Surge Energy (SGY.TO and ZPTAF) Update - Dec 8

[dan_s]

Surge Energy pays monthly dividends, which I expect them to raise mid-2024 when they meet their debt reduction goal.

After an excellent year of drilling success and debt repayment, Surge delivering a more of the same budget, given current market conditions, with the ability to pivot quickly with the drill bit and return of capital to shareholders.

SURGE ENERGY INC. ANNOUNCES 2024 CAPITAL AND OPERATING BUDGET; RELEASE OF ANNUAL SUSTAINABILITY REPORT; APPOINTMENT OF VICE PRESIDENTS CALGARY, ALBERTA (December 7, 2023)

Surge Energy Inc. (“Surge” or the “Company”) (TSX: SGY) is pleased to announce its 2024 capital and operating budget as approved by the Company’s Board of Directors, the release of the Company’s third annual sustainability report, as well as the appointment of two Vice Presidents.

2024 BUDGET GUIDANCE: CONTINUED FOCUS ON FREE CASH FLOW GENERATION AND SHAREHOLDER RETURN Surge's focus in 2024 will continue to be on disciplined capital allocation, with cash flow strategically allocated between high rate of return capital projects, net debt1 repayment, and further increases to shareholder returns. Surge is currently returning over $48 million annually to shareholders through the Company’s existing base dividend of $0.48 per share, per annum (paid monthly).

Surge’s 2024 capital budget will see approximately 95 percent of its development expenditures directed towards two of the top four crude oil plays in Canada in its Sparky (>11,000 boepd; 85% liquids) and SE Saskatchewan (~8,000 boepd; 90% liquids) core areas, as independently evaluated by a leading brokerage firm2, which now comprise over 80 percent of the Company’s current production.

Based on Surge’s 2024 capital budget, the Company can deliver production of 25,000 boepd (87 percent liquids), while concurrently generating an anticipated $105 million of free cash flow1 (before dividends) at US$75 WTI crude oil pricing3 – providing investors with an estimated free cash flow yield1,4 of 15 percent.

Surge Management closely monitors market conditions for commodity prices, Canadian oil price differentials, as well as interest and foreign exchange rates. The pace of the Company’s capital expenditures budget is strategically adjusted, based on market conditions.

2024 BUDGET HIGHLIGHTS

Surge’s disciplined 2024 capital and operating budget:

• Maximizes free cash flow, through a focused, $190 million exploration and development capital program;

• Generates forecast annual cash flow from operating activities of more than $295 million ($2.95 per share) at US$75 WTI crude oil pricing;

• Results in forecast free cash flow (before dividends) of $105 million ($1.05 per share1) at US$75 WTI crude oil pricing;

• Substantially increases the Company’s waterflood budget, with approximately $10 million of capital expenditures directed towards expanding the Company’s waterflood program;

• Targets the drilling of 70 (net) of the Company’s most capital efficient drilling locations; focused predominately in the Sparky and SE Saskatchewan core areas; and 1 This is a non-GAAP and other financial measure which is defined under

Non-GAAP and Other Financial Measures section of this document. 2 Source: Peters & Co. Limited (January 9, 2023 North American Oil and Natural Gas Plays). 3 Additional pricing assumptions: (WCS: US$16.00, EDM US$3.50 differentials), CAD/USD FX of $0.725 and AECO of $2.95 per mcf. 4 Free cash flow yield of 15 percent is calculated as $105 million of free cash flow (before dividends), divided by 100.3 million basic shares outstanding, divided by a SGY share price of $7.00/sh.

2 • Uses less than seven percent of the Company’s internally estimated drilling locations (i.e. over 1,050 net total estimated locations currently in inventory)5

. Further details relating to the 2024 budget are set forth below: Guidance @ US $75 WTI6 Average 2024 production
25,000 boepd (87% liquids)
2024(e) Exploration and development expenditures $190 million 2024
(e) Cash flow from operating activities* $295 million Per share $2.95 per share 2024(e) Free cash flow (before dividends) $105 million Per share $1.05 per share 2024(e)
All-in payout ratio7 81% 2024(e)
Exit net debt to 2024(e) cash flow from operating activities ratio7 0.7x

2024(e) Royalties as a % of petroleum and natural gas revenue 18.00% 2024(e) Net operating expenses7 $19.95 - $20.95 per boe
2024(e) Transportation expenses $1.50 - $1.75 per boe
2024(e) General & administrative expenses $2.15 - $2.35 per boe * Cash flow from operating activities assumes a nil change in non-cash working capital.

