CALGARY - Surge Energy Inc. ('Surge' or the 'Company') (TSX: SGY) is pleased to announce its 2022 budget guidance, as approved by the Company's Board of Directors, an update on Surge's anticipated reinstatement of Management's shareholder returns focused business model, and an operations update.

2022 BUDGET GUIDANCE - CONTINUED FOCUS ON SHAREHOLDER RETURNS & SUSTAINABILITY

Surge's focus in 2022 continues to be on disciplined capital allocation, with cash flow strategically allocated between capital projects, net debt1 repayment, and a fundamental goal of reinstating the Company's dividend and shareholder returns focused business model. The Company's 2022 capital budget will see 85 percent of the expenditures focused in its two, top-tier core medium and light gravity conventional crude oil plays in the Sparky and SE Saskatchewan, which now comprise two thirds of Surge's current production.

In 2022, the Company can maintain its current production levels of 21,500 boepd, while continuing to increase shareholder's net asset value2 by generating more than $130 million of free cash flow1 at US$75 WTI3 - providing investors with an estimated free cash flow yield1,4 of over 25 percent.

2022 BUDGET HIGHLIGHTS

Surge's disciplined 2022 capital expenditure budget

Maximizes free cash flow through a returns focused, $124 million exploration and development capital program; Generates forecasted 2022 annual cash flow from operating activities in excess of $255 million ($3.06 per share) at US$75 WTI crude oil pricing; Generates free cash flow1 of over $130 million ($1.57 per share1) at US$75 WTI crude oil pricing; Reduces the Company's exit 2022 net debt to cash flow from operating activities1 to an estimated 0.75 times at US$75 WTI crude oil pricing; Targets 65 of the Company's most capital efficient drilling locations - focused predominately in its Sparky and SE Saskatchewan core areas; Uses less than seven percent of the Company's internally estimated drilling locations (i.e. over 950 net estimated locations currently in inventory)5 and Cost effectively maintains production of 21,500 boepd (86% liquids), maximizing free cash flow.

CORPORATE UPDATE -TIMELINE FOR REINSTATEMENT OF SURGE'S MULTI-FACETED SHAREHOLDER RETURNS MODEL

Management's stated goal is to position the Company as a well-financed energy producer with a significant free cash flow profile that supports consistent shareholder returns through: 1) net asset value per share increases through ongoing debt repayment; 2) sustainable dividends; 3) modest production per share growth and 4) opportunistic share buybacks.

On December 9, 2021, the Company announced the successful closing of a $130 million, 5-year term debt facility, injecting a significant amount of stable, long term debt into the Company's capital structure, with the strategic objective of reducing Surge's reliance on volatile, shorter term debt. Surge will continue to focus on providing shareholder returns through further reductions in net debt over the coming months.

On this basis, Surge is initially targeting a reduction of net debt to a range of $250 to $265 million, at which point the Company will look to resume its historical, shareholder returns focused business model, including the reinstatement of a dividend. Management will also evaluate the potential for opportunistic share buybacks. A reduction of net debt to the targeted range will also add approximately $0.60 to $0.75 per share to the net asset value of the Company (based on approximately 83.4 million shares outstanding).

At current commodity price levels, Management estimates that Surge will be within its targeted net debt range before mid-year in 2022.

OPERATIONS UPDATE - UNLOCKING SIGNIFICANT INCREMENTAL VALUE IN SPARKY AND SE SASKATCHEWAN

Surge finished 2021 on a strong operational note. The Company continued to successfully develop its dominant land position in its core Sparky asset, using its traditional low risk single-leg multi-stage frac design, with results continuing to outperform internal type curve expectations8. In addition, Surge has now successfully tested multi-leg, open hole lateral development in portions of its Sparky core area where the multi-stage frac design is not optimal.

To date, Surge has drilled four multi-leg laterals in the Sparky formation with the average of the four wells exceeding the Company's internal type curve expectations. Encouragingly, two of the wells have been brought on production with rates over 220 bopd each on an IP30 basis. At current pricing these two wells paid out in just 115 days.

