production (4) ~ 2,500 boe/d

PDP Reserves (5) 6.3 MMboe

PDP NPV10 (5) $40.2 MM

Proved Reserves (5) 11.4 MMboe

Proved NPV10 (5) $65.3 MM

Southern Energy Assets – Global Gas Export Perspective

Magee

Southern US Office

Approved LNG Export Terminal 20+ Bcf/d export by 2025


Strong BaseAsset

Optimization

Additional Accretive PDP Acquisitions

Low-Risk Development Drilling and

Reserves Growth

• Accretive PDP acquisitions• Low risk, stable cash flow• Management & basin

experience• Technical advantage

• Operating cost savings • Production and lift

optimizations• Environmentally conscious

and safety driven approach

• Disciplined strategy• Low decline long life assets• PDP valuations• Synergistic with base• No value paid for extensive

upside

• Under-developed assets with low historic recovery from verticals

• Creation of large-scale reserve additions and drilling inventory

Timing driven by commodity environment:BUY LOW – DRILL HIGH

Access to Capital

The Business Plan

3

• Build a high margin asset base of sufficient scale with significant low risk drilling inventory that continues to generate free cash flow

• Southern will be attractive to patient, value shareholders, as well as LNG players seeking easily expandable, long-life gas assets

Focused on Value Creation: Real Shareholder Returns

Long-Term Sustainability

Exit Optionality


Investment Thesis

4

Why Invest in Southern Energy?

Experience• Highly experienced management team• Extensive operations experience in southeastern U.S. core area• Management and Board have significant personal investment

Financial Support• Strong institutional investor support• Cash flow resilient in low price environment• Focused on being a low-cost operator

Premium Commodity Pricing• Access to the best commodity pricing in North America• Exposure to operational U.S. Gulf Coast LNG• Unique amongst Canadian-listed energy companies

Accretive Acquisition Strategy• Complementary, accretive acquisitions at attractive metrics• Target low decline, under-developed assets with scale• Team continues to execute strategy

Future Development Opportunities• Organic growth from low-risk, multi-zone, infill drilling inventory • Held by production lands offer oil and gas drilling optionality• Horizontal Cotton Valley re-development in northern Louisiana

TEAM HAS SPENT 6 YEARS OPERATING IN THE U.S. GULF COAST AREA

SOUTHERN IS 21% INSIDER OWNED (NON-DILUTIVE BASIS)

~ 2,500 BOE/D OF LOW DECLINE PRODUCTION

95% WORKING INTEREST

HENRY HUB BASIS IS TYPICALLY THE HIGHEST PRICE GAS IN NORTH AMERICA

LLS CRUDE TRADES AT A PREMIUM TO WEST TEXAS INTERMEDIATE

RECENTLY CLOSED AN ACQUISITION OF 1,000 BOE/D IN CORE AREA

ACQUISITION COST OF 1X PDP NPV10 USING THIRD PARTY EVALUATION

STACKED PAY WITH 12 PRODUCING FORMATIONS IN CORE AREA

HORIZONTAL DRILLING POTENTIAL WITH 60+ HZ LOCATIONS AT GWINVILLE


U.S. Gulf Coast Gas Demand to Increase 20+ Bcf/d in Next 5 years

5

Positioning Southern for the future

The U.S. Gas Depletion Story: 2020 and Beyond• Unprecedented production of 100+ Bcf/d with annual decline rate of > 25%• System requires ~ 25 Bcf/d of new annual production to stay flat• Producers currently focused on fiscal responsibility and FCF – not growth

Associated Gas Supply Becoming Capital Constrained• Constrained to self-funded growth opposed to equity/debt funded growth• Low oil prices (~ $25 WTI) not expected to incent incremental oil drilling• Permian and Marcellus likely entering extended period of decline in 2H20

Structural Demand From Increasing U.S. Natural Gas Exports• LNG exports currently ~ 9 Bcf/d• Second wave of LNG projects adding another 10+ Bcf/d of exports by 2025• Pipeline exports to Canada and Mexico to exceed 10 Bcf/d by 2025

