Southern Energy (AIM:SOUC), the Mississippi-focused oil and gas producer, reported petroleum and natural gas sales of $4.2 million for the second quarter, up 4% from a year earlier.
The increase came despite a 7% drop in average production to 10,460 thousand cubic feet equivalent per day, after the company temporarily shut in its Mechanicsburg and Greens Creek fields amid an ongoing dispute with the Federal Energy Regulatory Commission (FERC) over transportation arrangements.
Higher realized oil prices offset the lost volumes, with oil fetching $99.32 per barrel against $62.60 a year earlier, while natural gas slipped to $3.15 per thousand cubic feet from $3.63. Adjusted funds flow from operations rose 15% to $0.7 million, though the company posted a net loss of $0.4 million, unchanged from the prior year.
Southern said it continues to work with FERC staff and a settlement judge to resolve the transportation dispute, which has shut in roughly 400 barrels of oil equivalent per day; an evidentiary hearing, if talks fail, could produce an outcome in the first half of 2027.
On 11 August, the company spudded the Terrible Creek 21-2 #2 Cotton Valley test well in its Williamsburg Field, the first of two farm-out commitment wells planned for the year, targeting a depth of roughly 19,000 feet by early September.
"We enter the second half of 2026 fully funded to advance our key development targets", said President and CEO Ian Atkinson, pointing to the Cotton Valley well and a final drilled but uncompleted well at Gwinville.
The company holds a fixed-price natural gas hedge of 5,000 MMBtu per day at $3.40 through December.
News Intelligence what this means for the company
Southern Energy grew Q2 sales 4% to $4.2 million despite a 7% production drop, as a 59% jump in realized oil prices ($99.32 vs $62.60/bbl) offset shut-ins at two fields tied up in a FERC transportation dispute. The company remains cash-constrained—adjusted funds flow of $0.7 million barely covers operations—and the dispute could linger until H1 2027, but management says it is fully funded to drill two committed wells this year, including the Cotton Valley test spudded in August.
The 4% sales growth masks underlying production weakness and regulatory risk; the FERC dispute has idled ~400 boe/d with no near-term resolution path. Near-term upside depends on well results and oil price hold-up, but the company's thin cash generation ($0.7m adjusted FFO) and reliance on ~$22.0 million in February proceeds to fund development leave little margin for delay or commodity weakness.
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