CALGARY, Feb. 18, 2014 /CNW/ - Surge Energy Inc. ("Surge"
or the "Company") (TSX: SGY) is pleased to announce the results of
its 2013 year-end oil and gas reserves evaluation (NI-51-101
compliant), delivering a 59 percent increase over year-end 2012
reserves. This significant increase reflects exceptional organic
growth through the drill-bit, advancement of waterflood
initiatives, and the completion of four strategic, accretive,
elite, light and medium crude oil acquisitions in 2013.
The following highlights and reserves
information do not include the Company's SE Saskatchewan, high quality, low decline,
operated, light oil asset acquisition which closed on February 14, 2014.
2013 YEAR-END RESERVES HIGHLIGHTS:
Surge reports the following 2013 year-end
reserves highlights based on the Sproule Associates Limited
("Sproule") and McDaniel & Associates Consultants Ltd.
("McDaniel") independent assessments of the Company's
reserves dated effective December 31,
20131 (the "Surge Sproule Report") and (the
"Surge McDaniel Report"). The results presented below used
the following unaudited estimated values2: total capital
expenditures for 2013 of approximately $126
million and $698 million
including acquisitions and dispositions. Surge's 2013 average
production was approximately 10,768 boe per day, and represents a
21 percent increase compared to average 2012 production of 8,873
boe per day.
Reserves
- Achieved Proved plus Probable finding and development costs
(F&D) of $17.03 per boe,
including the change in Future Development Capital (FDC).
- Achieved a Proved plus Probable recycle ratio of 2.5
with F&D costs of $17.03
per boe, including the change in FDC and based on Surge's estimated
2013 operating netback of $41.74 per boe3.
- Achieved Proved plus Probable finding, development and
acquisition (FD&A) cost of $27.27 per boe, including the change in
FDC.
- Achieved a Proved plus Probable recycle ratio of 1.5
with FD&A costs of $27.27 per boe, including the change
in FDC and based on Surge's estimated 2013 operating netback of
$41.74 per boe.
- Increased Proved plus Probable reserves by 59% to 73.5
million boe as compared to December 31,
2012 reserves of 46.1 million boe.
- Organic proved plus probable reserve additions replaced
196% of production in the year and proved reserve additions
replaced 138% of production, excluding reserves added through
acquisitions.
- Increased Proved plus Probable Oil and NGLs reserves by
79% to 57.1 million barrels over December 31, 2012 reserves of 31.9 million
barrels. Oil and NGLs made up 78% of the Company's total
Proved plus Probable reserves.
- Proved plus Probable FDC discounted at 10% of $391 million represents less than 1.8 times 2014
forecast average funds flow4.
- Achieved a Proved plus Probable Reserve Life Index (RLI) of
16.8 years based on the Company's 2013 fourth quarter
average production rate of approximately 12,014 boe per day.
- Achieved a Proved plus Probable reserves replacement ratio
of 8.0 based on the Company's estimated 2013 average production
for the year of 10,768 boe per day.
- Surge's Net Asset Value (NAV) is estimated at $6.95 per basic share based on Net Present
Value discounted at 10 % Before Tax ("NPV10 BT") Proved plus
Probable (2P) reserves of $1.365
billion as at December 31,
2013.
Operations
- Achieved record 2013 annual production of 10,768 boe/d (79%
oil and NGLs), an increase of 13% compared to 2012.
- Invested $114 million in 2013 on
development capital expenditures which includes the drilling of 31
(28.6 net) wells with a 97% success rate.
- Increased oil production weighting to 86% in Q4
2013 from an average of 70 % in 2012.
- Reduced corporate decline rate from 36% in 2012 to 24%
exiting 2013 based on Surge's low risk operating strategy
and waterflood initiatives.
_______________________________________ |
1 Using Sproule forecast prices and costs |
2 As Surge plans to release its audited financial
statements before the end of March 2013, certain financial
estimates have been made herein. Readers are advised to that
these financial estimates are subject to audit and may be
revised. |
3 Operating netback is calculated as forecast
revenue per boe less forecast royalties, operating and
transportation expenses on a per boe basis. |
4 Excluding G&A, corporate and exploration
capital. |
The following table summarizes the Company's
reserves evaluated by independent reserves evaluators at
December 31, 2013. The Surge
Sproule Report and Surge McDaniel Report were prepared in
accordance with definitions, standards and procedures contained in
the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and
National Instrument 51-101 Standards of Disclosure for Oil and Gas
Activities ("NI 51-101"). Additional reserve information as
required under NI-51-101 will be included in the Company's Annual
Information Form, which will be filed on SEDAR by March 30, 2014.
