Highlights

  • Southern completed USD 23.5 million in financings and royalty sale transactions.
  • Net proceeds of approximately USD 22.0 million were raised after original issue discount.
  • USD 12.9 million senior credit facility fully repaid and discharged.
  • Debentures mature December 2028 with 7% annual interest rate.
  • Proceeds to fund development capital and Gulf Coast drilling activity.

Southern Energy Corp has completed its previously announced non-brokered private placement of senior secured convertible debentures and common shares, alongside the sale of a newly created gross overriding royalty (GORR), raising total gross proceeds of USD 23.5 million.

Southern Energy Corp (AIM:SOUC) shares were trading 6.67% lower at GBX 3.50 during the morning session on 13 February 2026. The stock has declined 53.33% over the past one year.

Structure of the Transaction

The financing comprised USD 18.5 million of gross proceeds through the issuance of 17,000 debentures with a USD 1,000 face value, priced at USD 911.76 per debenture, reflecting an 8.8235% original issue discount (OID). This resulted in gross proceeds of USD 17.0 million and net proceeds of USD 15.5 million from the debenture issuance.

In addition, the Company issued 30.0 million common shares at CAD 0.07 per share (equivalent to USD 0.05), generating CAD 2.1 million, or approximately USD 1.5 million.

The Company also raised USD 5.0 million through the sale of a 6% GORR on all existing and future developed petroleum production across its lands as of 12 February 2026. The royalty is calculated on realized commodity prices and is payable monthly in perpetuity.

After accounting for the OID of USD 1.5 million, aggregate net proceeds from the full transaction amounted to approximately USD 22.0 million.

Strengthening the Balance Sheet

Southern utilised USD 12.9 million of the proceeds to fully repay and retire its existing senior credit facility. Upon closing, all associated security related to the prior facility was discharged.

The remaining capital will be directed toward development initiatives, including the completion of two drilled but uncompleted wells in Gwinville, additional drilling across its asset base, and general working capital requirements.

Management stated that the refinancing reduces higher-cost debt exposure and introduces a long-term capital partner, positioning the Company for disciplined execution across its Gulf Coast assets.

Debenture Terms and Conversion Features

The debentures mature on 31 December 2028 and carry a 7% annual interest rate, payable quarterly. Investors have the option to receive interest in cash or shares, subject to TSXV approval.

If investor approval as a “Control Person” is not obtained by 31 December 2026, the interest rate will increase to 15% per annum from 1 January 2027.

Assuming full conversion (excluding the OID portion repayable in cash), up to approximately 212.35 million additional shares could be issued, in addition to the 30.0 million shares already placed.

The debentures are secured by a first-priority security interest over substantially all present and after-acquired assets of the Company and its subsidiaries.

Listing Timeline and Updated Share Count

Application has been made for the admission of the 30,000,000 new shares to trading on AIM, expected around 16 February 2026. Following admission, the total issued share capital is expected to be 366,254,953 common shares.

The transaction has received conditional approval from the TSX Venture Exchange, with final approval pending customary closing documentation.

Investor Takeaway

The completion of this transaction materially reshapes Southern’s capital structure by eliminating its prior USD 12.9 million credit facility and extending debt maturity to December 2028 under revised terms. While the issuance introduces potential future dilution through debenture conversion, the refinancing enhances liquidity and provides funding visibility for development drilling and operational execution.

With fresh capital in place and a strengthened balance sheet, investor focus may centre on production growth, operational delivery and the Company’s ability to convert its Gulf Coast asset base into sustained cash flow generation.

Frequently Asked Questions (FAQs)

  1. How much did Southern Energy raise in total?

The Company raised USD 23.5 million in gross proceeds, with approximately USD 22.0 million in net proceeds after accounting for the original issue discount.

  1. How were the proceeds used?

USD 12.9 million was used to fully repay the existing senior credit facility, with the balance allocated to development capital, drilling activities and working capital.

  1. What are the key terms of the debentures?

The debentures mature on 31 December 2028 and carry a 7% annual interest rate, which may rise to 15% if certain approval conditions are not met.