CALGARY, AB, Nov. 3, 2020 /CNW/ - Surge Energy Inc.
("Surge" or the "Company") (TSX: SGY) is pleased to announce that
it has received lender approvals for a total of $90 million in new credit commitments to the
Company, subject to final documentation. These commitments
include:
- a new term loan facility (the "Term Facility") led by the
Business Development Bank of Canada ("BDC") in partnership with the
Company's syndicate of lenders (the "Syndicate"), for a
non-revolving facility of $40 million
with attractive interest rates and a four year term; and
- a credit commitment of up to $50
million from Export Development Canada ("EDC") to join the
Company's existing $335 million
first-lien credit facility ("Credit Facility").
Subject to the closing of the Term Facility, the Syndicate has
agreed to an extension of Surge's Credit Facility. Maturity on the
Credit Facility will be extended from March
31, 2021 to December 31, 2021
and the Company's next semi-annual borrowing base redetermination
will be shifted out from December 15,
2020 to June 30, 2021.
Surge anticipates that these new credit commitments, as well as
the extension of the Credit Facility, will close on or about the
week of November 16th,
2020. Closing is subject to final documentation.
$40 MILLION 4 YEAR TERM DEBT
FACILITY
Surge has received commitments for a $40
million Term Facility under the BDC's Business Credit
Availability Program ("BCAP") Mid-Market Financing Program, which
provides the Company with a four year, non-revolving second lien
Term Facility.
The BDC's BCAP Mid-Market Financing Program was designed to
provide support to financially viable, medium-sized businesses
impacted by the COVID-19 pandemic, and the recent decline in oil
prices, in the form of additional liquidity to continue operations
through the pandemic, and to assist these companies in returning to
pre-COVID-19 operating levels.
This Term Facility will also drive meaningful economic activity
across the country, through the creation of hundreds of direct and
indirect full-time jobs.
The Term Facility will provide Surge with significant, long term
liquidity at attractive interest rates, and allows the Company to
return production to pre-COVID-19 levels through the development of
its high-quality, medium and light crude oil asset base. In turn,
the Company will generate net asset value per share growth for all
stakeholders.
$50 MILLION EDC CREDIT
COMMITMENT
In addition to the Term Facility, the Company has received a
credit commitment of up to $50
million from EDC, providing Surge with a significant new
Syndicate banking partner in the Company's existing $335 million Credit Facility.
EXTENSION OF CREDIT FACILITY
Concurrently with closing of the Term Facility, Surge's lending
Syndicate will re-confirm the Company's existing $335 million Credit Facility.
Subject to the closing of the Term Facility, Surge's Syndicate
of lenders have agreed to extend the maturity of the Company's
$167.5 million revolving facility,
and its non-revolving $167.5 million
facility, from March 31, 2021 to
December 31, 2021. In addition, the
Company's next semi-annual borrowing base redetermination will be
extended to June 30, 2021.
The above reconfirmation and Credit Facility extensions, in
combination with the Term Facility, will provide Surge with over
$75 million in available liquidity on
its credit facilities1.
Additionally, the Credit Facility requirement that Surge explore
potential options for a small number of its lenders, through an
asset sales solicitation process, has been deferred.
The Company appreciates the support and partnership of the BDC,
EDC, and Surge's Syndicate of lenders.
ESG AND ALBERTA SITE
REHABILITATION PROGRAM UPDATE
As part of the Company's commitment to Environmental, Social and
Governance ("ESG") stewardship, Surge and its service providers
submitted more than 1,700 applications under the Government of
Alberta's Site Rehabilitation
Program ("SRP") to abandon and reclaim well bores, pipelines and
well sites. The Government of Alberta is administering the SRP in various
phases, providing grant funding through service providers for the
abandonment or remediation of oil and gas sites.
As a result of these applications, the Company has now received
SRP grants to date in excess of $10
million, which will allow Surge to greatly increase the
number of wells, pipelines, and facilities it can abandon. In
addition, Surge has received funding from the Saskatchewan
Accelerated Site Closure Program to complete abandonments at the
Company's Saskatchewan
properties.
Surge's internal ongoing abandonment program, together with the
enhanced SRP abandonment program, will meaningfully reduce the
Company's decommissioning liability over the next 12 months. The
Company now anticipates abandoning more than 300 wells by March,
2021 - which is equal to approximately 26 percent of Surge's total
inactive well count.
Surge remains actively engaged with the Government of
Alberta regarding additional SRP
developments, as well as new developments in both Federal and
Government of Saskatchewan
programs, in order to accelerate the decommissioning of the
Company's asset retirement obligations.
