CALGARY, AB - Surge Energy Inc. ('Surge' or the 'Company') (TSX: SGY) is pleased to announce the Company's financial and operating results for the quarter ended June 30, 2022, an update on Surge's shareholder returns framework, an operations update, and revisions to the Company's 2022 capital and operating budget.

Q2 2022 FINANCIAL & OPERATING HIGHLIGHTS

An extremely tight physical market for crude oil has manifested from continued growth in demand, supply disruptions stemming from years of global underinvestment in oil projects, and ongoing geopolitical tensions. These factors have led to a favourable commodity pricing environment for Canadian producers.

During the second quarter of 2022 Surge delivered record cash flow from operating activities of $75.8 million, an increase of 818 percent, as compared to Q2/21 cash flow from operating activities of $8.3 million. Additionally, the Company delivered adjusted funds flow1 of $78.6 million in Q2/22, an increase of 479 percent compared to Q2/21 adjusted funds flow of $13.6 million.

In Q2/22, the Company generated cash flow from operations before realized gains or losses on financial contracts of $121.8 million (with an average oil price of US$108.41 WTI per barrel during the period), an increase of 318 percent as compared to $29.2 million in Q2/21 (with an average oil price of US$66.07 WTI per barrel during the period). Surge reported a realized loss on financial contracts of $46.0 million in Q2/22, primarily due to mandated fixed price oil hedging relating to the corporate acquisitions that closed in 2H/21. These fixed price hedging volumes wind down significantly over the second half of 2022, and expire at the end of the year.

Prior to the $121.8 million generated in Q2/22, the single best quarter in Surge's 12 year corporate history for cash flow from operations before realized gains or losses on financial contracts was Q3/14 at $77.5 million.

During the quarter, Surge generated $36 million of free cash flow1, reducing net debt significantly from $315.8 million at March 31, 2022 to $280.1 million at June 30, 2022.

Additionally, on June 15, 2022 Surge reinstated its base cash dividend of $0.42 per share per annum (paid monthly). Annualized, the Company's base cash dividend represents 12 percent of Q2/22 cash flow from operating activities.

Additional highlights from the Company's Q2 2022 financial and operating results include: Reduced net debt1 by $35.6 million as compared to March 31, 2022 while concurrently completing the successful Q2/22 capital program for $36.9 million; Achieved average daily production of 21,003 boepd (85 percent liquids) during Q2/22, an increase of 39 percent over Q2/21 production of 15,132 boepd (84 percent liquids); Successfully drilled 9 net wells with activity focused in the Company's Sparky, SE Saskatchewan and Valhalla conventional, light and medium gravity crude oil core areas; and As previously released, the Company was successful at a highly competitive Saskatchewan Crown land sale at Steelman, adding more than 40 net highly economic light oil Frobisher drilling locations, directly offsetting Surge's recent successful drilling results.

RETURN OF CAPITAL FRAMEWORK

Surge is poised to deliver strong operational results in 2H/22 and beyond with more than 2.6 billion of net (internally estimated) original oil in place ('OOIP')2, an approximate 6.5 percent recovery factor to date, and dominant operational positions in two top tier light and medium gravity crude oil growth plays in the Sparky and SE Saskatchewan core areas. Further, with over $1.3 billion in tax pools, the Company is well positioned to deliver its shareholders a combination of: Continued net debt repayment, increasing Surge's net asset value ('NAV')2 per share; A sustainable base monthly cash dividend (currently a 4.7 percent yield based on a $9.00/share price); Strategic share buybacks; Potential for variable or special dividends; and A modest production growth wedge.

