RE: s o u c24 Nov 2022 11:00
From Malcy's Blog.
"I have been a huge fan of Southern since it came to the London market last year and time after time the company has delivered solid results and this announcement is no exception. It really does tick all the boxes, production of 3,408 boe/d gives strong revenues, growing net profits and strong free cash flow deliver a healthy cash balance and all at premium prices.
One of the key differences that makes SOUC a standout in the sector is the pricing it achieves, average realised natural gas and oil prices for Q3 2022 of $10.00/Mcf and $91.93/bbl, respectively, are quite astonishing and delivered due to strategic access to premium-priced US sales hubs in a geographic region with strong industrial and power generation natural gas demand.
Next up is the top of class total process costs, running at some 65 cents per mcfe which is genuinely outstanding in the sector. Even the super-majors who should be much cheaper with their vastly larger throughputs are well over $1 per mcfe, the answer is partly in the much cheaper transportation by Southern and partly due to the high quality infrastructure particularly in the Gwinville where the Selma and City Bank formations are key.
All these mean that when the wells start to come into their prime in around February there should be a number of producing sites and the company will have a pretty good idea of production for 2023. Also worth noting is that early next year the company will be drilling longer laterals of 5,500-6,500 feet which should translate into improved well performance and further cost efficiencies.
All these mean that when the wells start to come into their prime in around February there should be a number of producing sites and the company will have a pretty good idea of production for 2023. Also worth noting is that early next year the company will be drilling longer laterals of 5,500-6,500 feet which will be in the reservoir for most of that time.
So, to sum up Southern does indeed tick all my boxes, plenty of wells ensuring growing production which get premium pricing and at the lowest costs possible. The company will therefore produce low cost, high margin gas with massive potential upside, what’s not to like? With a target price of 150p before looking at the longer term upside a place in the Bucket list is a given for Southern"
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