CALGARY, Nov. 13, 2013 /CNW/ - Surge Energy Inc. ("Surge"
or the "Company") (TSX: SGY) is pleased to announce that it has now
closed two previously announced strategic, high quality light oil
acquisitions (the "Acquisitions").
The first acquisition (the "Privateco Acquisition") involved the
$147 million purchase of all of the
shares of a Calgary based private
oil and gas company ("Privateco"), with high netback, operated,
producing light oil assets focused in the Steelman area of SE
Saskatchewan, and the Dodsland area of SW
Saskatchewan (the "Privateco Assets"). The consideration to
be paid to the shareholders of Privateco was comprised of 20.2
million shares of Surge and cash consideration elected by Privateco
shareholders of $3.0 million, plus
the assumption of $23 million of
debt.
With the second acquisition (the "Asset Acquisition"), Surge
acquired high quality, high netback, operated, producing light oil
assets primarily located in the SW area of Manitoba (the "Manitoba Assets"). Total
consideration of $135 million paid to
the vendor of the Manitoba Assets
was comprised of 14.2 million shares of Surge, and $50 million of cash.
As a result of the structure of the Acquisitions, post-closing
Surge will maintain the Company's excellent balance sheet and debt
to forward cash flow ratio, with over $145
million of credit availability on the Company's bank line.
In addition, pro-forma the Acquisitions, there is no change in
Surge's very low, "all-in" sustainability ratio of 93 percent.
As a result of the accretive Acquisitions, together with better
than expected operational and drilling results, Surge's Board of
Directors has now approved a 19 percent increase in the Company's
annual dividend from $0.42 per share
per year ($0.035 per share per month)
to $0.50 per share per year
($0.04166 per share per month).
The Acquisitions fit squarely within Surge's defined business
strategy of investing growth capital to acquire elite, operated,
light and medium gravity crude oil reservoirs, with large original
oil in place ("OOIP"1) and low recovery factors.
The Privateco Acquisition provides a strategic entry point for
Surge into the prolific Midale Marly, light oil play trend in
SE Saskatchewan, and the Viking
light oil play in SW Saskatchewan.
The Manitoba Assets provide Surge shareholders with exposure to one
of the highest quality; highest netback light oil plays in
Canada, focused in the
Bakken/Three Forks formation located in SW Manitoba.
The Acquisitions are highly accretive to Surge shareholders and
provide Surge with exposure to three of the top light oil plays in
Canada. They also provide an
excellent operational platform for additional growth on these
proven trends.
The Acquisitions comprise and possess large OOIP reservoirs,
together with low recovery factors, operatorship and high working
interests. They also possess significant upside from low risk
development drilling and waterfloods. Furthermore, the Acquisitions
include key producing infrastructure, including batteries,
pipelines and waterflood facilities.
Corporately, the light oil Acquisitions significantly increase
Surge's operating netback by over 11 percent, and increase the
Company's oil weighting to over 84 percent.
As a result of the closing of the Acquisitions, Surge now has
over one Billion barrels of light and medium gravity OOIP under the
Company's ownership and management, with a recovery factor of less
than three percent.
In addition to the above closings, on November 13, 2013 Surge announced that it has
entered into an agreement to acquire a high quality, low decline,
operated, crude oil producing asset strategically located near
Wainwright, Alberta in the
Company's core area of central Alberta. The closing of this elite core area
"top-up" acquisition is set for December 3,
2013. On this basis, Surge now anticipates an additional
four percent increase in the Company's annual dividend from
$0.50 per share per year
($0.04166 per share per month) to
$0.52 per share per year
($0.04333 per share per month).
ADVISORS
Macquarie Capital Markets Canada Ltd. acted as financial advisor
to Surge with respect to the Privateco Acquisition. CIBC World
Markets Inc. and Scotia Capital Inc. acted as strategic advisors to
Surge with respect to the Privateco Acquisition.
GMP Securities L.P. acted as financial advisor to Surge with
respect to the Asset Acquisition. National Bank Financial Inc.
acted as strategic advisor to Surge with respect to the Asset
Acquisition.
Macquarie Capital Markets Canada Ltd. acted as lead transaction
advisor to Surge with respect to both Acquisitions.
Peters & Co. Limited acted as financial advisor to
Privateco.
FirstEnergy Capital Corp. acted as exclusive financial advisor
to the Asset Acquisition.
FORWARD LOOKING STATEMENTS:
This press release contains forward-looking
statements. More particularly, it contains forward-looking
statements concerning: (i) targeted growth in reserves; (ii) the
"all-in" sustainability ratio; (iii) the debt to forward cash flow
ratio; (iv) availability on the Company's bank line; (v) the
potential growth through acquisitions; (vi) the realization of
anticipated benefits of the Acquisitions; (vii) the future upside
of the Acquisitions; (viii) operating netback; (ix) OOIP; and *
recovery factors.
The forward-looking statements contained in this press release
are based on certain key expectations and assumptions made by
Surge, including expectations and assumptions concerning the
success of future drilling, development and completion activities,
the performance of existing wells, the performance of new wells,
the viability of waterflood projects, the availability and
performance of facilities and pipelines, the geological
characteristics of Surge's properties, the successful application
of drilling, completion and seismic technology, prevailing weather
conditions, commodity prices, royalty regimes and exchange rates,
the application of regulatory and licensing requirements and the
availability of capital, labour and services.
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.
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.
SOURCE Surge Energy Inc.