Surge strives to be a leader in reducing the impact of its
operations on the environment. The Company is committed to
producing energy in a safe, responsible, and sustainable
manner.
Q3 2020 FINANCIAL AND OPERATING HIGHLIGHTS
During Q3/20, the Company reactivated most of its temporarily
curtailed production, averaging 17,092 boepd for the period.
As a result of a lower than anticipated corporate production
decline rate (now approximately 19 percent), Q3/20 production was
consistent with the average production rate of Q2/20 with no
drilling activity during the period.
Reactivation of the Company's temporarily curtailed production
was due to both rising crude oil and natural gas prices, as well as
successful cost optimization projects, which have resulted in a
lower breakeven price for several of Surge's properties.
Strong operating results, combined with cost reduction efforts,
resulted in the Company continuing to reduce net debt meaningfully
during the quarter, despite crude oil prices averaging only
US$40.93WTI per barrel. Year to date,
Surge has reduced bank debt by more than $20
million through the COVID-19 pandemic and the
Saudi/Russia crude oil price war.
In Q3/20 alone, Surge generated $10
million of adjusted funds flow in excess of exploration and
development expenditures.
Additionally, in Q3/20 the Company brought onstream two new
Sparky wells that were drilled in the first quarter of 2020,
confirming a significant new medium gravity crude oil discovery at
Betty Lake North. This discovery at Betty Lake North further
de-risks over 75 net Sparky locations2 in Surge's
internal drilling inventory, with full waterflood upside.
This exciting new discovery is consistent with the Company's
stated operating strategy of focusing capital towards large
OOIP3 per section, conventional, low-cost,
long-life, medium/light oil pools. Betty Lake North is the latest
in a series of Sparky new pool discoveries for the Company over the
last 6 years.
Surge has recently completed its 2020 internal type curve review
of the Company's extensive ~500 well ( > 12 year) Sparky
drilling inventory, and the weighted average Sparky drilling
location delivers an IRR3 of greater than 50
percent at US$40 WTI per barrel flat
pricing.
FINANCIAL AND OPERATING HIGHLIGHTS
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
($000s except per
share amounts)
|
2020
|
2019
|
%
Change
|
|
2020
|
2019
|
%
Change
|
Financial
highlights
|
|
|
|
|
|
|
|
Oil sales
|
54,000
|
93,818
|
(42)%
|
|
143,643
|
289,333
|
(50)%
|
NGL sales
|
1,161
|
1,958
|
(41)%
|
|
2,868
|
6,032
|
(52)%
|
Natural gas
sales
|
1,770
|
1,250
|
42 %
|
|
4,631
|
7,194
|
(36)%
|
Total oil, natural
gas, and NGL revenue
|
56,931
|
97,026
|
(41)%
|
|
151,142
|
302,559
|
(50)%
|
Cash flow from
operating activities
|
15,082
|
40,228
|
(63)%
|
|
61,190
|
114,943
|
(47)%
|
Per share - basic
($)
|
0.04
|
0.13
|
(69)%
|
|
0.18
|
0.37
|
(51)%
|
Adjusted funds
flow*
|
12,523
|
41,513
|
(70)%
|
|
51,405
|
134,106
|
(62)%
|
Per share - basic
($)*
|
0.04
|
0.13
|
(69)%
|
|
0.15
|
0.43
|
(65)%
|
Net loss**
|
(13,184)
|
(4,269)
|
209 %
|
|
(689,570)
|
(14,863)
|
4,540 %
|
Per share basic
($)
|
(0.04)
|
(0.01)
|
300 %
|
|
(2.06)
|
(0.05)
|
4,020 %
|
Total exploration and
development expenditures
|
2,477
|
22,247
|
(89)%
|
|
38,497
|
88,705
|
(57)%
|
Total acquisitions
& dispositions
|
(762)
|
12,077
|
(106)%
|
|
(6,038)
|
(44,896)
|
(87)%
|
Total capital
expenditures
|
1,715
|
34,324
|
(95)%
|
|
32,459
|
43,809
|
(26)%
|
Net debt*, end of
period
|
369,993
|
377,409
|
(2)%
|
|
369,993
|
377,409
|
(2)%
|
|
|
|
|
|
|
|
|
Operating
highlights
|
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
|
Oil (bbls per
day)
|
13,759
|
17,170
|
(20)%
|
|
14,817
|
17,358
|
(15)%
|
NGLs (bbls per
day)
|
582
|
769
|
(24)%
|
|
558
|
713
|
(22)%
|
Natural gas (mcf per
