CALGARY - Surge Energy Inc. ('Surge' or the 'Company') (TSX: SGY) and Fire Sky Energy Inc. ('Fire Sky') announce that they have entered into an amalgamation agreement, pursuant to which Surge has agreed to acquire all of the issued and outstanding common shares of Fire Sky by way of a statutory amalgamation for total consideration of approximately $58 million.

The Transaction is to be funded by the issuance of approximately 11.2 million Surge common shares ('Surge Shares'), and the assumption of approximately $3 million of net debt1, inclusive of transaction costs. With the Company's recent acquisition of Astra Oil Corp. ('Astra'), Surge management strategically targeted SE Saskatchewan as a new area of growth based on its high value light oil netbacks, low-cost production efficiencies, and quick drilling payouts. Surge's operational track record of execution in SE Saskatchewan, combined with its proven in-house technical expertise, make this an exciting new core area for the Company.

The Fire Sky assets ('Fire Sky Assets') are currently producing more than 1,500 boepd (>95 percent liquids) of operated, light oil, focused in Surge's SE Saskatchewan core area, with an operating netback1 of more than $52 per boe at US$70 WTI pricing - which is now less than 2022 average strip pricing.

Following the Transaction, Surge now forecasts average production in 2022 of 21,500 boepd (86% liquids) of primarily light and medium gravity crude oil.

STRATEGIC RATIONALE

The Transaction is accretive to Surge's 2022 free cash flow1 per share, and debt adjusted cash flow per share1; The Fire Sky Assets are forecast to increase the Company's cash flow from operating activities by $26 million over the next 12 months at US $70 WTI; The Company now estimates that its exit 2022 net debt to annualized Q4 2022 adjusted funds flow1 ratio will be approximately 0.7 times at US$70 WTI; The Transaction adds highly concentrated light oil reserves, production, land, and infrastructure in Surge's SE Saskatchewan core area; The Fire Sky Assets include a large internally estimated development drilling inventory of more than 100 locations2; The Fire Sky Assets are an excellent operational fit providing numerous synergies with the attractive light oil assets recently acquired through the Astra transaction and Fire Sky has an attractive corporate Licensee Liability Rating ('LLR') in Saskatchewan of 3.5, with a total undiscounted decommissioning liability of only $9.8 million.

The Transaction is consistent with Surge's defined business model of acquiring high quality, operated, light and medium gravity crude oil reservoirs with large original oil in place ('OOIP')3 and low recovery factors. The combined company possesses high netbacks, an operated light and medium gravity crude oil asset base, with extensive infrastructure in place to facilitate years of future development drilling and waterflood.

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 concerning management's expectations and assumptions concerning the anticipated benefits of the Transaction and the transaction metrics related thereto; the timing of various matters in connection with the Transaction and the conditions to completion of the Transaction and Surge's revised guidance for the remainder of 2021 and preliminary guidance for 2022. The forward-looking statements are based on certain key expectations and assumptions made by Surge, including expectations and assumptions the performance of existing wells and success obtained in drilling new wells; anticipated expenses, cash flow and capital expenditures; the application of regulatory and royalty regimes; prevailing commodity prices and economic conditions; development and completion activities; the performance of new wells; the successful implementation of waterflood programs; the availability of and performance of facilities and pipelines; the geological characteristics of Surge's properties; the successful application of drilling, completion and seismic technology; the determination of decommissioning liabilities; prevailing weather conditions; exchange rates; licensing requirements; the impact of completed facilities on operating costs; the availability and costs of capital, labour and services and the creditworthiness of industry partners.

The forward-looking statements are based on certain key expectations and assumptions made by Surge, including expectations and assumptions the performance of existing wells and success obtained in drilling new wells; anticipated expenses, cash flow and capital expenditures; the application of regulatory and royalty regimes; prevailing commodity prices and economic conditions; development and completion activities; the performance of new wells; the successful implementation of waterflood programs; the availability of and performance of facilities and pipelines; the geological characteristics of Surge's properties; the successful application of drilling, completion and seismic technology; the determination of decommissioning liabilities; prevailing weather conditions; exchange rates; licensing requirements; the impact of completed facilities on operating costs; the availability and costs of capital, labour and services and the creditworthiness of industry partners.

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 year 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.

Contact:

Paul Colborne

Tel: (403) 930-1507

Fax: (403) 930-1011

Email: pcolborne@surgeenergy.ca

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