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
In Q2/22, the Company generated cash flow from operations before realized gains or losses on financial contracts of
Prior to the
During the quarter, Surge generated
Additional highlights from the Company's Q2 2022 financial and operating results include: Reduced net debt1 by
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
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
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
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
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
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.
President & CEO
Phone: (403) 930-1507
Fax: (403) 930-1011
Chief Financial Officer
Phone: (403) 930-1046
Fax: (403) 930-1011
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