CALGARY, Dec. 10, 2012 /CNW/ - Surge Energy Inc. ("Surge" or the
"Company") (TSX: SGY) announces operations update.
Surge has drilled, completed and placed on production all 22 gross (17.9
net) planned wells in the fourth quarter of 2012. As such, Surge is
well positioned to meet its targeted exit production guidance of 11,000
boe per day.
At Valhalla South, Surge drilled, completed and tied-in three gross
(1.96 net) horizontal multi-frac wells. All wells are currently on
production, and although all of the wells have not produced for an
entire month, it appears that on average the wells will exceed the
Company's best 30 day average production rate of 620 boe per day per
well. The Company is currently in the process of drilling one gross
(0.44 net) horizontal multi-frac well, which is planned to be on
production in early January 2013.
On November 27, 2012, Surge's 6-18 battery at Valhalla South experienced
an unplanned outage. The battery was fully operational on Sunday
December 9, 2012. The repair cost impact to Surge is estimated to be
less than $300,000. As a result of this unplanned outage, Surge's
fourth quarter production will be negatively impacted by approximately
600 boe per day.
The five gross (five net) horizontal multi-frac wells that were drilled
and completed at Nipisi during the third quarter of 2012 have now
cleaned up approximately 90 percent of their load fluid. Wells in the
core of the structure are cleaning up well and are proving capable of
meeting the Company's type curve expectations. Light oil production
rates from recent down-dip step-out horizontal wells drilled along the
south and west perimeter of the Slave Point pool have proved very
encouraging, supporting the Company's belief that the pool is over 30
percent larger than originally thought. The Company's current estimate
of DPIIP1 is 85 million barrels in the northern block and 30 million barrels in
the southern block.
At South East Alberta, Surge drilled and completed two gross (two net)
horizontal wells into a new Cretaceous pool. These wells are producing
at their best 30 day average production rate of 100 barrels of oil per
day per well. In addition, two gross (two net) horizontal multi-frac
wells were drilled and completed and have recovered most of their load
fluid. These two wells are trending towards their best 30 day average
production rate of 125 barrels of oil per day per well.
In North Dakota, all five of Surge's 100 percent operated wells, drilled
from a single pad, are currently producing and are in various stages of
load fluid recovery. All of these wells will be cleaned up before the
end of the year and are forecast to produce at their best 30 day
average production rate of 125 barrels of oil per day per well. The
five gross (1.9 net) joint venture wells that Surge participated in
during the third quarter were on production early in the fourth
quarter. Production from these wells has exceeded the Company's type
Management continues to protect Surge's balance sheet with a strong risk
management program. Surge has protected 61 percent of its forecast
fourth quarter oil and NGL production after royalties with 70 percent
participation in the upside above an average WTI floor price of C$89.84
per barrel. Surge also has a WTI-to-Edmonton oil differential swap for
2,000 barrel per day at $0.00 (no differential) for the fourth quarter
of 2012. The Company has assembled more than 570 gross (435 net) oil
drilling locations, made significant progress in reducing its cost
structure and increasing netbacks and gained exposure to an internally
estimated gross DPIIP of more than 680 million barrels, with multiple
waterflood opportunities and exploration initiatives.
Surge expects to release its 2013 capital expenditure plans in
Surge is committed to delivering top quartile corporate performance and
creating value for shareholders by growing reserves, cash flow and
production on a per share basis.
Surge is an oil focused oil and gas company with operations throughout
Alberta, Manitoba and North Dakota. Surge's common shares trade on the
Toronto Stock Exchange under the symbol SGY. The Company currently has
71.2 million basic and 79.8 million fully diluted common shares
1 Discovered Petroleum Initially-In-Place or "DPIIP" (equivalent to
discovered resources) is that quantity of petroleum that is estimated,
as of a given date, to be contained in known accumulations prior to
production. The recoverable portion of discovered petroleum initially
in place includes production, reserves, and contingent resources; the
remainder is unrecoverable. Contingent Resources are those quantities
of petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations using established technology or
technology under development, but which are not currently considered to
be commercially recoverable due to one or more contingencies.
Contingencies may include factors such as economic, legal,
environmental, political, and regulatory matters, or a lack of
markets. It is also appropriate to classify as contingent resources
the estimated discovered recoverable quantities associated with a
project in the early evaluation stage. Contingent Resources are
further classified in accordance with the level of certainty associated
with the estimates and may be subclassified based on project maturity
and/or characterized by their economic status.
This press release contains forward-looking statements. More
particularly, this press release contains statements concerning
anticipated: (i) timing of the release of 2013 planned capital
expenditures (ii) exploration, development, drilling, construction and
acquisition activities, (iii) average and exit oil & natural gas
production during 2012, ( iv) expected results from completion
technology, (v) initial production rates, (vi) production capacity
(vii) operating and transportation costs and (viii) primary and
secondary recovery potentials and implementation thereof.
The forward-looking statements are based on certain key expectations and
assumptions made by Surge, including expectations and assumptions
concerning the performance of existing wells and success obtained in
drilling new wells, anticipated expenses, cash flow and capital
expenditures and the application of regulatory and royalty regimes.
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.
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
This press release contains the term "netbacks" which is not a term
recognized under IFRS Generally Accepted Accounting Principles
("GAAP"). The Company uses this measure to help evaluate its
performance as well as to evaluate acquisitions. The Company considers
netbacks as a key measure as it demonstrates its profitability relative
to current commodity prices. Operating netbacks are calculated by
taking total revenues (excluding derivative gains and losses) and
subtracting royalties, operating expenses and transportations costs on
a per boe basis. Funds flow netbacks are calculated by taking the
operating netback, adding finance income and then subtracting interest
costs, and general and administrative costs on a per boe basis.
In this press release: (i) mcf means thousand cubic feet; (ii) mcf/d
means thousand cubic feet per day (iii) mmcf means million cubic feet;
(iv) mmcf/d means million cubic feet per day; (v) bbls means barrels;
(vi) mbbls means thousand barrels; (vii) mmbbls means million barrels;
(viii) bbls/d means barrels per day; (ix) bcf means billion cubic feet;
* mboe means thousand barrels of oil equivalent; and (xi) mmboe means
million barrels of oil equivalent.
SOURCE: Surge Energy Inc.
For further information:
Dan O'Neil, President and CEO
Surge Energy Inc.
Phone: (403) 930-1020
Fax: (403) 930-1011
Max Lof, CFO
Surge Energy Inc.
Phone: (403) 930-1021
Fax: (403) 930-1011