Industrial Power Demand in Gulf Coast States increasing• Industrial power demand increase of ~ 10% in 2018 is expected to continue• U.S. industrial natural gas power demand now over 25 Bcf/d • Recent major manufacturing plants include Yokohama, Mercedes & Toyota

Southern LNG Exposure

LNG Terminal

Primary Sales Point

Southern Assets

Existing Pipelines

A

B

C DE

F

Increasing Market Share for Gas-Fired Power Generation• Continued coal and nuclear retirement (currently 30 & 20% share)• 20 years ago coal provided 50% of power generation market share• Every 1% of market share gain for gas creates 0.8+ Bcf/d of new demand

Legend Project Company Capacity Timeline

Corpus Chris ti Cheniere 2.1 Bcf/d Active

Freeport Freeport LNG 2.5 Bcf/d Active

Sabine Pass Cheniere 3.7 Bcf/d Active

Cameron Intl . Consortium 3.5 Bcf/d Active

Lake Charles Energy Transfer / Shel l 1.8 Bcf/d FID 2019

Dri ftwood Tel lurian 3.5 Bcf/d Fi rs t LNG 2023

A

B

C

D

E

F

Source: Cheniere, Platts, EIA, TSI, BMO, Jefferies, Morgan Stanley


Six Years of Operating History Has Formed Growth Strategy

6

• Management expects to establish a dominant production base through acquisitions during weak pricing environment

• Target production of > 10,000 boe/d over 18 - 24 months• Pursuing multiple follow on acquisitions while focusing on cash flow per

share growth• Opportunities range from 1,500 – 15,000 boe/d• Accumulate large, low risk drilling inventory capable of organic growth

when commodity prices dictate

Buy Low – Drill High

• Low decline, low risk assets, with a stable production base, complementary to Southern’s existing assets

• Operated, high WI assets with control of infrastructure• Under-developed conventional & quasi-conventional assets

containing a significant inventory of drilling locations• Opportunity to realize material OPEX savings through field

synergies and facility optimization

Evaluation Criteria

Focus Area

Southern Field Office

Core Areas


Environment, Social & Governance

7

Core Values at Southern – Not Buzz WordsEnvironment

• Actively engaged with Mississippi state regulators to help design best practices and policies for air emissions and freshwater usage

• Meet or exceed recent EPA Standards to reduce gas emissions• Maintain a thorough asset integrity program designed to mitigate risk

of environmental damage

Safety• Strong corporate safety culture with highly experienced and trained

field personnel• No lost time incidents for employees or contractors since Management

began operations in the southeastern U.S. in 2013

Social• Southern supports employees who are active in their communities in

the form of time or financial resources and encourages ongoing community involvement

Governance• Southern maintains clear controls and oversight with a diverse and

independent board that is well aligned with shareholders• All Board Committees and Chairs are independent• Regular engagement with shareholders, employees and stakeholders


Leadership Team

8

Management Team Board of Directors

Ian Atkinson, M.Sc., P. Eng. – President & CEOAthabasca Oil, Morpheus, Renaissance and Talisman

Ian Atkinson, P. Eng., ICD.DFormer founder and EVP of Athabasca OilFormer VP Engineering of MorpheusDirector of Chronos Resources

Calvin Yau, CA, CPA – VP Finance & CFOMolopo, Waldron and Daylight

Bruce Beynon, P. Geol.Former EVP, Exploration and Corporate Development of Baytex EnergyFormer President of Raging River Exploration

Chris Birchard – VP GeoscienceAthabasca Oil, Bellamont, Espoir and Devon

Michael KohutCFO of Hammerhead Resources, Chairman of Big Rock BreweryDirector of Chronos Resources

Erin Buschert – VP LandCrescent Point, TriStar, ARC and Talisman

Tamara MacDonald, ICD.DFormer SVP Corporate and Business Development of Crescent PointDirector of Equinor Canada and Spartan Delta Corp.

