/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES/
CALGARY, Dec. 3, 2013 /CNW/ - Surge Energy Inc. ("Surge" or the
"Company") (TSX: SGY) is pleased to announce that it has now closed the
previously announced acquisition (the "Acquisition") of a high quality,
low decline, operated, crude oil producing asset strategically located
near Wainwright in the Company's core area of Central Alberta (the
The Assets include over 980 barrels per day of primarily medium gravity
crude oil production (with a historical nine percent annual decline),
producing from the Sparky Formation. The purchase price for the Assets
was $76.8 million.
As a result of the accretive Acquisition, together with better than
anticipated operational and drilling results, Surge's Board of
Directors has now approved an increase in the Company's annual dividend
of four percent from $0.50 per share per year ($0.04166 per share per
month), to $0.52 per share per year ($0.04333 per share per month).
This increased dividend is to be paid on January 15, 2014 in respect of
December, 2013 production, for the shareholders of record on December
The Acquisition comprises an elite, operated, low decline crude oil
property strategically located within Surge's core operating area of
Central Alberta. The production is focused in a large, medium gravity
crude oil Sparky reservoir - with over 210 million barrels of estimated
original oil in place ("OOIP")1.
The Assets are under waterflood and currently possess a very low annual
decline of nine percent, which is expected to provide significant
annual free cash flow to Surge. The Acquisition fits with the Company's
focused business strategy and with Surge's modest growth/dividend
Surge management has identified significant upside with respect to the
Assets, primarily from waterflood optimization and infill drilling.
As a result of the closing of the Acquisition, Surge now has over 1.3
Billion barrels estimated of light and medium gravity OOIP under the
Company's ownership and management.
Following the Acquisition, Surge has again revised upward the Company's
2013 exit guidance and 2014 full year guidance, as set forth below.
Surge 2014E Guidance2 3
2013E Exit Production
2014E Average Production (boe/d)
2014E Exit Production (boe/d)
15,500 (83% Oil/NGLs)
RLI (based on 2013E exit production)
2014E Capital Spending
2014E Wells Drilled
Surge 2014E Guidance2 3
2014E Funds from Operations ("FFO")
$214 ($1.29 per share)
2014E Operational Netback
2014E Cash Flow Netback
Basic Shares Outstanding
Basic Payout Ratio 2014E
"All-in" Payout Ratio
2014E Exit Net Debt
2014E Net debt / 2014 FFO
CONVERSION OF SUBSCRIPTION RECEIPTS
The purchase price for the Acquisition was financed, in part, by the net
proceeds pursuant to the previously announced $63,273,000 equity
financing of Subscription Receipts completed by Surge on November 28,
2013. With the closing of the Acquisition, Surge confirms that the
escrow release condition of the Subscription Receipt Agreement dated
November 28, 2013 has occurred and therefore, each outstanding
Subscription Receipt of Surge has been automatically exchanged, without
payment of additional consideration or further action, for one Common
Share of Surge.
Trading in the Subscription Receipts on the Toronto Stock Exchange
("TSX") has been halted and will remain halted until the close of
business today, at which time the subscription receipts will be
de-listed from the TSX. The Common Shares issued on exchange of the
Subscription Receipts have commenced trading on the TSX.
Neither the Subscription Receipts nor the Common Shares have been nor
will be registered under the United States Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in
the United States absent registration or an applicable exemption from
the registration requirements of the Securities Act and applicable
state securities laws. This press release shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of the securities in the United States or any jurisdiction in
which such offer, solicitation or sale would be unlawful.
Macquarie Capital Markets Canada Ltd. acted as financial advisor to
Surge with respect to the Acquisition.
FORWARD LOOKING STATEMENTS:
This press release contains forward-looking statements. More
particularly, it contains forward-looking statements concerning: (i)
potential development opportunities and drilling locations associated
with the Acquisition, (ii) the timing, amount and sustainability of
dividends, (iii) primary and secondary recovery potentials and
implementation thereof, (iv) oil & natural gas production growth during
2013 and 2014, (v) planned drilling, development and waterflood
activities, (vi) estimated 2014 average and exit rates of production,
(ix) estimated 2014 capital expenditures, wells drilled, decline rates,
funds from operations, operating netback, cash flow netback and payout
ratio, estimated 2014 year end net debt and net debt to funds from
operations ratio; and (xi) the anticipated exceeding by Surge of the
previously estimated 2013 exit rate of production.
