/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR
DISSEMINATION IN THE UNITED
STATES./
CALGARY, July 3, 2013 /CNW/ - Surge Energy Inc. ("Surge"
or the "Company") (TSX: SGY) is pleased to announce the closing of
the previously announced $240 million
acquisition of an elite, operated, crude oil producing asset in the
southwest area of Saskatchewan;
the conversion of 34,500,000 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.
2013/2014 GUIDANCE:
With the closing of the accretive Acquisition
and the concurrent equity financing, Surge now confirms
management's guidance for 2013 and 2014 as follows:
OPERATIONAL2 |
2014E Q1 Production (boe/d) |
12,000 (78% Oil/NGLs) |
2014E Average Production (boe/d) |
12,100 (78% Oil/NGLs) |
2014E Exit Production (boe/d) |
12,500 (80% Oil/NGLs) |
2P Reserves |
54.6 mmboe |
Net Asset Value (NAV) per share |
$8.21 P+P NPV103 |
RLI (based on 2013E exit production) |
> 12 years |
2014E Development Capital Spending |
$85 million |
2014E Wells Drilled |
30 wells |
2014 Decline Rate |
24% |
FINANCIAL4 |
2014E Funds from Operations ("FFO") |
$143 million ($1.18 per basic
share) |
2014E Operating Netback |
$37.63/boe |
2014E Cash Flow Netback |
$33.25/boe |
Shares Outstanding |
121 million |
Annual Dividend |
$49 million |
Dividend / Share |
$0.40 per share per annum |
Yield |
7.8%5 |
Basic Payout Ratio 2014E |
34% |
"All-in" Payout Ratio |
93% |
2013E Year-end net debt |
$204 million |
2013E Year-end net debt / 2014E FFO |
1.4x |
Bank Line |
$350 million |
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.
FORWARD LOOKING STATEMENTS:
This press release contains forward-looking
statements. More particularly, this press release contains
statements concerning anticipated: (i) potential development
opportunities and drilling locations, (ii) the timing and amount of
future dividend payments, (iii) hedging results, and (iv)
realization of anticipated benefits of the Acquisition.
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 for the year
ended December 31, 2012 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.
This news release does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities
in the United States. The
securities have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S.
Securities Act") or any state securities laws and may not be
offered or sold within the United
States or to U.S. Persons unless registered under the U.S.
Securities Act and applicable state securities laws or an exemption
from such registration is available.
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. |
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.
|
SOURCE Surge Energy Inc.