CALGARY, Oct. 25, 2018 /CNW/ – Surge Energy Inc. (“Surge” or the “Company”) (TSX: SGY) is pleased to announce that it has successfully completed the previously announced acquisition (the “Acquisition”) of Mount Bastion Oil & Gas Corp. (“MBOG”) pursuant to an arrangement (the “Arrangement”) under the provisions of the Business Corporations Act (Alberta).
All of the issued and outstanding common shares of MBOG were acquired by Surge for aggregate consideration consisting of $145 million in cash and approximately 75.4 million common shares of Surge (“Surge Shares”). At the special meeting of Surge shareholders to approve the issuance of the Surge Shares pursuant to the Acquisition, held on October 24, 2018, 42.79% of the outstanding Surge Shares were represented and the issuance was approved by 99.31% of the Surge Shares voted at the meeting.
Effective today, Surge's revolving credit facility was increased by 57 percent from $350 million to $550 million. As of the close of the Acquisition, approximately $400 million is currently drawn on the credit facility, providing Surge with approximately $150 million in available liquidity.
As previously announced, Surge anticipates increasing its dividend by 25 percent, from $0.10 per share annually ($0.008333 per month) to $0.125 per share annually ($0.0104166 per month). The proposed increase is expected to be effective for Surge's regular monthly dividend to be paid in December 2018. Any dividend increase will be subject to the approval of Surge's Board of Directors.
Based on continued successful development drilling results in Surge's Sparky, Valhalla, and Shaunavon core areas, together with consistent waterflood results at Shaunavon and Sparky, the Company's Q3/18 production averaged 18,029 boepd (79 percent oil and liquids).
The Company's Q3/18 production exceeded Surge's previously released 2018 production exit rate guidance of 17,175 boepd by five percent, and exceeded analyst consensus production estimates of 16,880 boepd1 for Q3/18 by seven percent.
Over the last nine financial quarters Surge has now grown the Company's production per share by 41 percent. The Company has upwardly revised production five times over the 27 month period (i.e. prior to the MBOG Acquisition) – two times organically, and three times relating to accretive core area acquisitions.
Surge's continued quarterly operational outperformance has been accomplished within the Company's existing capital expenditure budget guidance of $107 million for 2018.
The Company's Q3/18 results are expected to be released on November 6, 2018, and do not include any operational or financial contribution from the Arrangement.
For further details regarding the Company's 2019 guidance, please see Surge's Press Release dated September 5, 2018.
Macquarie Capital Markets Canada Ltd. is acting as exclusive financial advisor to Surge with respect to the Acquisition. McCarthy Tétrault LLP is acting as legal advisor to Surge with respect to the Acquisition. GMP FirstEnergy and BMO Capital Markets have also been appointed strategic advisors to Surge.
National Bank Financial Inc. acted as financial advisor to MBOG on the Acquisition.
More particularly, this press release contains statements concerning: management's expectations with respect to 2018 exit and 2019 production volumes, Surge's oil and liquids weighting, Surge's 2019 exploration and development capital expenditures and Surge's 2019 corporate base decline; the timing of the release of Surge's Q3/18 results; the potential increase in Surge's dividend; and the availability of Surge's bank line to fund provide the Company with liquidity.
1 Consensus average production of 16,880 boepd as per Thomson Reuters as at October 23rd, 2018.