Southern Energy Corp. (SOUC LN/SOU CN): Shallower decline at LSC well supports reserve upside
• Southern Energy’s 2Q25 production averaged 1,883 boe/d, exceeding our forecast of 1,698 boe/d. Current assets minus accounts payable stood at ~US$1.5 mm at end-June, in line with expectations.• The GH LSC 13-13 #2 well in the Lower Selma Chalk continues to exhibit a notably shallower decline rate than the previous Upper Selma Chalk wells. This is a key development: sustained performance combined with a lower cost structure could materially enhance YE25 reserves bookings. The current reserves audit assumes a per-well cost of US$5.0 mm; revising this to US$4.0 mm would improve reserve economics. The Lower Selma Chalk inventory includes an additional 45 unbooked drilling locations, representing ~26 mmboe of potential reserves—nearly equivalent to YE24 2P reserves of 28 mmboe.
• The FERC Office of Enforcement has initially ruled in Southern’s favor regarding the transportation tariff dispute. This decision, along with completion of the new rate determination process, is expected to enable the restoration of ~400 boe/d of curtailed production, which is expected to benefit from reduced tariff rates. Production is anticipated to be back online by October.
• With natural gas prices strengthening and LNG feed gas demand rising from 4Q25, Southern is well-positioned to complete additional DUCs by YE25 and initiate new drilling in 2026. Notably, Southern’s realized gas prices in July were 19% above Henry Hub benchmarks.
• We re-iterate our target price of £0.25 per share, which is based on our ReNAV. Our Unrisked NAV for the is £0.50 per share.
Valuation
Our 2P NAV for Southern is ~£0.09/sh (~3x the current s/p). The lower Selma Chalk additional 45 locations have an unrisked NAV of £0.10/sh. Our ReNAV for the company is £0.24 per share. The shares trade at EV/DACF multiples of 3.3x for 2026 and 2.2x for 2027.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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