Summary of Reserves5 |
|
Oil & NGLs
(mbbls) |
Gas
(mmcf) |
Combined
(mboe) |
Future
Development Capital (FDC)
($MM) |
|
|
|
|
Discounted @
10% |
Undiscounted |
Proved Developed Producing |
20,286 |
32,752 |
25,745 |
7,300 |
8,030 |
Proved Developed
Non-Producing |
685 |
2,823 |
1,156 |
2,491 |
2,578 |
Proved Undeveloped |
11,991 |
27,637 |
16,597 |
245,383 |
278,244 |
Total Proved |
32,963 |
63,212 |
43,498 |
255,174 |
288,787 |
Probable Additional |
24,094 |
35,209 |
29,963 |
136,058 |
163,420 |
Total
Proved plus Probable |
57,057 |
98,421 |
73,460 |
391,232 |
452,269 |
Summary of Before Tax Net Present Values
(Forecast Pricing)
As at December 31,
20136
BEFORE TAX NET PRESENT VALUE
($MM) |
Discount Rate |
DESCRIPTION |
|
|
0% |
|
|
5% |
|
|
10% |
|
|
15% |
|
|
20% |
Proved producing |
|
|
971,648.4 |
|
|
763,037.8 |
|
|
639,042.1 |
|
|
555,326.2 |
|
|
494,566.3 |
Proved non-producing |
|
|
33,711.8 |
|
|
25,459.9 |
|
|
20,538.5 |
|
|
17,229.8 |
|
|
14,837 |
Undeveloped |
|
|
489,214.2 |
|
|
325,794.8 |
|
|
232,507.3 |
|
|
172,235.9 |
|
|
130,390.3 |
Total proved |
|
|
1,494,574 |
|
|
1,114,293 |
|
|
892,087.9 |
|
|
744,791.9 |
|
|
639,793.6 |
Probable |
|
|
1,320,686 |
|
|
717,473.5 |
|
|
472,559.3 |
|
|
342,669 |
|
|
262,928.4 |
Total proved plus
probable7 |
|
|
2,815,260 |
|
|
1,831,766 |
|
|
1,364,647 |
|
|
1,087,461 |
|
|
902,722 |
Per fully diluted share |
|
|
16.46 |
|
|
10.71 |
|
|
7.98 |
|
|
6.36 |
|
|
5.28 |
________________________________________ |
5 Please see reserves note of this press
release |
6 Based on Sproule's January 1, 2014 forecast
prices. |
7 Numbers may not add due to rounding. |
Capital Program Efficiency
Based on the evaluation of our petroleum and natural gas
reserves prepared in accordance with NI 51-101 by our independent
reserve evaluators, the historical efficiency of our capital
programs is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
|
|
2012 |
|
|
|
|
Four
Year
Weighted
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding Future Development Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved
($/boe) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F&D costs8 |
|
|
|
$ |
|
19.54 |
|
|
|
$ |
|
23.43 |
|
|
|
$ |
18.00 |
|
FD&A costs9 |
|
|
|
$ |
|
36.18 |
|
|
|
$ |
|
26.86 |
|
|
|
$ |
29.43 |
Proved plus
probable ($/boe) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F&D costs8 |
|
|
|
$ |
|
13.69 |
|
|
|
$ |
|
14.84 |
|
|
|
$ |
12.18 |
|
FD&A costs9 |
|
|
|
$ |
|
22.32 |
|
|
|
$ |
|
17.00 |
|
|
|
$ |
18.73 |
Proved plus
Probable Recycle ratio10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F&D costs |
|
|
|
|
|
3.0x |
|
|
|
|
|
2.3x |
|
|
|
|
3.1x |
|
FD&A costs |
|
|
|
|
|
1.9x |
|
|
|
|
|
2.0x |
|
|
|
|
2.0x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Including Future
Development Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved
($/boe) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F&D costs8 |
|
|
|
$ |
|
27.92 |
|
|
|
$ |
|
28.00 |
|
|
|
$ |
24.41 |
|
FD&A costs9 |
|
|
|
$ |
|
42.10 |
|
|
|
$ |
|
30.13 |
|
|
|
$ |
34.52 |
Proved plus
probable ($/boe) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F&D costs8 |
|
|
|
$ |
|
17.03 |
|
|
|
$ |
|
23.72 |
|
|
|
$ |
18.34 |
|
FD&A costs9 |
|
|
|
$ |
|
27.27 |
|
|
|
$ |
|
23.34 |
|
|
|
$ |
23.75 |
Proved plus
Probable Recycle ratio10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F&D costs |
|
|
|
|
|
2.5x |
|
|
|
|
|
1.5x |
|
|
|
|
2.0x |
|
FD&A costs |
|
|
|
|
|
1.5x |
|
|
|
|
|
1.5x |
|
|
|
|
1.5x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating netback
per boe10 |
|
|
|
$ |
|
41.74 |
|
|
|
$ |
|
34.65 |
|
|
|
$ |
36.88 |
_______________________________________ |
8 The aggregate of the exploration and development
costs incurred in the financial year and change during that year in
estimated future development costs generally will not reflect total
