CALGARY, AB, March 6, 2024 /CNW/ - Surge Energy Inc. ("Surge", "SGY", or the "Company") (TSX: SGY) is pleased to announce its financial and operating results for the quarter and year ended December 31, 2023; and its year end 2023 reserves as independently evaluated by Sproule Associates Limited ("Sproule").
Surge's disciplined operating strategy involves focusing growth and development capital to high netback, low cost, light and medium gravity crude oil reservoirs, that possess large original oil in place ("OOIP")1 and low recovery factors.
In Q4/23 Surge achieved an average production rate of 25,050 boepd (86 percent liquids), exceeding the Company's 2023 public guidance production exit rate of 25,000 boepd. Additionally, Surge achieved record annual production in 2023 of 24,438 boe/d (86 percent liquids), an increase of 15 percent over 2022 average production of 21,262 boepd.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Surge's Board and Management are pleased to report that the Company organically generated free cash flow2 before dividends ("FCF") of $94 million in 2023, representing 35 percent of 2023 cash flow from operating activities.
Additional financial and operating highlights for the quarter and year ended December 31, 2023 include:
Generated cash flow from operating activities of $79.7 million in Q4/23;
Reduced net debt by over $62 million in 2023 to $290.1 million, a decrease of 18 percent;
Distributed cash dividends to shareholders in the amount of $46.8 million in 2023;
Reduced net operating expenses by $2.36 per boe over the course of 2023, from $22.26 per boe in Q1/23 to $19.90 per boe in Q4/23. This represents an 11 percent decrease in net operating expenses over the year;
Repaid in full Surge's $47.9 million first lien term loan facility that was set to mature in December 2024;
Completed a new, oversubscribed, $48.3 million unsecured convertible debenture financing, with an attractive 8.50% interest rate;
Finalized the early redemption of $34.5 million of previously issued unsecured convertible debentures that were set to mature on June 30, 2024 with no pre-payment penalty;
Executed a successful 2023 drilling program of 70 gross (64.5 net) wells, strategically focused on light and medium gravity crude oil in the Company's conventional SE Saskatchewan and Sparky core areas; and
Continued the Company's focus on ESG efforts, highlighted by spending a total of $15.6 million on abandonment activities during the year. This resulted in Surge abandoning 132 gross wells during 2023, representing 1.9 wells abandoned for each new gross well drilled in 2023.
2023 YEAR END RESERVES HIGHLIGHTS
Surge is pleased to announce the results of the independent reserves evaluation of the Company's crude oil and natural gas assets, dated February 9, 2024 and effective December 31, 2023, in compliance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and in accordance with the Canadian Oil and Gas Evaluation Handbook (the "Reserve Report").
Building off of the successful 2023 drilling program in the Company's Sparky and SE Saskatchewan core areas, Surge continued to delineate and improve the Company's reserve base through pool extensions, establishing new development fields, and new exploration/appraisal drilling over the year.
Surge Management is pleased to report that, even after giving effect to increases in industry wide inflationary cost estimates, and a reduction in Sproule's crude oil price deck, the Company's 2023 Total Proved Net Asset Value1 ("TP NAV") is $11.27 per basic share. The Company's new TP NAV includes 397 net booked locations of Surge's more than 1,000 net internally identified drilling locations3. This new TP NAV is approximately 65 percent higher than Surge's current trading price of $6.92 per share.
With Surge's December 31, 2023 Reserve Report, the Company delivered the following:
117 million boe of Total Proved & Probable ("TPP") reserves;
High oil weighting, with Proved Developed Producing ("PDP") reserves comprised of 88% light and medium oil and natural gas liquids, and TPP reserves comprised of 86% light and medium oil and natural gas liquids;
543 gross (489 net) booked TPP drilling locations; 70% of these locations are located in the Company's Sparky and SE Saskatchewan core areas3;
Reported a TPP NAV of $17.63 per basic share;
Generated a TP NAV of $11.27 per basic share;
Confirmed a PDP NAV of $5.66 per basic share;
Delivered a TP Finding, Development & Acquisition ("FD&A") cost of $21.59/boe1;
1.8x Recycle Ratio1 on a 2023 operating netback of $39.07/boe (before realized losses on financial contracts);
Reported a strong reserve life index1 of 12.8 years on TPP reserves, 9.3 years on TP reserves, and 4.7 years on PDP reserves;
Replaced 102% of production on a TP basis, and 80% of production on a PDP basis; and
Total Proved Undeveloped ("PUD") reserve net locations3 increased to 397 net, an increase of 31 locations over last year. All additional PUD locations were added in the Sparky and SE Saskatchewan core areas.
________________