On this basis, Surge's Board and Management are pleased to announce the implementation of the Company's return of capital framework. This return of free cash flow will follow a phased approach, based on achieving certain net debt targets, as set forth below: Phase 1: Return approximately 25 percent of free cash flow to shareholders through the Company's existing base dividend of $0.42 per share per annum. The remainder of free cash flow will be allocated to debt reduction until net debt is reduced to $200 million; Phase 2: Return approximately 50 percent of free cash flow to shareholders, with 25 percent allocated to the base dividend, and 25 percent allocated to strategic share buybacks, acquisitions, and/or variable or special dividends, until net debt is reduced below $125 million; and Phase 3: Return approximately 75 percent of free cash flow to shareholders once net debt is reduced below $125 million. 25 percent of free cash flow will be allocated to the base dividend, 50 percent allocated to strategic share buybacks, a modest growth wedge, and/or variable or special dividends, and 25 percent will be allocated to strategic acquisitions and/or further net debt repayment.

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: Surge's declared focus and primary goals; management's expectations and plans with respect to the development of its assets and the timing thereof; the Company's return of capital framework, including its expectation that it will be positioned to deliver to its stakeholders a combination of: continued net debt repayment; a reinstated, sustainable, base monthly dividend; share buybacks; a modest production growth wedge; and potential for variable or special dividends, and the anticipated timing thereof; ; Surge's internally estimated oil in place, drilling inventory and drilling locations; Surge's 2022 capital and operating budget; Surge's ongoing monitoring of costs and management of capital expenditures as they relate to the impact of supply constraints, cost inflation, and labour shortages; Surge's belief that it has secured the services necessary to execute its planned capital program for the balance of 2022 and into 2023; Surge's approach to future acquisition opportunities; Surge's updated 2022 capital guidance, including in respect of strategic core area land acquisitions, incremental facility and infrastructure capital, inflation estimate increase for drilling and completions and its revised guidance for 2022(e) expenditures on property, plant, and equipment; Surge's updated 2022 operational costs and expenditures, including 2022(e) royalties as percentage of petroleum and natural gas revenue, 2022(e) net operating expenses, 2022(e) transportation expenses and 2022(e) general & administrative expenses; and the anticipated timing of release of Surge's preliminary 2023 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 March 9, 2022 and in Surge's MD&A for the period ended December 31, 2021, both of which have 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.

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 Discovered Petroleum Initially In Place ('DPIIP'). DPIIP is derived by Surge's internal Qualified Reserve Evaluators ('QRE') and prepared in accordance with National Instrument 51-101 and the Canadian Oil and Gas Evaluations Handbook ('COGEH'). DPIIP, as defined in COGEH, is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of DPIIP includes production, reserves and Resources Other Than Reserves (ROTR). OOIP/DPIIP and potential recovery rate estimates are based on current recovery technologies. There is significant uncertainty as to the ultimate recoverability and commercial viability of any of the resource associated with OOIP/DPIIP, and as such a recovery project cannot be defined for a volume of OOIP/DPIIP at this time. 'Internally estimated' means an estimate that is derived by Surge's internal QRE's and prepared in accordance with National Instrument 51-11 - Standards of Disclosure for Oil and Gas Activities. All internal estimates contained in this new release have been prepared effective as of Jan 1, 2021.

NAV per share is the Company's Net Asset Value as of 2021YE (on a Before Tax basis), evaluated by an independent auditor (Sproule) and in accordance with COGE Handbook, minus net debt, then divided by the company's basic share count as of Dec 31, 2021. Surge's NAV does not include any value for Land or Seismic. Surge's Total Proved plus Probable Net Asset Value on Sproule's 2021YE price deck was $16.94 per share.

February 2022 pricing assumptions used to generate $24.34/share Total Proved plus Probable Net Asset Value were: US$80/bbl WTI, US$13.00/bbl WCS Differential, US$3.50/bbl EDM/Cromer Differential, $0.79 FX and $3.25 per mmbtu AECO.

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.

Contact:

Paul Colborne

President & CEO

Surge Energy Inc.

Phone: (403) 930-1507

Fax: (403) 930-1011

Email: pcolborne@surgeenergy.ca

Jared Ducs

Chief Financial Officer

Surge Energy Inc.

Phone: (403) 930-1046

Fax: (403) 930-1011

Email: jducs@surgeenergy.ca

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