ACCRETIVE ASSET SALE COMPLETED
Surge has now closed its previously announced strategic Sale, providing a significant, immediate, positive impact on the Company's balance sheet. As a result of the Sale transaction, Surge's bank indebtedness is reduced by over
Following the Sale, Surge maintains a high quality, low decline, medium and light oil asset base – with large original oil in place ("OOIP")2 reservoirs, high netbacks, and a large internally estimated drilling inventory of over 750 locations3 (>14 year inventory).
In 1H/21, Surge anticipates adding over 3,200 boepd from the Company's 32 well drilling program at a cost of
The Company has rig released all 31 gross (31.0 net) wells budgeted for the Sparky core area. One additional (1.0 net) well commenced drilling in late March, 2021 into the Company's large OOIP, Montney turbidite, pool in the
POSITIVE CREDIT FACILITIES RE-DETERMINATION CONFIRMED
In combination with the Sale, the Company is pleased to announce that it has completed a re-determination of its credit facilities.
Surge's first lien credit facility has been re-determined at
OUTLOOK; GUIDANCE 2021/2022
In the last 4 months, Surge has injected over
- BDC 2nd lien financing of
$40 million ; - EDC participation into Surge's existing 1st lien credit facility for
$50.6 million ; - Alberta Site Rehabilitation Program grants of
$14 million ; and - The strategic asset Sale providing gross proceeds of
$106 million .
As a result of the top tier production efficiencies associated with the Company's 1H/21 drilling program, Surge expects to add over 3,200 boepd for total capital expenditures of
Following the successful, accretive Sale, and the completion of the Company's low risk 1H/21 development drilling program, Surge is planning a disciplined capital allocation strategy with an emphasis on free cash flow generation in 2H/21. Surge will be issuing revised guidance following the completion of the final
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 plans with respect to the development of its assets and the timing thereof; Surge's declared focus and primary goals and its strategy for 2H/21; Surge's planned drilling program and the anticipated costs thereof and payout thereunder; Surge's drilling inventory and locations; management's expectations regarding 2021 production levels; the expectation that the Sale will further enhance the Company's financial flexibility and available liquidity; the anticipated benefits of the re-determination of Surge's credit facilities, including the anticipated reduction in Surge's annual interest expense; and the anticipated timing of release of revised 2021/22 guidance.
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
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.
Oil and Gas Advisories
The term "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" and "boepd" mean barrel of oil equivalent per day. Bbl means barrel of oil and "bopd" means barrels of oil per day. NGLs means natural gas liquids.
This press release contains certain oil and gas metrics and defined terms which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar metrics/terms presented by other issuers and may differ by definition and application. All oil and gas metrics/terms used in this document are defined below:
Original Oil in Place ("OOIP") means
Drilling Inventory
This press release discloses drilling locations in two categories: (i) booked locations; and (ii) unbooked locations. Booked locations are proved locations and probable locations derived from an internal evaluation using standard practices as prescribed in the Canadian Oil and Gas Evaluations Handbook and account for drilling locations that have associated proved and/or probable reserves, as applicable.
Unbooked locations are internal estimates based on prospective acreage and assumptions as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources. Unbooked locations have been identified by Surge's internal certified Engineers and Geologists (who are also Qualified Reserve Evaluators) as an estimation of our multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. There is no certainty that the Company will drill all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas reserves, resources or production. The drilling locations on which the Company actually drills wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors. While certain of the unbooked drilling locations have been de-risked by drilling existing wells in relative close proximity to such unbooked drilling locations, the majority of other unbooked drilling locations are farther away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil and gas reserves, resources or production.
Assuming a
Surge's weighted average internal Sparky type curve economics have an IRR of greater than 115% and a payout of under one year @
Surge's internally used type curves were constructed using a representative, factual and balanced analog data set, as of
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.
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1 For the purposes of this press release, "cash flow multiple" is calculated as total gross proceeds from the Sale of | |
2 See the Oil and Gas Advisories section of this document for further details. | |
3 See Drilling Inventory in Forward Looking Statements | |
4 See Drilling Inventory in Forward Looking Statements |
SOURCE
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