Surge Expands Crude Oil Discovery at Upper Shaunavon and Announces Sale of SE Saskatchewan and Manitoba Assets

Surge Energy Inc. (TSX:SGY) announced it has continued to expand the Upper Shaunavon crude oil discovery in southwest Saskatchewan through ongoing delineation drilling results. The company also announced it has signed a definitive purchase agreement to sell all of its southeast Saskatchewan and Manitoba assets for $430 million.

As quoted in the press release:

Surge now believes that this high quality, conventional sandstone pool is over 250 million barrels of net original oil in place (“OOIP”¹), with over 200 (net) low risk development drilling locations, and full waterflood upside.

Surge management believes that the Company needs to strategically allocate capital towards the drilling and waterflooding of this exciting new Upper Shaunavon discovery, to the continued development of the Company’s large OOIP, high quality Valhalla Doig light oil pool in NW Alberta, and to the continued development and waterflooding of Surge’s large OOIP Sparky crude oil assets in SE Alberta. Accordingly, Surge management and Board have agreed to sell the Company’s SE Saskatchewan and Manitoba assets (the “Assets”) for a purchase price of $430 million (the “Transaction”).

Proceeds from the sale of the Assets will be used initially to reduce indebtedness, which will improve the Company’s pro forma debt to forward cash flow ratio to 1.25 times (based on April 23^rd, 2015 strip pricing), and ultimately be redeployed in accordance with managements capital allocation strategy.

The Transaction is forecast to be greater than 20 percent accretive to production per share, 15 percent accretive to cash flow per share, and 15 percent accretive to proven plus probable reserves per share, to Surge shareholders on a debt-adjusted basis.

Surge confirms that the Company is maintaining its current dividend of $0.30 per share per annum.

The Assets comprise over 23 mmboe of independently engineered Proven plus Probable reserves, and approximately 4,750 bopd of crude oil production.

Click here to read the full Surge Energy Inc. (TSX:SGY) press release.