Jim McFadyen – VP OperationsAthabasca Oil, Galleon, Fairborne and Renaissance

Andrew McCreath, CFAPortfolio Manager at Forge First Asset Management Inc.The Market Commentator on BNN Bloomberg TV

Gary McMurren, P.Eng. – VP EngineeringAthabasca Oil, Galleon, ARC and Talisman

C. Neil Smith, P.Eng., MBAFormer Chief Operating Officer of Crescent Point

R. Steven Smith, CA, CPAFormer Director and Chief Financial Officer of Broadview EnergyDirector of Karve Energy

Strong technical expertise combined with a modern approach to data and workflow creates proven early mover advantage

Proven track record of success and value creation through acquisitions, joint ventures and organic growth

Board of Directors bring substantial technical, financial and capital markets expertise and experience

Management has 6+ years operating experience in the southeastern U.S.

Experienced and successful management team with a history of creating shareholder value


$0.01

$0.03

SOU(Pre-Acq)

SOU(Pro-Forma)

1,550

2,550

SOU(Pre-Acq)

SOU(Pro-Forma)

$8.80

$6.00

SOU(Pre-Acq)

SOU(Pro-Forma)

Corporate Cash Flow ($/share) (1)

Recent Accretive Acquisition – Executing on Strategy

1) Netback and Cash Flow based on 2019 flat pricing at $62/bbl WTI and $2.90/MMBTU HH as at April 25, 2019

9

Production (boe/d) Operating Cost ($/boe)

• Significant accretion to both operating and corporate cash flow

• Pro-forma PDP reserves increase of > 45%• Mature wells with decline rate of < 5%

• Field synergies drove further 25% operating cost reduction

• Costless production optimization increased production over 20%• Immediately re-negotiated a $0.27/Mcf transportation fee reduction on sales gas• Moved a company-owned compressor to one of the assets to reduce rental charges by a

further $11K/month• Existing SOU field staff immediately took over operations, reducing labor costs by >

$12K/month

Extracting Further Acquisition Value

600

800

1,000

1,200

1,400

1,600

4/1/2019 7/1/2019 10/1/2019

Gros

s Ra

w P

rodu

ctio

n (b

oe/d

)

THEN:

NOW:Change of Operatorship

Current Production: > 1,250 boe/d


Mechanicsburg

Gwinville

Acquisition Assets

• Liquids rich (> 30 bbl/MMcf oil & NGL)• Field covered by 53 mi2 3D• 10 - 12 infill Cotton Valley locations • Large gas resource; OGIP: > 300 Bcf

Core Southern Energy Asset Base

1) CMS assets covering 31,000 acres are > 97% held by production2) Estimated working interest sales production capacity at May 20203) Based on reserve report by Netherland, Sewell and Associates, Inc., estimated at December 31, 2019 using average CDN engineering consultants January 1, 2020 price forecast

10

Mississippi Alabama

Black Warrior Basin

Non-Operated Assets

Mechanicsburg

Gwinville

Williamsburg

Black Warrior Basin

Magee

WilliamsburgSouthern Field Office

Field Location

Acquisition Field

• Multi-zone development upside• Field covered by 48 mi2 3D• 60+ horizontal Selma Chalk

locations (OGIP: > 600 Bcf)

• Per share accretive on all metrics• Production optimizations and

operating cost reductions completed• Cotton Valley oil potential

575boe/d

585boe/d

1,100boe/d

• Light, sweet 45° API oil• > 600,000 acres of highly

prospective land on mapped trend• OOIP: 8 - 12 MMbbl/sec

• Field production > 10 MMbbl• High quality oil - 40° API• 4 - 10 vertical Hosston /

Cotton Valley locations

• Infill drilling opportunities• Recent large oil discoveries on trend• 65 - 75 vertical Cotton Valley

locations

60boe/d

45boe/d

170boe/d

Magee

> 39,000Acres (> 80% HBP (1))

~ 2,500boe/d (2)

$40.2$MM PDP PV10 (3)

6.3MMboe WI PDP Reserves (3)