2024 DRILLING PROGRAM: FOCUSED ON THE SPARKY (MANNVILLE) AND SE SASKATCHEWAN (FROBISHER)
Surge’s 2024 capital program is focused in the Company’s Sparky and SE Saskatchewan core areas, with approximately 95 percent of 2024 development budget in these two areas. A total of 70 net wells are planned across all core areas, with 37 net wells planned in the Sparky, 32 net wells planned in SE Saskatchewan, and one well targeting the prolific Doig formation in Surge’s Valhalla core area.

Sparky (Mannville)

Surge’s 2024 capital program in the Sparky core area (>85% liquids; 23° API average crude oil gravity) is focused on development drilling, with 37 net wells budgeted to be drilled in the Company’s large original oil in place (“OOIP”)8 pools at Cadogan, Sounding Lake, Betty Lake – as well as the Company’s emerging multi-lateral Sparky/Mannville play in the Hope Valley/Giltedge area.
5 See the Drilling Inventory section of this document for further information. 6 Additional pricing assumptions (WCS: US$16.00, EDM US$3.50 differentials), CAD/USD FX of $0.725 and AECO of $2.95 per mcf. 7 This is a non-GAAP and other financial measure which is defined in the Non-GAAP and Other Financial Measures section of this document. 8 See the Oil & Gas Advisory section of this document for further information. 3

This capital program will consist of 25 net single-leg frac’ed Sparky horizontal wells, 8 net multi-leg Sparky wells, and 4 net horizontal wells in the Lloydminster formation. In 2024, Management is focused on the continued growth of Surge’s multi-lateral well footprint in the Mannville, with approximately 30 percent of drilling capital directed to multi-lateral development.

SE Saskatchewan

In the Company’s SE Saskatchewan core area, Surge is currently budgeting the drilling of 32 (net) conventional Mississippian horizontal wells, with 25 of these wells targeting the Frobisher formation, and 7 wells targeting the Midale and Lodgepole formations.

Over the past number of years, the Company has endeavored to optimize reservoir contact by drilling two and three leg stacked multi-lateral wells within the Frobisher. In 2024, 19 (75 percent) of Surge’s planned Frobisher wells will be drilled as multi-lateral horizontal wells.

ANNUAL SUSTAINABILITY REPORT RELEASED

Surge has released its third annual Sustainability Report, outlining the Company's advancement of its environmental, social and governance practices, and their impact on Surge's business and operating strategy.

The Company's third annual Sustainability Report reaffirms Surge's commitment to be a leader in reducing the impact of oil and gas operations on the environment. The report covers performance metrics for the 2020, 2021, and 2022 calendar years and aligns with guidance set forth by the Task Force on Climate-Related Financial Disclosure.

The Sustainability Report was approved by Surge's Management team, as well as the Company's Board of Directors, and is intended to allow all Surge stakeholders to better understand the Company's commitment to sustainable, responsible oil and gas operations. Surge’s latest annual Sustainability Report can be accessed through the Company's website.

APPOINTMENT OF VICE PRESIDENTS

Surge’s Board and Management is pleased to announce the addition of two new Vice Presidents to the leadership team of the Company.

Mr. Dan Kelly, CA, CPA has been promoted to Vice President, Finance and Controller. Mr. Kelly is an experienced energy finance professional with over 15 years of industry experience, and has been with Surge for over 9 years

. Mr. Grant Cutforth, P. Geol. has been promoted to Vice President, Business Development. Mr. Cutforth is a seasoned professional Geologist and business development professional with over 24 years of industry experience, and has been with the Company for over 9 years

[Fraser921]

What happen to Ducs. Is he now a dead duc?

[dan_s]

Dan Kelly will report to Jared Duc. Think of the controller as the Head Bookkeeper.