NEW 5-YEAR TERM DEBT FACILITY
On
The Term Debt Facility provides the Company with long term stable capital, to facilitate the continued development of Surge's high quality, conventional, light and medium gravity crude oil asset base. Furthermore, the Term Debt Facility also represents a significant step forward toward the Company's goal of returning to a shareholder returns-based business model focused on a combination of 1) debt repayment; 2) sustainable dividends; 3) modest production per share growth; and 4) share buybacks.
Surge has directed the majority of the
NEW FIRST LIEN CREDIT FACILITY
In conjunction with the Term Debt Facility, Surge has also closed a new first lien secured credit facility for a total of
REPAYMENT OF BDC TERM FACILITY
The closing of the Term Debt Facility and First Lien Credit Facility has facilitated the repayment of the Company's non-revolving,
This strategic repayment allows the Company to exit the Business Credit Availability Program ("BCA Program") that governed the BDC Term Facility. Participation in the BCA Program placed certain restrictions on Surge's capital allocation options, including the payment of dividends.
The Company would like to thank the
REVISED DEBT CAPITAL STRUCTURE AND LIQUIDITY
With the closing of the Term Debt Facility, the new First Lien Credit Facility, and the repayment of the BDC Term Facility, the Company's debt capital structure benefits from significantly improved term and enhanced stability.
The Company now forecasts that it will be drawn approximately
"Surge's attractive conforming first lien credit facility and new second lien credit facility are the culmination of the many strategic steps taken by Management and the Board over the past 12 months to reposition Surge for the current business environment," said
Surge will continue to focus on reducing debt leverage over the next six months and is targeting the reinstatement of its sustainable dividend model in mid-2022, subject to market conditions and the approval of Surge's Board of Directors.
STRATEGIC OUTLOOK: FINANCIAL DISCIPLINE AND SHAREHOLDER RETURNS MODEL
The Company has seen significant, structural changes regarding the availability of conventional debt capital for Canadian energy companies, due primarily to the
Consequently, in late 2020 Surge Management strategically assessed and analyzed the Company's strong competitive corporate advantages including, its long (15 year) reserve life index, low conventional corporate decline, high crude oil netbacks, top tier production efficiencies, large 13 year drilling inventory, and substantial
Accordingly, with this announcement today, over the last 12 months Surge Management has now executed over
Surge Management's stated goal is to position the Company as a well financed energy producer with a significant free cash flow yield that supports consistent shareholder returns through: 1) debt repayment; 2) sustainable dividends; 3) modest production per share growth; and 4) share buybacks.
As previously announced, Surge now forecasts a free cash flow yield of 30%1 in 2022 at crude oil pricing of
The Company is currently producing at or above management's projected 2021 production exit rate of 21,500 boepd (86 percent liquids), with over 975 net (internally estimated) development drilling locations3 - providing the Company a 13 year development drilling inventory.
The Company will provide further details to shareholders on management's shareholder returns-based business model, along with announcing its Board approved 2022 capital budget, in January of 2022.
ADVISORS
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 with respect to Surge's declared focus and primary goals, including its goal of returning to a shareholder returns-based business model; Surge's plans regarding the continued development of its assets; Surge's beliefs regarding the stability of its revised debt capital structure; Surge's forecast regarding the amount expected to be drawn under its First Lien Credit Facility as at
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
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 external 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.
Net of Surge
Surge's internally developed type curves (for Surge, Astra and Fire Sky) were constructed using a representative, factual and balanced analog data set, as of
Non-GAAP Financial Measures
Certain secondary financial measures in this press release – namely, "free cash flow" are not prescribed by GAAP. These non-GAAP financial measures are included because management uses the information to analyze business performance, cash flow generated from the business, leverage and liquidity, resulting from the Company's principal business activities and it may be useful to investors on the same basis. None of these measures are used to enhance the Company's reported financial performance or position. The non-GAAP measures do not have a standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other issuers. They are common in the reports of other companies but may differ by definition and application. All non-GAAP financial measures used in this document are defined below:
Free Cash Flow and Free Cash Flow per Share
Free cash flow is calculated as cash flow from operating activities less exploration and development capital expenditures. Management uses free cash flow to determine the amount of funds available to the Company for future capital allocation decisions.
Free cash flow per share is calculated using the same weighted average basic and diluted shares used in calculating income per share.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
______________________________ |
1 Calculated as |
2 |
3 See the Drilling Inventory section of this document for further information |
SOURCE
© Canada Newswire, source