Additionally, given that the rock properties of the Sparky formation are analogous to that of the Clearwater formation, Surge is testing drilling mud systems that have proven to be effective in the Clearwater play, in three separate multi-leg Sparky wells. On this basis, the Company is piloting an oil based mud system, offsetting wells drilled with variations of KCL brine-based mud systems. Initial results on the oil based pilot well are encouraging, and as such, Surge will expand the pilot of this oil based mud system in its 2022 drilling program.

Going forward, Surge views multi-leg lateral development as complimentary to its existing single-leg multi-frac drilling program. The addition of the multi-leg design will upgrade a meaningful portion of the Company's existing Sparky core area drilling inventory, which currently consists of over 425 internally estimated locations8. Based on the strong initial well results, Surge is now budgeting eight additional multi-leg Sparky wells in its 2022 drilling program, along with 27 single-leg multi-frac Sparky wells.

In Surge's newly acquired, high operating netback, light oil core area of SE Saskatchewan, recent development drilling has yielded impressive results. In the Minard area, two wells drilled in August had initial production rates over 320 bopd and have already produced a total of 30,000 barrels of oil each. These wells each paid out in less than 55 days. In 2022 SE Saskatchewan will be an important component of the Company's drilling activity, with 36 gross (27.7 net) wells budgeted.

Surge has continued its Q4/21 operational momentum by securing services, having commenced its 2022 drilling program in December of 2021. The Company currently has 3 drilling rigs operating in its core areas: one rig drilling single-leg multi-frac Sparky wells, one drilling multi-leg open hole Sparky wells, and one drilling horizontal wells in SE Saskatchewan. To date, the Company has rig released eight net wells of its planned 27.1 net well Q1/22 drilling program.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements. The use of any of the words 'anticipate', 'continue', 'estimate', 'expect', 'may', 'will', 'project', 'should', 'believe' and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. More particularly, this press release contains statements with respect to Surge's declared focus and primary goals, including its goal of returning to a shareholder returns-based business model; management's expectations regarding increases to Surge's net asset value; management's expectations and plans with respect to the development of its assets and the timing thereof; Surge's annual exploration and development capital expenditure program and budget; Surge's drilling program and inventory; management's 2022 guidance, including estimated production levels, exploration and development capital expenditures, cash flow from operating activities, free cash flow and free cash flow yield, all-in payout ratio; exit net debt to cash flow from operating activities ratio, royalties as a percentage of petroleum and natural gas revenue; net operating expenses, transportation expenses and general and administrative expenses; management's expectations regarding net bank debt repayment at current prices and the timing thereof; commodity prices and Surge's reserve life index, corporate decline and tax pool base.

The forward-looking statements are based on certain key expectations and assumptions made by Surge. 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 condition of the global economy, including trade, public health (including the impact of COVID-19) and other geopolitical risks; 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 constraint in the availability of services, adverse weather or break-up conditions; uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures and failure to obtain the continued support of the lenders under Surge's bank line. Certain of these risks are set out in more detail in Surge's AIF dated March 9, 2021 and in Surge's MD&A for the period ended December 31, 2020, both of which have 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.

Non-GAAP and Other Financial Measures

This press release includes references to non-GAAP and other financial measures used by the Company to evaluate its financial performance, financial position or cash flow. These specified financial measures include non-GAAP financial measures and non-GAAP ratios, are not defined by IFRS and therefore are referred to as non-GAAP and other financial measures. Certain secondary financial measures in this press release - namely, 'all-in payout ratio', 'free cash flow', 'free cash flow yield', 'net debt', 'net debt to cash flow from operating activities', 'net operating expenses', and 'operating netback' are not prescribed by GAAP. These non-GAAP and other financial measures are included because management uses the information to analyze business performance, cash flow generated from the business, leverage and liquidity, resulting from the Company's principal business activities and it may be useful to investors on the same basis. None of these measures are used to enhance the Company's reported financial performance or position. The non-GAAP and other financial measures do not have a standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other issuers. They are common in the reports of other companies but may differ by definition and application. All non-GAAP and other financial measures used in this document are defined below, and as applicable, reconciliations to the most directly comparable GAAP measure for the year ended December 31, 2020, have been provided to demonstrate the calculation of these measures:

Contact:

Paul Colborne

Tel: (403) 930-1507

Fax: (403) 930-1011

Email: pcolborne@surgeenergy.ca

(C) 2022 Electronic News Publishing, source ENP Newswire