Corporate Presentation July 2019 TSXV : SOU
Disclaimers BOE Disclosure 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 beliefs The term barrels of oil equivalent (“BOE”) may be misleading, particularly if used in isolation. A BOE conversion ratio of relating to future events or future performance . All statements contained herein, other than statements of historical fact, may six thousand cubic feet per barrel (6Mcf/bbl) of natural gas to barrels of oil equivalence is based on an energy be forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. "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 US Disclaimer the forward-looking information contained in this investor presentation are reasonable, it cannot guarantee future results, This presentation is not an offer of the securities for sale in the United States. The securities have not been registered levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent competitive, political and social uncertainties and contingencies. Therefore, investors should not unduly rely on the forward- registration or an exemption from registration. This presentation shall not constitute an offer to sell or the solicitation of looking information contained in this investor presentation as actual results may vary. an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful. 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 to Non-GAAP Measures operate, 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 In this presentation, certain key performance indicators and industry benchmarks such as netback are used to analyze price of oil and gas. The forward-looking information contained in this investor presentation involves known and unknown financial and operating performance. These key performance indicators and benchmarks are key measures of risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such profitability and provide investors with information that is commonly used by other oil and gas companies. These key forward-looking information. performance indicators and benchmarks as presented do not have any standardized meaning prescribed by Canadian Actual results could differ materially from those anticipated in the forward-looking information contained in this presentation generally accepted accounting principles and therefore may not be comparable with the calculation of similar measures for other entities. as a result of the following risk factors: volatility in the market prices for oil and natural gas, unanticipated changes in any applicable 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 and Information Regarding Disclosure on Reserves and Resources natural gas operations, fluctuations in currency and interest rates, incorrect assessments of the value of acquisitions, The reserve and resource estimates contained herein are estimates only and there is no guarantee that the estimated unanticipated results of exploration and development drilling and related activities, competition for capital, competition for reserves or resources will be recovered. Where discussed herein "NPV 10“ or similar expressions represents the net acquisitions of reserves and resources, competition for undeveloped lands, competition for skilled personnel, unpredictable present value (net of capex) of net income discounted at 10%, with net income reflecting the indicated oil, liquids and weather conditions, the impact of general economic conditions and political conditions, industry conditions including changes natural gas prices and IP rate, less internal estimates of operating costs and royalties. in 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. All figures in USD unless otherwise specified 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. TSXV: SOU www.southernenergycorp.com 1
About Southern Energy Company Profile Southern Energy Assets – Global Gas Export Perspective • 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. Gulf Coast LNG • Target of 10,000 boe/d in 18 - 24 months 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 Magee Metrics CAD $ Capitalization CAD $ Trading Symbol (TSX-V) SOU.V Land > 50,000 acres Production (4) ~ 2,550 boe/d Common Shares Outstanding (Basic / FD) 223.8/ 310.7 PDP Reserves (5) 7.7 MMboe Insider Ownership (Basic / FD) 21% / 34% Southern US Office Market Capitalization (1) $22.4 MM PDP NPV10 (5) $58.9 MM 20+ Bcf/d Approved LNG Export Terminal Convertible Debenture and Bank Debt (2) $28.8 MM Proved Reserves (5) 13.5 MMboe export by 2025 Enterprise Value (3) $51.2 MM Proved NPV10 (5) $95.9 MM 1) Market capitalization is calculated as of June 17, 2019 using a share price of CAD $0.10/share 2) Includes CAD $8.1 MM of convertible debentures and CAD $20.7 MM of reserves-based lending bank debt (Total available credit of ~ CAD $22.7 MM) 3) Enterprise value is the sum of market capitalization, convertible debentures and bank debt 4) Estimated Working Interest production as of June 2019 5) Based on reserve reports by Netherland, Sewell and Associates, Inc., estimated at December 31, 2018 using the GLJ Petroleum Consultants January 1, 2019 price forecast TSXV: SOU www.southernenergycorp.com 2
The Business Plan Focused on Value Creation: Real Shareholder Returns • Build a high margin asset base of sufficient Long-Term scale with significant low risk drilling inventory Access to Capital Sustainability that continues to generate free cash flow • Southern will be attractive to patient, value Low-Risk shareholders, as well as LNG players seeking Exit Optionality Development easily expandable, long-life gas assets Drilling and Reserves Additional Growth Accretive PDP Acquisitions Asset Optimization Strong Base • • Under-developed assets Disciplined strategy • • Accretive PDP acquisitions Operating cost savings • with low historic recovery Low decline long life assets • • Low risk, stable cash flow Production and lift • PDP valuations from verticals • Management & basin optimizations • • Synergistic with base Creation of large-scale • experience Environmentally conscious • No value paid for extensive reserve additions and • Technical advantage and safety driven approach drilling inventory upside Timing driven by commodity environment: BUY LOW – DRILL HIGH TSXV: SOU www.southernenergycorp.com 3
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