day)
|
16,503
|
19,668
|
(16)%
|
|
16,857
|
20,342
|
(17)%
|
Total (boe per day)
(6:1)
|
17,092
|
21,217
|
(19)%
|
|
18,185
|
21,461
|
(15)%
|
Average realized
price (excluding hedges):
|
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
42.66
|
59.39
|
(28)%
|
|
35.38
|
61.06
|
(42)%
|
NGL ($ per
bbl)
|
21.68
|
27.69
|
(22)%
|
|
18.76
|
30.97
|
(39)%
|
Natural gas ($ per
mcf)
|
1.17
|
0.69
|
70 %
|
|
1.00
|
1.30
|
(23)%
|
|
|
|
|
|
|
|
|
Netback ($ per
boe)
|
|
|
|
|
|
|
|
Petroleum and natural
gas revenue
|
36.21
|
49.71
|
(27)%
|
|
30.33
|
51.64
|
(41)%
|
Realized gain (loss)
on commodity and FX contracts
|
(1.67)
|
(0.86)
|
94 %
|
|
5.29
|
(0.84)
|
(730)%
|
Royalties
|
(4.00)
|
(7.12)
|
(44)%
|
|
(3.61)
|
(6.61)
|
(45)%
|
Net operating
expenses*
|
(14.16)
|
(13.93)
|
2 %
|
|
(14.32)
|
(14.36)
|
- %
|
Transportation
expenses
|
(1.39)
|
(1.42)
|
(2)%
|
|
(1.58)
|
(1.58)
|
- %
|
Operating
netback*
|
14.99
|
26.38
|
(43)%
|
|
16.11
|
28.25
|
(43)%
|
G&A
expense
|
(1.91)
|
(1.81)
|
6 %
|
|
(1.91)
|
(1.82)
|
5 %
|
Interest
expense
|
(5.11)
|
(3.31)
|
54 %
|
|
(3.88)
|
(3.54)
|
10 %
|
Adjusted funds
flow*
|
7.97
|
21.26
|
(63)%
|
|
10.32
|
22.89
|
(55)%
|
|
|
|
|
|
|
|
|
Common shares
outstanding, end of period
|
339,785
|
324,215
|
5 %
|
|
339,785
|
324,215
|
5 %
|
Weighted average
basic shares outstanding
|
337,115
|
318,076
|
6 %
|
|
334,799
|
313,876
|
7 %
|
Stock option
dilution
|
-
|
-
|
- %
|
|
-
|
-
|
- %
|
Weighted average
diluted shares outstanding
|
337,115
|
318,076
|
6 %
|
|
334,799
|
313,876
|
7 %
|
* This is a non-GAAP
financial measure which is defined in the Non-GAAP Financial
Measures section of this document.
|
** For the nine
months ended September 30, 2020, the Company incurred a net loss of
$689.6 million, including a non-cash asset impairment charge of
$590.6 million recognized in the first quarter of 2020 primarily
due to a decrease in the average independent engineering price
forecasts. The impairment charge does not impact the Company's
adjusted funds flow, and is reversible in future periods should
there be any indicators that the value of the assets has
increased.
|
SURGE OUTLOOK: A COMPELLING VALUE PROPOSITION
Surge has a high quality, low decline, light and medium gravity
crude oil asset and opportunity base. With the Company's low (19
percent) annual production decline, high netbacks, large OOIP per
section (conventional) crude oil assets, Surge provides investors
with an excellent opportunity to participate in the ongoing crude
oil price recovery.
The Company's anticipated closing of $90
million in new credit commitments, pending final
documentation, provides Surge with significant additional long term
liquidity at reasonable interest rates, allowing the Company to
pursue attractive development opportunities that generate net asset
value growth for all stakeholders.
Surge has the flexibility to strategically deploy capital into
its Sparky play, which has now emerged as one of the premium medium
and light oil growth plays in Canada. Surge's industry leading Sparky play
has some of the best production efficiencies4
(<$10,000/boepd IP90), and rates
of return for drilling new wells in all of Canada. Surge estimates a weighted average,
risked, IRR @ $40 WTI per bbl flat
pricing for its entire Sparky inventory, of greater than 50
percent. These excellent risked returns are for primary drilling
only, and do not include waterflood upside.
The Company has now drilled 138 consecutive successful
horizontal Sparky wells, and grown production in its Sparky core
area by more than 650 percent from 1,200 boepd (95 percent oil), to
approximately 9,000 boepd (95 percent medium/light oil), in the
last 6 years.
Surge's Sparky core area now has:
- Numerous high quality, high permeability, high porosity,
conventional sandstone reservoirs.
