Mr. Ian Atkinson reports

SOUTHERN ENERGY CORP. ANNOUNCES US$23.5 MILLION FINANCINGS AND ROYALTY SALE

Southern Energy Corp. has executed definitive subscription and purchase and sale agreements with three related arm's-length private investors, pursuant to which the investors have agreed to subscribe, on a non-brokered private placement basis, for senior secured convertible debentures and new common shares of the company and purchase a newly created gross overriding royalty (GORR) for aggregate net proceeds of $22-million (U.S.) after a 8.8235-per-cent original issue discount (OID) equivalent to $1.5-million (U.S.) on the debentures.

Ian Atkinson, president and chief executive officer of Southern, commented: "This transaction is a strategic reset of Southern's capital structure. By retiring our existing high-cost senior credit facility and extending maturities, we are significantly reducing our cost of capital, improving financial flexibility and creating a runway to execute our 2026 development plan.

"The structure of the transaction sees an existing shareholder step up as a long-term strategic partner through a combination of equity participation, disciplined convertible financing and non-dilutive capital tied directly to asset-level performance. Importantly, the investment allows us to refinance debt that previously carried a substantially higher interest rate and accelerate development across our core Gulf Coast asset base, where we have successfully proven significant natural gas reserves realizing premium pricing.

"While the U.S. continues to set record levels of liquefied natural gas exports from the Gulf Coast area, with significant additional capacity coming on line in 2026, the proliferation of AI [artificial intelligence] data centres is soon expected to have a profound effect on the robust future of natural gas demand. With this financing in place, we are focused on disciplined execution, advancing high-return development activity, with the objective of delivering sustainable, long-term value for shareholders."

Transaction highlights:

• Use of proceeds: Net proceeds from the transaction will be used to repay and retire the company's existing senior credit facility in full and for development capital, including for the completion of two drilled uncompleted wells in Gwinville and further drilling on the company's existing asset base, and general working capital and corporate purposes.
• Offering: The $18.5-million (U.S.) gross purchase price will be through the issuance of: (i) 17,000 $1,000 (U.S.) face value debentures issued with an 8.8235-per-cent OID at a price of $911.76 (U.S.) per debenture for gross proceeds of $17-million (U.S.) (net proceeds of $15.5-million (U.S.)); and (ii) 30.0 million shares at a price of seven Canadian cents (five U.S. cents) per share for additional gross proceeds of $2.1-million (Canadian) ($1.5-million (U.S.)).
• GORR: There will be a $5-million (U.S.) gross purchase price of a 6-per-cent GORR in all revenue from all existing and future developed production of petroleum substances on the company's lands as of the closing date calculated based on the company's realized price received for each commodity, in perpetuity, payable monthly.
• Interest payments (coupon): The debentures bear interest at 7 per cent per annum on the outstanding principal amount of $17-million (U.S.), payable quarterly in arrears.
• Maturity: The debentures will mature on Dec. 31, 2028. The principal amount attributed to the OID, being $1.5-million (U.S.), will be repaid in cash.
• Conversion price: The debentures (excluding the principal amount attributed to the OID) will be convertible at the investor's option into shares at a price of 7.3 U.S. cents (10 Canadian cents) per share, being a ratio of 13,700 shares per $1,000 (U.S.) principal amount of the convertible portion of the debentures.
• Ownership restrictions: The investor may not convert the debentures or receive interest in shares if doing so would cause the investor's ownership to exceed 19.99 per cent of the outstanding shares without prior TSX Venture Exchange clearance and shareholder approval.
• Change of control: In the event of a change of control, the debentures will be redeemed for principal and accrued interest, though the investor may convert prior to the closing of any such transaction.
• Listing and admission: The company has applied to have the shares (including the shares issuable upon conversion or interest payment of the debenture) listed on the TSX-V and admitted to trading on the AIM (Alternative Investment Market) of the London Stock Exchange. The debentures will not be listed on any exchange.
• Closing date: The closing date will be on or about Feb. 12, 2026.

Further information on the offering and GORR

The debentures will mature on Dec. 31, 2028, and bear interest at a rate of 7 per cent per annum, payable quarterly. The debentures (excluding the principal amount attributed to the OID, being $1.5-million (U.S.)) will be convertible into shares at any time prior to maturity at the conversion price. At the investor's option, interest may be paid in cash or in shares, with the number of shares determined based on the market price of the shares and prevailing exchange rate at the time of payment, subject to approval by the TSX-V. In the event that the investor is not approved as a control person (as defined in the TSX-V corporate finance manual) on or prior to Dec. 31, 2026, then, from and after Jan. 1, 2027, the debentures will bear interest at a rate of 15 per cent per annum.

The company intends to seek disinterested shareholder approval of the investors as a control person at its next annual general meeting. Assuming full conversion of the debentures (excluding the portion of principal attributable to the original issue discount, which is to be repaid in cash), a maximum of approximately 212.35 million shares would be issuable, in addition to the 30.0 million shares issued pursuant to the offering.

The debentures will be secured by a first-priority security interest over all present and after-acquired personal property of the company and its subsidiaries. This includes an Alberta law general security agreement and charges over the shares of the company's subsidiaries. The terms of the debentures will restrict the company from granting liens over its property without the investor's consent, other than customary permitted liens. The GORR will be granted as a non-possessory fee-simple determinable interest in land that runs with the company's lands as of the closing date.

The transaction is expected to close on or about Feb. 12, 2026, or such other date as the company and the investors may agree, and is subject to customary closing conditions, including the payout and discharge of the company's existing senior credit facility and the approval of the TSX-V, and will result in aggregate net proceeds to the company of $22-million (U.S.).

The debentures and shares (including the shares issuable upon conversion or interest payment of the debenture) will be subject to a four-month-and-one-day hold period under applicable securities laws in Canada and the rules and policies of the TSX-V.

Admission to AIM and total voting rights

Pursuant to the equity element of the offering, the company shall issue 30 million shares for gross proceeds of $2.1-million (Canadian) ($1.5-million (U.S.)). Application will be made to the London Stock Exchange for the admission of the 30 million shares to trading on AIM, which is expected to occur shortly following closing of the transaction. The new common shares will rank pari passu with the existing common shares.

Subject to and on admission, ceteris paribus, the total number of common shares in the company in issue will be 366,254,953, and this figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the company.

About Southern Energy Corp.

Southern Energy is a natural gas exploration and production company characterized by a stable, low-decline production base, a significant low-risk drilling inventory and strategic access to premium commodity pricing in North America. Southern has a primary focus on acquiring and developing conventional natural gas and light oil resources in the southeastern Gulf states of Mississippi, Louisiana and east Texas. The company's management team has a long and successful history working together and has created significant shareholder value through accretive acquisitions, optimization of existing oil and natural gas fields, and the utilization of redevelopment strategies utilizing horizontal drilling and multistaged fracture completion techniques.

We seek Safe Harbor.