Mississippi’s Largest Gas Field

Scalable Large Resource Assets - Gwinville Field Example

11

Currently Producing

with low Rf

Historic producing

horizons with potential for

improved recovery

Bcf MMbbl

Wilcox 0.7 -

Selma 134 0.2

City Bank 10 < 0.1

Tuscaloosa 1,100 11

Rodessa 110 0.6

Sligo 48 0.2

Hosston 2.0 < 0.1

Cotton Valley

Gas test

Haynesville

Significant Liquids Upside

Potential

• 1+ Tcf OGIP in Selma Chalk, current recovery ~ 15%

• Multi-zone production of 1.5 Tcf, 12 MMbbl, current decline < 8%, with additional upside potential

• At least 3 stacked horizons to be accessed with horizontal drilling and modern completion designs, following on the early success of previous operator

• Significant potential below the Tuscaloosa from zones which have produced more than 750 Bcf and 80 MMbbl from immediately offsetting fields

• Owned and operated infrastructure with expandable capacity

Significant Underdeveloped Gas Resource

Future HZ Location• Field is covered by proprietary 3D seismic• Delineated from vintage vertical wells• EOG and Penn Virginia drilled 25 Gen-1

HZ’s between 2005 – 2010• Targeted Upper Selma, Lower Selma and

the City Bank across the entire field • SOU’s first location will be a direct offset

to an under-stimulated Gen-1 HZ

Future HZ

3 - 4+ TCF OGIP

Low recovery, large location inventory

Multi-Stacked HZ Potential

Well IRR’s > 50% at $3/MMBTU Henry Hub


Low Risk, Multi-Zone Gas Resource Development

12

1,000

10,000

100,000

2014 2015 2016 2017 2018 2019 2020

Gas R

ate

(Mcf

/d)

Gwinville134 Bcf CTD

Baxterville135 Bcf CTD

• The Baxterville field has undergone a successful HZ conversion and is a direct analog to the Gwinville Field

‒ Recent horizontal wells in the middle of the pool producing > 7 MMcf/d IP30

‒ Southern plans to increase the number of stages and proppant loading to optimize completion design

• Both fields have nearly identical cumulative production, aerial size, pay thickness and reservoir quality

• Gwinville Field has two porosity units in the Selma Chalk that will be developed

Similar Pool Characteristics

Baxterville Selma Chalk Production

3 HZ wells more than doubled field production

14 stage, 1200 lb/ftHZ IP30 7.3 MMcf/d

Vertical well tested570 Mcf/d13X HZ Multiplier Lower Selma

vertical wellIP: 770 Mcf/d

Upper Selma vertical wellIP: 1.0 MMcf/d

Baxterville Gwinville

City Bank vertical well IP: 800 Mcf/d

Future Multi-well Pads


Defined plan to build Cotton Valley oil assets in a regional fairway using Southern’s ‘early mover’ advantage

Significant Oil Potential in Regional Cotton Valley Fairway

• Trend is less developed with drilling as the play moves east from Texas

• Similar ‘macro’ trapping elements exist throughout the trend

• Several recent and significant light oil discoveries along this trend

• Proven vertical production in Mississippi with low-cost completions

• Shallower depths in Louisiana and Arkansas allow for horizontal development

• Over-pressured plays in Louisiana enhance horizontal drilling results

Low Risk, Prolific Light Oil Trend

13


Proven Oil Potential within Core Asset Base

14

CNVL Penetrations

CNVL Production

Shallow Production

Central Mississippi Cotton Valley (CNVL) Focus Area

Historic exploration:• Majority of wells drilled before 1985• Pre-2000 drill times up to 12 months

Recently:• Successful oil development below historic

shallow production• Drilling time down to < 30 days

SOU Acquisition:• Access to HBP land to test two of the largest

productive structures west of Williamsburg• Existing infrastructure for oil and gas

processing and takeaway

Cotton Valley Oil Success

Recent Development (1)

1) Collins NE and Glade Crossing fields only

Reduced drilling costs allow for deeper CNVL drilling opportunities

Williamsburg

• 2 CNVL penetrations• 1 producer – EUR 2.3 Bcf, 43 Mbbl• Under-stimulated; Flowing up 4.5”