- 9,000 boepd (95 percent medium/light oil) of current
production;
- ~500 internally identified net drilling locations5 (>12
year inventory) – with very predictable drilling results; and
- Top decile production efficiencies (<$10,000/boepd IP90).
Additionally, Western Canadian Select ("WCS") differentials have
contracted meaningfully in the last several months, with WCS to WTI
differentials currently over 20 percent tighter than the long term
average. Surge's Sparky play will benefit significantly from this
tightening, with cashflows, netbacks and reserve values in this
premier conventional medium/light oil play increasing
commensurately.
Management believes that Surge's premium Sparky crude oil growth
asset is unique within the Company's entire peer group in
Canada.
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
concerning: the ability of management to protect stakeholder's
capital; 2020 forward strip oil prices; management's expectations
and plans with respect to the development of its assets and the
timing thereof; Surge's assets and performance, the characteristics
thereof, and the potential for shareholders to benefit from such
assets; drilling inventory of Surge; Surge's operational and
financial flexibility for the balance of 2020; the ability of Surge
to maximize corporate cash flows; Surge's declared focus and
primary goals; the continued participation and exploration by Surge
in all applicable Government assistance programs relating to
COVID-19, and additional funding expected to be received by Surge
as a result of such programs; Surge's continued commitment to ESG
initiatives; Surge's capital expenditure program and its
flexibility to make adjustments thereto; Surge's cost reduction
efforts and the anticipated results and benefits therefrom;
commodity prices and management's ability to react to changes
thereto; Surge's risk management program;
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 as a result of fluctuating commodity prices
and reserve determinations by the lenders or otherwise.
Certain of these risks are set out in more detail in Surge's AIF dated March 9, 2020 and in Surge's MD&A for the
period ended December 31, 2019, both of which
have been filed on SEDAR and can be
accessed at www.sedar.com.
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.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. "Bopd" and "bbl/d" 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.
Original Oil in Place ("OOIP") means Discovered Petroleum
Initially In Place ("DPIIP"). DPIIP is derived by Surge's internal
Qualified Reserve Evaluators ("QRE") and prepared in accordance
with National Instrument 51-101 and the Canadian Oil and Gas
Evaluations Handbook ("COGEH"). DPIIP, as defined in COGEH, is that
quantity of petroleum that is estimated, as of a given date, to be
contained in known accumulations prior to production. The
recoverable portion of DPIIP includes production, reserves and
Resources Other Than Reserves (ROTR). OOIP/DPIIP and potential
recovery rate estimates are based on current recovery technologies.
There is significant uncertainty as to the ultimate recoverability
and commercial viability of any of the resource associated with
OOIP/DPIIP, and as such a recovery project cannot be defined for a
volume of OOIP/DPIIP at this time. "Internally estimated" means an
estimate that is derived by Surge's internal QRE's and prepared in
accordance with National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities.
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 internal 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.
The Company's Sparky core area has 184 net booked locations, of
which 137 net are Proved locations and 47 net are Probable
locations based on 2019YE reserves.
The Company's Betty Lake asset
has 35 net booked locations based on 2019YE reserves, of which 25
net are Proved locations and 10 net are Probable locations.
Surge's internally used type curves were constructed using a
representative, factual and balanced analog data set, as of January
1, 2020. All locations were risked appropriately, and EUR's
were measured against OOIP estimates to ensure a reasonable
recovery factor was being achieved based on the respective spacing
assumption. Other assumptions, such as capital, operating expenses,
wellhead offsets, land encumbrances, working interests and NGL
yields were all reviewed, updated and accounted for on a well by
well basis by Surge's Qualifies Reserve Evaluators. All type
curves fully comply with Part 5.8 of the Companion Policy 51 –
101CP.
Sparky Core area has ~500 net
locations (>460 net Sparky formation + >40 net locations from
formations other than Sparky).
Sparky Core area has ~500 net
locations (>460 net Sparky formation + >40 net locations from
formations other than Sparky).
Surge's weighted average internal Sparky type curve economics
have an IRR of greater than 50 percent at US$40/bbl WTI (C$2.00/mmbtu AECO, US$13/bbl WCS differential and 0.75 FX) and are
supported by >460 internally evaluated Sparky locations by
Surge's Qualified Reserve Evaluators (with weighted average metrics
of: ~$1.15 MM per well capital, ~100
boe/d IP180 per well and ~125 mboe Estimated Ultimate Recoverable
reserves per well).
Internal Rate of Return is the discount rate required to achieve
an NPV of $0.
