Surge Energy Inc. (SGY.TO), which fell 4% Tuesday, announced its
financial and operating results for the year ended December 31,
2012 ACHIEVEMENTS & HIGHLIGHTS:
Surge achieved significant growth in 2012. Funds from operations
increased 60% to $92.2 million in 2012 as compared to 2011.
Production grew 49% in 2012 as compared to 2011. Management
continues to execute a strong risk management program which
supports the protection of Surge's balance sheet. Surge remains
well positioned with three core areas with an expanded oil drilling
inventory of 585 gross (450 net) locations, internally estimated
gross DPIIP5 of 685 million barrels of oil and multiple waterflood
opportunities and exploration initiatives.
Surge has achieved operational efficiencies in each of its core
areas, resulting in reductions in both operating costs per boe and
general and administrative costs per boe in 2012 as compared to
2011. Surge continues to strive to become one of the lowest cost
oil producers among its oil weighted peer group.
- Achieved a 99% success rate during 2012 drilling 62 gross
(50.05 net) wells.
- Increased funds from operations per fully diluted share by 33%
to $1.30 in 2012.
- Increased production per basic share by 21% in 2012.
- Reduced operating costs per boe by 25% in 2012.
- Reduced G&A per boe by 24% in 2012 and a 45% reduction
- Increased its bank line to $290 million from $150 million
- Strong risk management program supports the protection of the
company's balance sheet. More than half of the company's forecast
2013 production is hedged with approximately one third of the
Edmonton to WTI differential hedged for the last nine months of
- Approximately 92% of Surge's revenue resulted from oil and
natural gas liquids production in 2012.
- Increased its oil and natural gas liquids production weighting
by 17% to 70% in 2012 from 60% in 2011.
- Oil and NGLs made up 69% of the company's total Proved plus
- Completed the accretive acquisition of a private company that
added approximately 1,200 barrels per day (100% light oil) of
focused, high quality, high netback and high working interest Slave
Point/Gilwood light oil assets in January 2012.
- Expanded its oil drilling inventory to 585 gross (450 net)
locations from 490 gross (350 net) locations and significantly
increased its internally estimated DPIIP to greater than 685 gross
million barrels from greater than 440 gross million barrels of
- Significant waterflood progress with waterflood projects in
Silver Lake, Windfall, Waskada and Nipisi underway or planned for
- Increased Proved plus Probable reserves by 43% to 46.1 million
boe over December 31, 2011 reserves of 32.2 million boe.
- Increased Proved plus Probable Reserves per share by 29%
- Achieved Proved plus Probable finding, development and
acquisition costs (FD&A) of $23.32 per boe, including the
change in future development capital.
- Achieved a corporate recycle ratio of 1.5 with F&D costs
of $23.70 per boe, including the change in FDC and based on Surge's
estimated 2012 netback of $34.67 per boe6.
- Surge achieved Proved plus Probable recycle ratios of 2.8, 2.6
and 2.2 at Valhalla, Silver Area and Nipisi, respectively. These
three areas represent approximately 82% of the reserves value.
- Increased Proved plus Probable Oil and NGLs reserves by 66
percent to 31.9 million barrels over December 31, 2011 reserves of
19.2 million barrels.
- Increased Net Present Value discounted at 10% Before Tax of
Proved plus Probable reserves by 25% to $732 million compared to
$588 million as at December 31, 20118.
- Surge's Net Asset Value (
) is estimated at $8.18 per basic share based on NPV10 BT Proved
plus Probable (2P) reserves at December 31, 2012.
OUTLOOK & GUIDANCE - POSITIONED FOR CONTINUED LIGHT OIL
Surge's board of directors approved a capital budget of $140
million for 2013 with a balanced approach of production growth
(approximately 16% growth in average daily production per share)
and unlocking additional value in its high quality, large DPIIP
light oil assets. Surge has allocated approximately $124 million to
its 2013 drilling program, $9 million to waterflood implementation
and optimization, $17 million to a combination of land,
acquisitions, corporate and capitalized G&A expenditures and is
planning $10 million of non-core dispositions late in the year.
Surge is also pleased to announce that the Company's bank line was
increased from $250 million to $290 million late in the fourth
quarter of 2012, providing flexibility to execute the company's
2013 capital program.
In 2013, management's primary goals for Surge include improving
operational performance, improving capital efficiencies,
maintaining balance sheet flexibility with an effective risk
management program and confirming the commercial viability of the
company's waterflood program. In addition to Surge's Windfall
waterflood pilot, which commenced injection during the third
quarter of 2012, early in 2013 Surge implemented a horizontal well
waterflood pilot at Waskada and will implement a waterflood program
at Nipisi in the second quarter of 2013. In South East Alberta, two
existing waterflood schemes will be optimized in 2013 and Surge
will build new facilities and submit applications to commence two
new schemes. The implementation of the waterflood pilots are an
integral piece of Surge's strategy of increasing oil recovery
factors throughout the company's oil portfolio, lowering corporate
decline rates and maximizing shareholder value.
With this 2013 budget, Surge expects to achieve greater than 15%
growth in average production per share and funds from operations
per share while maintaining its balance sheet. Based on Surge's
2013 guidance, the company is forecasting growth in funds from
operation per basic share of more than 235% since the company was
recapitalized in 2010 with a compound annual growth rate of 50%
over that time. Surge is forecasting growth in production per basic
share of more than 70% since 2010 with a compound annual growth
rate of 20% over that time.
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