Chris Mathews, senior editor of shale and A&D, Hart Energy:  Hi, I am Chris Matthews, senior editor of shale and A&D for Hart Energy and Oil and Gas Investor, and I'm joined by Linhua Guan, who's CEO of Surge Energy, who is growing a position in the northern Midland Basin. Linhua, thank you so much for your time today.

Linhua Guan, CEO, Surge Energy America: Yeah, thank you for the invitation.

CM: Can you update us on maybe your first quarter results from Surge's position in the northern Midland?

LG: Yeah. This week we just released our first quarter result to our stakeholders in the United States. For the first quarter, Surge delivered 61,000 barrels of oil equivalent per day. That is the first quarter record in the company’s nine-year history. At the same time, the company generated $127 million free cash flow. That's another first quarter record. At the same time, the company achieved record low level ratio of 0.6 time and the company achieved record high liquidity of $1.4 billion for additional growth.

CM: And investors, bankers, industry experts, they had some questions about the northern Midland Basin, Dawson or Borden, Howard counties when the company first bought in there in 2015. How has that area of the Midland Basin changed over time?

LG: Yeah, that's a long journey. When the company first time bought the acreage in 2015, the whole industry were thinking maybe just only a small part in the Howard County would work and that would be a dead zone in some part in Howard County. But the whole company or search team continues testing the new zone, testing the new area and push the development area from south Howard to North Howard even to the Borden area. And this month we celebrate nine years anniversary for Surge Energy. And in the past nine years, the company already generated over $9 billion of wells for the state of Texas. At the same time, the company's investment and operational excellence in water infrastructure and in electricity, the company already conserved over 5.7 billion gallons of fresh water from operations in West Texas. At the same time, the company eliminated about 365,000 nitrate tons of CO2 from our operations in West Texas.

CM: You've also been growing in Dawson County, Gaines County, where there is some very interesting activity by very large operators in the area. What are your plans for some of those more emerging zones in the Northern Midland?

LG: Yeah, we bought that Gaines County acreage at the end of 2022 and currently our colleagues are evaluating those areas and I see the same in the past few years, more and more company have interest in the northern Midland County, no longer considered Howard County or even Borden County dead zone. So have more and more interest in that area.

CM: No, it seems like there's more deals happening up that way. Ovintiv bought some private companies in the northern Midland Basin, the Callon property in the northern Midland Basin, EOG has been actively expanding its footprint there. So what do you think of the future of the M&A landscape in your neighborhood?

LG: I think because of the scarcity or inventory, I see more and more consolidation in the Midland Basin too. And as a company, Surge, like I mentioned at the end of first quarter, we have $1.4 billion liquidity for additional growth. We are also looking for growth opportunity just like other public-listed companies in that area.

CM: Fantastic. It sounds like Surge will be growing in the Midland for some time to come.

LG: Yes. I think we will continue growing in the Midland Basin, but the growth rate will be much lower. Just consider, when the company was founded in 2015, the production was lower than 4,000 barrel per day, and at the end of first quarter of production, 61,000 boe per day. That is from less than four to over 61. That's a big amount of growth, but right now, I will say in the future of growth rate it will be quite slow. Consider our first quarter this year with our first quarter production last year, we only grow about 5%, and I see this year production likely to be flight or single digit growth.

CM: Makes sense. Got it. Well, thank you so much Linhua for helping us learn a bit more about that area of the Midland Basin.

LG: Okay, thank you Chris.

CM: Thank you so much. For more information, head to