The forward-looking statements contained in this press release are based
on certain key expectations and assumptions made by Surge, including
expectations and assumptions concerning the success of future drilling,
development and completion activities, the performance of existing
wells, the performance of new wells, the viability of waterflood
projects, the availability and performance of facilities and pipelines,
the geological characteristics of Surge's properties, the successful
application of drilling, completion and seismic technology, prevailing
weather conditions, commodity prices, royalty regimes and exchange
rates, the application of regulatory and licensing requirements and the
availability of capital, labour and services.
Although Surge believes that the expectations and assumptions on which
the forward-looking statements are based are reasonable, undue reliance
should not be placed on the forward-looking statements because Surge
can give no assurance that they will prove to be correct. Since
forward-looking statements address future events and conditions, by
their very nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated due to
a number of factors and risks. These include, but are not limited to,
risks associated with the oil and gas industry in general (e.g.,
operational risks in development, exploration and production; delays or
changes in plans with respect to exploration or development projects or
capital expenditures; the uncertainty of reserve estimates; the
uncertainty of estimates and projections relating to production, costs
and expenses, and health, safety and environmental risks), commodity
price and exchange rate fluctuations and uncertainties resulting from
potential delays or changes in plans with respect to exploration or
development projects or capital expenditures. Certain of these risks
are set out in more detail in Surge's Annual Information Form which has
been filed on SEDAR and can be accessed at www.sedar.com.
The forward-looking statements contained in this press release are made
as of the date hereof and Surge undertakes no obligation to update
publicly or revise any forward-looking statements or information,
whether as a result of new information, future events or otherwise,
unless so required by applicable securities laws.
The estimates of 2014 year end net debt, 2014 funds from operations and
2014 operating netback and cash flow netback contained in this press
release are financial outlooks within the meaning of applicable
securities laws. These financial outlooks have been prepared by
management of Surge to provide an outlook of Surge's anticipated funds
from operations and netbacks for a full year of operations with its
current assets and based on management's expectations and assumptions
as to a number of factors, including commodity pricing, production,
operating expenses and royalties. Readers are cautioned that this
information may not be appropriate for any other purpose. Management
does not have firm commitments for all of the costs, expenditures,
prices or other financial assumptions used to prepare the financial
outlooks or assurance that such results will be achieved. The actual
results of Surge will likely vary from the amounts set forth in the
financial outlooks and such variation may be material.
Surge and its management believe that the financial outlooks have been
prepared on a reasonable basis, reflecting the best estimates and
judgments, and represent, to the best of management's knowledge and
opinion, Surge's expected expenditures and results of operations
following completion of the Acquisitions. However, because this
information is highly subjective and subject to numerous risks,
including the risks discussed under the note regarding Forward Looking
Statements, it should not be relied on as necessarily indicative of
future results. Except as required by applicable securities laws, Surge
undertakes no obligation to update this information.
Note: Boe means barrel of oil equivalent on the basis of 1 boe to 6,000
cubic feet of natural gas. Boe may be misleading, particularly if used
in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of
natural gas is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. Boe/d means barrel of oil equivalent per
Neither the TSX nor its Regulation Services Provider (as that term is
defined in the policies of the TSX) accepts responsibility for the
adequacy or accuracy of this release.
Original Oil in Place (OOIP) is the equivalent to Discovered Petroleum
Initially In Place (DPIIP) for the purposes of this press release.
DPIIP is defined as quantity of hydrocarbons that are estimated to be
in place within a known accumulation, plus those estimated quantities
in accumulations yet to be discovered. There is no certainty that it
will be commercially viable to produce any portion of the resources. A
recovery project cannot be defined for this volume of DPIIP at this
time, and as such it cannot be further sub-categorized.
Based on 2014 Edmonton Par $90.45/bbl; 2014 AECO gas $3.69/mcf and a
2014 CAD/USD exchange rate of $0.98.
Management uses funds from operations (cash flow from operations before
changes in non-cash working capital, legal settlement expenses,
transaction costs and current tax on disposition) to analyze operating
performance and leverage. Funds from operations as presented does not
have any standardized meaning prescribed by IFRS and, therefore, may
not be comparable with the calculation of similar measures for other
Based on independent and internally generated engineering reports as of
December 31, 2012 or later.
Based on a Surge share price of $6.55.
SOURCE: Surge Energy Inc.
For further information:
Paul Colborne, President & CEO
Surge Energy Inc.
Phone: (403) 930-1507
Fax: (403) 930-1011
Max Lof, CFO
Surge Energy Inc.
Phone: (403) 930-1021
Fax: (403) 930-1011