finding and development costs related to reserve additions for that
year. |
9 The capital expenditures include the announced
purchase price of corporate acquisitions rather than the amounts
allocated to property, plant and equipment for accounting purposes.
The capital expenditures also exclude capitalized administration
costs. |
10 Recycle ratio is calculated as operating netback
divided by FD&A costs (proved plus probable). Operating netback
is calculated as revenue (including realized hedging gains and
losses) minus royalties, production and operating expenses and
transportation expenses. |
RESERVES NOTE:
In accordance with National Instrument 51-101 -
Standards of Disclosure for Oil and Gas Activities (NI 51-101), a
report was prepared by each of Sproule and McDaniel. These reports
evaluated, as at December 31, 2013,
all of Surge's oil, natural gas, and natural gas liquids
reserves.
The tables in this press release disclose in the
aggregate the Company's gross and net proved and proved plus
probable reserves and Net Present Value (NPV) as estimated in both
the Surge Sproule Report and the Surge McDaniel Report. These
estimates were calculated using Sproule forecast prices and
costs.
"Forecast prices and costs" means future prices
and costs used by Sproule in the Surge Sproule Report and in the
Surge McDaniel Report that are generally accepted as being a
reasonable outlook of the future, or fixed or currently
determinable future prices or costs to which the Company is
bound.
"Gross" reserves equate to those reserves that
are referred to as "Company Gross" reserves by the Canadian
Securities Administrators (CSA) in NI 51-101. Gross Reserves
are Company gross reserves, which are the Company's working
interest (operating or non-operating) share before deduction of
royalties and without including any royalty interests of the
Company.
"Net After Royalty" reserves are the Company's
working interest (operating or non-operating) share after deduction
of royalty obligations plus the Company's royalty interests in
reserves.
The net present value of future net revenue
attributable to Surge's reserves is stated without provision for
interest costs and general and administrative costs, but after
providing for estimated royalties, production costs, development
costs, other income, future capital expenditures, and well
abandonment costs for only those wells assigned reserves by Sproule
and McDaniel's. It should not be assumed that the undiscounted or
discounted net present value of future net revenue attributable to
Surge's reserves estimated by Sproule and McDaniel's represent the
fair market value of those reserves. The estimates of
reserves and future net revenue for individual properties may not
reflect the same confidence level as estimates of reserves and
future net revenue for all properties, due to effects of
aggregations. Other assumptions and qualifications relating
to costs, prices and future production and other matters are
summarized herein. The recovery and reserve estimates of
Surge's oil, natural gas, and NGL reserves provided herein are
estimates only and there is no guarantee that the estimated
reserves will be recovered. Actual reserves may be greater than or
less than the estimates provided herein.
FORWARD-LOOKING STATEMENTS:
This press release contains forward-looking
statements. More particularly, this press release contains
statements concerning anticipated: (i) estimates of 2013 average
production, capital expenditures, revenues and operating and
transportation expenses; (ii) exploration, development and drilling
activities, and (iii) 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.
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.
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 day.
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 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.
SOURCE Surge Energy Inc.