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CALGARY, April 7 /CNW/ - Surge Energy Inc. ("Surge" or the "Company") (TSXV: SGY) is pleased to announce the acquisition of adjoining
Spearfish light oil assets in Bottineau County, North Dakota through
two key transactions (the "Acquisitions"). The Acquisitions more than
double the Company's net unbooked Spearfish light oil drilling
inventory by adding 205 gross (120 net) horizontal drilling locations.
The Acquisitions also include a high working interest, contiguous
undeveloped land base of more than 100,000 acres that is exploratory in
nature and prospective for light oil in the Basal Spearfish and the
Surge is also pleased to provide exciting results of recent wells
drilled at Valhalla South and Windfall.
Summary of the Acquisitions
Through the Acquisitions, Surge is acquiring 100 bbl/d (2010 exit rate)
of high quality, high netback, light oil production, 6,000 net acres of
highly prospective land in the Spearfish light oil resource play adding
205 gross (120 net) horizontal drilling locations and greater than
100,000 acres of additional, high working interest, undeveloped land
for total consideration of $21.5 million in cash (subject to customary
closing adjustments). The assets will be acquired by Surge Energy USA
Inc., a wholly owned subsidiary of Surge Energy Inc. After closing
both transactions, Surge will have approximately 329 gross (231 net)
horizontal Spearfish drilling locations in Manitoba and North Dakota.
The 6,000 net acres of highly prospective Spearfish lands are located
directly south of the Waskada and Goodlands Spearfish oil fields,
immediately adjacent to the Canada/USA border. Based on existing
vertical well producers and the proximity to Goodlands, Surge
characterizes the acreage as being within the sweet spot of the
Spearfish trend with internally estimated Discovered Petroleum
Initially In Place (DPIIP) of 10 to 15 mmbbls of oil per section.
Management believes the acreage can be effectively exploited by
drilling 205 gross (120 net) horizontal wells resulting in internally
estimated net oil reserves of 7.4 mmbbls (36 degree API). On portions
of the same acreage, Surge has also identified additional light oil
upside in the underlying Madison Formation (Mississippian) with
internally estimated DPIIP of 1.5 to 4.5 mmbbls per section. This
formation has traditionally been developed with vertical wells but may
have the potential to be further exploited using conventional
On the remaining undeveloped land, which consists of more than 100,000
net acres, management believes the Basal Spearfish has significant
potential as a light oil resource play and could likely be exploited
with vertical wells or conventional horizontal wells. Surge estimates
the Total Petroleum Initially In Place (TPIIP) of the Basal Spearfish
to range between 1.5 and 3 mmbbls of oil per section; and if tested
successfully, the play could cover up to 20 percent of the undeveloped
land base. The Madison Formation also has potential as a secondary
target with similar TPIIP per section and could be exploited with
verticals wells and conventional horizontal wells.
The Acquisitions have the following characteristics:
2010 Exit Production:
(100 % light oil, 36 degree API)
(100 % light oil, 36 degree API)
Total Drilling Locations:(2)
130 gross (40 net) -
125 gross (80 net) -
100 % unbooked
Internally Estimated Net Recoverable Reserves:
2.6 mmbbls (100% light oil)
4.8 mmbbls (100% light oil)
Net Company Land: (3)
1,800 net acres
108,000 net acres
March 30th, 2011
May 12th, 2011
(1) Subject to customary closing adjustments.
(2) Approximately 50 gross drilling locations overlap between
Acquisition #1 and #2
(3) Net company land is the product of gross acreage*working
Valhalla South Doig Light Oil Play (Western Alberta)
The first two horizontal wells, each 100 percent working interest
("WI"), in the Valhalla South Doig light oil pool (40 degree API) have
been successfully drilled and completed. As previously announced,
Surge's first horizontal well at 16-6-74-8W6M was completed with 13, 30
tonne fracs in a 1,250 meter horizontal section of the Doig Formation.
The second horizontal well located at 2-7-74-8W6M encountered over
1,000 meters of Doig Formation and was recently completed with 7, 30
tonne fracs. Surge's third horizontal well (14-19-74-8W6M, 53.5
percent WI) is currently drilling horizontally in the Doig and will be
completed after spring break-up when surface access to the lease can be
The 2-7 well initially flowed at rates well in excess of a 1,000 boe/d
and after a five day flow test averaged 945 boe/d (85 percent light oil
and NGLs). On the last day of the test the well averaged 835 boe/d (79
percent light oil and NGLs). The well was produced up the 114mm (4.5
inch) tie back liner which is currently being replaced with a string of
73mm (2 7/8 inch) tubing. The smaller tubing should further enhance
these attractive initial production rates. Estimated cost to drill,
complete and tie in this well is as predicted at $4.2 million.
As previously disclosed, the 16-6 well, which management believes is
producing with less than half the wellbore contributing, has flowed at
rates of approximatley 400 boe/d (61 percent oil and NGLs) for the last
two weeks it has been on production. A cost estimate to open up the
remainder of the wellbore has been prepared and a decision will be made
during spring break-up on whether to execute this operation.
Surge's initial vertical re-frac into the Doig light oil pool at
9-7-74-8W6 averaged greater than 250 boe/d in its first full month of
production and paid out with just over one month's incremental
production. Prior to the re-frac the well was producing 20 boe/d.
Surge has followed up on the initial success of our first vertical
re-frac candidate at 9-7-74-8W6M, by performing an additional three
vertical re-fracs. All are in various phases of recovering frac water
and should be fully cleaned up imminently.
Surge has at least three additional horizontals planned for later this
year at Valhalla and has 22 gross (15.8) net horizontal multi-frac
drilling locations currently remaining in inventory.
Windfall Bluesky Light Oil Play (Western Alberta)
Surge's fourth Bluesky light oil (36 degree API) horizontal well,
16-29-58-15W5M (100 percent WI), which is two miles south of the
existing horizontal wells, has been tied into the recently expanded
battery at 16-4-59-15W5M (100 percent WI). Surge's fifth horizontal
well, 6-9-58-15W6M (100 percent WI), an additional two miles south of
16-29, has also been tied into the battery. This ensures that both
wells will be able to produce through break-up as the liquids rich
solution gas is being processed and sold. Surge's production from this
light oil property has now increased to more than 1,200 boe/d
(approximately 60 percent light oil).
Based on this very successful step out drilling program, Surge
reiterates its DPIIP estimates of more than 50 mmbbls of light oil at
Surge will re-commence its 2011 drilling program at Windfall after
spring break-up and currently has 31 gross (31 net) horizontal
multi-frac drilling locations remaining in inventory.
Based on Surge's continued light oil drilling success, the Company now
anticipates exceeding its 2011 production guidance and plans to update
2011 guidance as part of its year end press release.
In addition, Surge now anticipates its bank line will increase to $120
million before the end of May 2011.
Surge is a light oil focused energy production company with operations
throughout Alberta, southwest Manitoba and North Dakota. Surge's common
shares trade on the TSX Venture Exchange under the symbol "SGY" and has
56.1 million basic and 61.3 million fully diluted common shares
outstanding at the date of this press release.
Forward Looking Statements:
This press release contains forward-looking statements. More
particularly, this press release contains statements concerning
anticipated capital expenditures for the remainder of 2011, potential
geological characteristics of the Company's properties, the potential
for enhanced recovery and production from the application of completion
and reservoir management techniques, and exploration, development, and
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
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.
Neither the TSX Venture Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
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