Gwinville

• 2 CNVL penetrations• 1980 perf, 8 ft flare

Collins / Seminary

• Most recent CNVL drilling• > 10.5 MMbbl, > 13.4 Bcf;• 1,000 bbl/d, 1.6 MMcf/d• Producing from the same interval

as Williamsburg

Glade Crossing

• 8 recent CNVL producers• > 2.0 MMbbl, 5.5 Bcf since 2015• 1,850 bbl/d, 4.7 MMcf/d• Implementing waterflood scheme

0

2

4

6

8

10

12

14

16

18

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Wel

l Cou

nt

Gro

ss O

il Ra

te (b

bl/d

)

Oil - CD Well Count


Analog WellSOU Key

WellMultiple HZ tested IP’s> 1,500 boepd 200 bopd5 bopd

Low Risk Cotton Valley Horizontal Oil Play

15

Fully Delineated Prospect

High Quality Vertical Conversion Play:• Immediate focus area contains more than 200

historic vertical wells • All historic wells penetrate and define the

target zone• Interpretation supported by 2D seismic• SOU plans low risk HZ infill drilling to re-

develop play to full potential• Estimate > 40 MMbbl OOIP and > 160 Bcf OGIP• Early mover on initial ~ 10,000 acres• 50,000+ prospective acres on trend

• Southern has identified a low risk horizontal infill oil play in a member of the Cotton Valley Formation• Competitor has recently drilled several horizontal wells in the same zone, similar structure with excellent results

Cotton Valley Focus Area

More prolific historic vertical well production

than analog play:• Seven wells with test rates from

25 – 200 bopd• Cumulative oil production of ~

400 Mbbl oil, 3.3 Bcf gas• High quality oil: 53 – 64⁰ API• Moderately over-pressured at

> 0.5 psi/ft• Recovery factor < 1%

~ 9,000 ftTVD


The Southern Energy Difference

16

Key Attributes U.S. Unconventional E&PAs

set C

hara

cter Corporate Decline Rates Low (~10%) High (>40%)

Large Inventory of Undeveloped Resources Yes Yes

Capital Intensity Low High

Ope

ratin

g Ef

ficie

ncy Harvest Mature Production Efficiently Yes No

Unit Operating Costs Low LowOnly during flush production

G&A Overhead Costs Low HighShale development model requires more human capital

Barriers to Entry Driven By Scale & Capital Complexity & Capital

Fina

ncia

l M

anag

emen

t Delevering Yes NoSignificant reinvestment required to offset high declines

Sustaining Capital Low High

Acquisition Metrics Low (~1x PDP) High


Summary – Predictable Growth Strategy

17

• Target large scale growth through consolidation at current commodity pricing • Optionality for low risk drilling in under-developed, low-decline assets

Consolidating and developing high quality low risk conventional assets in under-exploited basins in U.S. Gulf Coast states

• Track record of substantial acquisition and organic growth in previous companies• More than 6 years of operating experience in these basins

Capitalizing on management’s technical experience in the area to enhance asset values

• Consolidate large scale natural gas assets connected to Henry Hub pricing• Assets offer optionality to develop oil that attracts a premium to WTI pricing

Focusing on accretive PDP acquisition of conventional assets with exposure to premium commodity pricing

Positioning Southern to return significant value to shareholders in a responsible, respectful and environmentally efficient manner

U.S. Gulf Coast focused energy company with a goal to create shareholder value by:

Southern Energy Focus on efficient, sustainable, per share growth


Appendix

18


Hedging Summary

Hedging Position:

• As at May 2020:

• Calendar 2020 average natural gas hedge price of ~ $2.55/MMBTU (~ 50% of current natural gas production base)

• Calendar 2021 average natural gas hedge price of ~ $2.45/MMBTU (~ 44% of current natural gas production base)

• Southern entered a buy-back swap for 75 Bbl/d of oil where Southern will pay a fixed price of WTI US$26.11/Bbl. This transactionenables Southern to lock in a hedge gain of US$543 thousand for the remainder of 2020 on the two oil fixed price swaps above

Natural Gas:

Deal Type Term Start Date End Date Volume (MMBtu/d) Index StrikeSwap Option Cal20 01-Jan-20 31-Dec-20 1,000 NYMEX HH $ 2.600 Swap Option Cal20 01-Jan-20 31-Dec-20 1,500 NYMEX HH $ 2.748 Swap Option Cal20 01-Jan-20 31-Dec-20 2,000 NYMEX HH $ 2.575 Swap Option Bal20 01-Feb-20 31-Dec-20 1,500 NYMEX HH $ 2.253 Swap Option Cal21 01-Jan-21 31-Dec-21 1,500 NYMEX HH $ 2.575 Swap Option Cal21 01-Jan-21 31-Dec-21 3,600 NYMEX HH $ 2.402

Oil:

Deal Type Term Start Date End Date Volume (Bbl/d) Index StrikeSwap Option Cal20 01-Jan-20 31-Dec-20 50 WTI $ 55.25 Swap Option Cal20 01-Jan-20 31-Dec-20 25 WTI $ 56.45

19


Selma Chalk HZ Development

20

100

1,000

10,000

0 12 24 36 48 60

Gas R

ate

(Mcf

/d)

Months

Typical advancements in horizontal well completion design leading to significantly improved results

Gen-1: 3 - 4 stages, 400 - 800 lb/ftGen-2: 12 - 14 stages, 800 - 1,200 lb/ftGen-3: 20+ stages, 2,000+ lb/ft

Type Curve Development

Economics

WTI ($/bbl) $60.00 $60.00

HenryHub ($/MMBTU) $2.90 $3.50

IRR (%) 44% 73%

NPV10 ($MM) $2.4 $3.8

Payout (years) 1.9 1.3

P/I Ratio (x) 0.68x 1.07x

Recycle Ratio (x) 2.5x 3.1x

Southern HZ Gen-3 Type Curve

Assumptions

EUR – Gas (Bcf) 4.3

EUR – Oil (Mbbl) 9.0

Net Revenue Interest (%) 79%

Drilling Cost ($MM) $1.7

Completion Cost ($MM) $1.7

Tie-in / Equip Cost ($MM) $0.1

Total Capex ($MM) $3.5

• Current Selma Chalk drilling inventory of 60+ horizontals• > $150 MM of PUD NPV10 value to SOU at > $3/MMBTU Henry Hub• Similar scale of upside potential in the City Bank Formation• Pad drilling of stacked zones will put downward pressure on future

development costs

1P Reserve Impact


Project Economics

1) Using flat price forecast of $60/bbl WTI, $2.90/MMBTU HH

21

Southern Project Economics HorizontalSelma Chalk

VerticalCotton Valley

HorizontalCotton Valley Play

Significant gas upside above $2.90/MMBTU HH Multi-year drilling inventory in identified oil bearing structures

IP 30Oil (bbl/d) 11 160 510

Gas (Mcf/d) 5,700 280 1,800

EUROil (Mbbl) 9 225 572

Gas (Bcf) 4.3 0.4 2.0

Liquids EUR 1% 78% 65%

DCET Type Curve Cost ($MM) $3.5 $3.5 $6.8

Operating Netback (1) ($/boe) $12.00 $29.00 $27.60

IRR (1) 44% 38% 90%

Payout (1) 1.9 years 2.2 years 1.2 years

F&D ($/boe) $4.75 $11.90 $6.80

Recycle Ratio 2.5 2.4 4.1

Capital Efficiency (1st year) ($/boe/d) $6,350 $20,550 $12,200

Comments

• > 2 Tcf OGIP (~ 15% recovery factor) and 200+ HZ well drilling inventory in identified Selma Chalk pools

• Unquantified potential in City Bank expected to yield similar results

• Structural closure of the Cotton Valley estimated at 14,000 acres

• Resource potential is significant

• Recent offsetting oil pool development

• 30,000+ acres high-graded with vertical production history

• Analog HZ wells with IP30 > 1,500 boe/d

Corporate Presentation...Corporate Presentation May 2020 TSXV: SOU Disclaimers 1 This presentation...

Documents

Transcript of Corporate Presentation...Corporate Presentation May 2020 TSXV: SOU Disclaimers 1 This presentation...