Acquired all of the shares of a Calgary-based private oil and gas company with producing assets in Saskatchewan.
Surge Energy Inc. (TO: SGY) closed two previously announced strategic, high quality light oil acquisitions, the company announced Nov. 13.
The first acquisition involved the $147 million purchase of all of the shares of a Calgary based private oil and gas company with high netback, operated, producing light oil assets focused in the Steelman area of southeast Saskatchewan, and the Dodsland area of southwest Saskatchewan. The consideration to be paid to the shareholders of the private company was comprised of 20.2 million shares of Surge and cash consideration elected by the company shareholders of $3 million, plus the assumption of $23 million of debt.
With the second acquisition, Surge acquired high quality, high netback, operated, producing light oil assets primarily located in the southwest area of Manitoba. Total consideration of $135 million paid to the vendor of the Manitoba assets was comprised of 14.2 million shares of Surge, and $50 million of cash.
As a result of the structure of the acquisitions, post-closing Surge will maintain the company's excellent balance sheet and debt to forward cash flow ratio, with over $145 million of credit availability on the company's bank line. In addition, pro-forma the acquisitions, there is no change in Surge's very low, "all-in" sustainability ratio of 93%.
The acquisitions comprise and possess large OOIP reservoirs, together with low recovery factors, operatorship and high working interests. They also possess significant upside from low risk development drilling and waterfloods. Furthermore, the acquisitions include key producing infrastructure, including batteries, pipelines and waterflood facilities.
Corporately, the light oil acquisitions significantly increase Surge's operating netback by over 11%, and increase the company's oil weighting to over 84%.
As a result of the closing of the acquisitions, Surge now has over one billion barrels of light and medium gravity OOIP under the company's ownership and management, with a recovery factor of less than 3%.
In addition to the above closings, Surge announced on Nov. 13 that it has entered into an agreement to acquire a high quality, low decline, operated, crude oil producing asset strategically located near Wainwright, Alberta in the company's core area of central Alberta . The closing of this elite core area "top-up" acquisition is set for Dec. 3. On this basis, Surge now anticipates an additional 4% increase in the company's annual dividend from $0.50 per share per year or $0.04166 per share per month to $0.52 per share per year or $0.04333 per share per month.
Macquarie Capital Markets Canada Ltd. was financial advisor to Surge for the private company acquisition. CIBC World Markets Inc. and Scotia Capital Inc. were strategic advisors to Surge for the private company acquisition.
GMP Securities LP was financial advisor to Surge for the asset acquisition. National Bank Financial Inc. was strategic advisor to Surge for the asset acquisition.
Macquarie Capital Markets Canada Ltd. was lead transaction advisor to Surge for both acquisitions. Peters & Co. Ltd. was financial advisor to the private company. FirstEnergy Capital Corp. was exclusive financial advisor to the asset acquisition.
Surge Energy Inc. explores for, develops, produces, and markets petroleum and natural gas reserves primarily in Western Canada and the Northern U.S. The company is headquartered in Calgary.