Surge Energy (SGY-T) closes $240-million Saskatchewan acquisition
July 3rd 2013 - News Release
Surge Energy Inc. has closed the previously announced $240-million acquisition of an elite, operated, crude-oil-producing asset in the southwest area of Saskatchewan; the conversion of 34.5 million subscription receipts into common shares of the company pursuant to the previously announced $247.5-million equity financing; and continued excellent drilling results at Valhalla and Silver.
CLOSING OF ELITE CRUDE OIL ACQUISITION:
Surge announced today the closing of its previously announced $240 million acquisition of an elite, operated, crude oil producing asset in the southwest area of Saskatchewan, with Original Oil in Place ("OOIP")1 of over 250 million barrels and a recovery factor of less than 1.5 percent (the "Acquisition"). This strategic Acquisition is accretive to Surge on a debt-adjusted production and cash flow per share basis. Surge estimates more than 271 gross / 264 net, lower risk, development drilling locations, and full (unbooked) waterflood upside with respect to the Acquisition. Concurrent with the Acquisition, Surge increased its bank line from $277 million to $350 million.
As a result of Surge's orderly transition to a sustainable, moderate growth, dividend paying oil and gas company (announced on June 11, 2013), the Company will be paying its first monthly dividend of $0.0333 per share ($0.40 per share annually) payable for August 2013 on September 16, 2013.
Macquarie Capital Markets Canada Ltd ("Macquarie") acted as exclusive financial advisor to Surge with respect to the Acquisition.
EXCELLENT DRILLING SUCCESS CONTINUES:
Surge continues to experience significantly better than anticipated drilling results at its core operated properties of Valhalla and Silver.
At Valhalla, the Company drilled another successful 100 percent working interest ("WI") well in the northern portion of Surge's Doig light oil pool. This well continues to significantly exceed management's type curve for the Valhalla property, and adds numerous additional drilling locations on this elite asset. Management's type curve at Valhalla has a 30 day IP of 600 boepd.
At Valhalla, Surge now estimates over 160 million barrels of OOIP, and over 46 gross / 38.6 net drilling locations.
In the Silver area, Surge successfully drilled the Company's second 100 percent WI oil well into the previously announced Sparky new pool discovery. This well is also producing at rates significantly above the Company's type curve for this medium gravity crude oil asset. Management's type curve at Silver has a 30 day IP of 100 bopd.
Surge now estimates that this new Sparky pool has over 47 million barrels of OOIP, over 37 gross / 35 net additional follow-up development drilling locations, and significant (unbooked) waterflood upside.
Also at Silver, Surge successfully drilled the Company's third 100 percent WI stepout development oil well into a separate, new Sparky pool. This well is presently producing at rates that significantly exceed the Company's Silver area type curve as well.
Surge estimates that this Sparky pool has in excess of 50 million barrels of OOIP, over 29 gross / 29 net additional follow-up development drilling locations, and significant (unbooked) waterflood upside.
CONVERSION OF SUBSCRIPTION RECEIPTS:
Upon completion of the Acquisition, the 34,500,000 Subscription Receipts issued pursuant to the previously announced $247.5 million equity financing have now been converted into common shares of Surge.
As a result of the recent continued successful drilling results at Valhalla, and the two new Sparky oil pool discoveries at Silver, Surge now anticipates that the Company will exceed management's estimated 2013 production exit rate of 12,000 boepd (78% Oil/NGLs).
NEW CORPORATE PRESENTATION POSTED ON SURGE WEBSITE:
With the closing of the strategic, accretive Acquisition, and the exciting new drilling results that Surge is delivering, the Company has now posted a new corporate presentation on the Surge website at: www.surgeenergy.ca.
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. 2 Based on 2014 Edmonton Par $88.66/bbl; 2014 AECO gas $3.69/mcf and a 2014 CAD/US exchange rate of $0.98. 3 Based on Sproule's independent engineering report as at December 31, 2012 (pre-Acquisition, and pre-equity financing). 4 Based on 2014 Edmonton Par $88.66/bbl; 2014 AECO gas $3.69/mcf and a 2014 CAD/US exchange rate of $0.98. 5 Based on Surge's closing share price on June 28, 2013 of $5.14.
We seek Safe Harbor.
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