CALGARY, Nov. 13, 2013 /CNW/ - Surge Energy Inc. ("Surge" or the
"Company") (TSX: SGY) is pleased to announce that it has now closed two
previously announced strategic, high quality light oil acquisitions
The first acquisition (the "Privateco Acquisition") involved the $147
million purchase of all of the shares of a Calgary based private oil
and gas company ("Privateco"), with high netback, operated, producing
light oil assets focused in the Steelman area of SE Saskatchewan, and
the Dodsland area of SW Saskatchewan (the "Privateco Assets"). The
consideration to be paid to the shareholders of Privateco was comprised
of 20.2 million shares of Surge and cash consideration elected by
Privateco shareholders of $3.0 million, plus the assumption of $23
million of debt.
With the second acquisition (the "Asset Acquisition"), Surge acquired
high quality, high netback, operated, producing light oil assets
primarily located in the SW area of Manitoba (the "Manitoba Assets").
Total consideration of $135 million paid to the vendor of the Manitoba
Assets was comprised of 14.2 million shares of Surge, and $50 million
As a result of the structure of the Acquisitions, post-closing Surge
will maintain the Company's excellent balance sheet and debt to forward
cash flow ratio, with over $145 million of credit availability on the
Company's bank line. In addition, pro-forma the Acquisitions, there is
no change in Surge's very low, "all-in" sustainability ratio of 93
As a result of the accretive Acquisitions, together with better than
expected operational and drilling results, Surge's Board of Directors
has now approved a 19 percent increase in the Company's annual dividend
from $0.42 per share per year ($0.035 per share per month) to $0.50 per
share per year ($0.04166 per share per month).
The Acquisitions fit squarely within Surge's defined business strategy
of investing growth capital to acquire elite, operated, light and
medium gravity crude oil reservoirs, with large original oil in place
("OOIP"1) and low recovery factors.
The Privateco Acquisition provides a strategic entry point for Surge
into the prolific Midale Marly, light oil play trend in SE
Saskatchewan, and the Viking light oil play in SW Saskatchewan. The
Manitoba Assets provide Surge shareholders with exposure to one of the
highest quality; highest netback light oil plays in Canada, focused in
the Bakken/Three Forks formation located in SW Manitoba.
The Acquisitions are highly accretive to Surge shareholders and provide
Surge with exposure to three of the top light oil plays in Canada. They
also provide an excellent operational platform for additional growth on
these proven trends.
The Acquisitions comprise and possess large OOIP reservoirs, together
with low recovery factors, operatorship and high working interests.
They also possess significant upside from low risk development drilling
and waterfloods. Furthermore, the Acquisitions include key producing
infrastructure, including batteries, pipelines and waterflood
Corporately, the light oil Acquisitions significantly increase Surge's
operating netback by over 11 percent, and increase the Company's oil
weighting to over 84 percent.
As a result of the closing of the Acquisitions, Surge now has over one
Billion barrels of light and medium gravity OOIP under the Company's
ownership and management, with a recovery factor of less than three
In addition to the above closings, on November 13, 2013 Surge announced
that it has entered into an agreement to acquire a high quality, low
decline, operated, crude oil producing asset strategically located near
Wainwright, Alberta in the Company's core area of central Alberta. The
closing of this elite core area "top-up" acquisition is set for
December 3, 2013. On this basis, Surge now anticipates an additional
four percent increase in the Company's annual dividend 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).
Macquarie Capital Markets Canada Ltd. acted as financial advisor to
Surge with respect to the Privateco Acquisition. CIBC World Markets
Inc. and Scotia Capital Inc. acted as strategic advisors to Surge with
respect to the Privateco Acquisition.
GMP Securities L.P. acted as financial advisor to Surge with respect to
the Asset Acquisition. National Bank Financial Inc. acted as strategic
advisor to Surge with respect to the Asset Acquisition.
Macquarie Capital Markets Canada Ltd. acted as lead transaction advisor
to Surge with respect to both Acquisitions.
Peters & Co. Limited acted as financial advisor to Privateco.
FirstEnergy Capital Corp. acted as exclusive financial advisor to the
FORWARD LOOKING STATEMENTS:
This press release contains forward-looking statements. More
particularly, it contains forward-looking statements concerning: (i)
targeted growth in reserves; (ii) the "all-in" sustainability ratio;
(iii) the debt to forward cash flow ratio; (iv) availability on the
Company's bank line; (v) the potential growth through acquisitions;
(vi) the realization of anticipated benefits of the Acquisitions; (vii)
the future upside of the Acquisitions; (viii) operating netback; (ix)
OOIP; and * recovery factors.
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.
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.
1 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.
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