The average IP90 from Surge's 2019 & 2020 programs (>40
wells) was 125 boe/d. Using the weighted average capital of
$1.15 MM per well, and average
production from the 2019 and 2020 programs of 125 boe/d, generates
production efficiencies over these two years of <$10,000/boepd.
Non-GAAP Financial Measures
Certain secondary financial measures in this press release –
namely, "adjusted funds flow", "adjusted funds flow per share",
"net debt", "net operating expenses", "operating netback", and
"adjusted funds flow per boe" 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:
Adjusted Funds Flow & Adjusted Funds Flow per
Share
The Company adjusts cash flow from operating activities in
calculating adjusted funds flow for changes in non-cash working
capital, decommissioning expenditures and transaction costs.
Management believes the timing of collection, payment or incurrence
of these items involves a high degree of discretion and as such may
not be useful for evaluating Surge's cash flows.
Changes in non-cash working capital are a result of the timing
of cash flows related to accounts receivable and accounts payable,
which management believes reduces comparability between periods.
Management views decommissioning expenditures predominately as a
discretionary allocation of capital, with flexibility to determine
the size and timing of decommissioning programs to achieve greater
capital efficiencies and as such, costs may vary between periods.
Transaction costs represent expenditures associated with
acquisitions, which management believes do not reflect the ongoing
cash flows of the business, and as such reduces comparability. Each
of these expenditures, due to their nature, are not considered
principal business activities and vary between periods, which
management believes reduces comparability.
Adjusted funds flow per share is calculated using the same
weighted average basic and diluted shares used in calculating
income per share.
The following table reconciles cash flow from operating activities
to adjusted funds flow and adjusted funds flow per share
for the three and
nine months ended September 30, 2020:
|
|
Three Months Ended
Sep 30,
|
Nine Months Ended
Sep 30,
|
($000s except per
share amounts)
|
|
2020
|
2019
|
2020
|
|
2019
|
Cash flow from
operating activities
|
|
15,082
|
40,228
|
61,190
|
|
114,943
|
Change in non-cash
working capital
|
|
(2,622)
|
(475)
|
(11,637)
|
|
13,693
|
Decommissioning
expenditures
|
|
63
|
1,279
|
1,754
|
|
4,097
|
Transaction
costs
|
|
-
|
481
|
98
|
|
1,373
|
Adjusted funds
flow
|
|
$
|
12,523
|
$
|
41,513
|
$
|
51,405
|
|
$
|
134,106
|
Per share -
basic
|
|
$
|
0.04
|
$
|
0.13
|
$
|
0.15
|
|
$
|
0.43
|
Net Debt
There is no comparable measure in accordance with IFRS for net
debt. Net debt is calculated as bank debt plus the liability
component of the convertible debentures plus or minus working
capital, however, excluding the fair value of financial contracts,
decommissioning obligations and lease and other obligations. This
metric is used by management to analyze the level of debt in the
Company including the impact of working capital, which varies with
timing of settlement of these balances.
|
|
As
at
|
($000s)
|
|
Sep 30,
2020
|
Jun 30,
2020
|
Sep 30,
2019
|
Bank debt
|
|
(296,055)
|
(306,549)
|
(308,335)
|
Accounts
receivable
|
|
25,205
|
27,503
|
40,562
|
Prepaid expenses and
deposits
|
|
4,900
|
5,828
|
6,200
|
Accounts payable and
accrued liabilities
|
|
(33,507)
|
(33,782)
|
(45,016)
|
Convertible
debentures
|
|
(70,536)
|
(69,907)
|
(68,118)
|
Dividends
payable
|
|
-
|
-
|
(2,702)
|
Total
|
|
(369,993)
|
(376,907)
|
(377,409)
|
Net Operating Expenses
Net operating expenses are determined by deducting processing
and other revenue primarily generated by processing third party
volumes at processing facilities where the Company has an ownership
interest. It is common in the industry to earn third party
processing revenue on facilities where the entity has a working
interest in the infrastructure asset. Under IFRS this source of
funds is required to be reported as revenue. However, the Company's
principal business is not that of a midstream entity whose
activities are dedicated to earning processing and other
infrastructure payments. Where the Company has excess capacity at
one of its facilities, it will look to process third party volumes
as a means to reduce the cost of operating/owning the facility. As
such, third party processing revenue is netted against operating
costs in the MD&A.
Operating Netback & Adjusted Funds
Flow Netback
Operating netback and
adjusted funds flow per boe for the
three and nine months ended September
30, 2020 are calculated on a per unit basis
as follows:
|
|
Three Months Ended
Sep 30,
|
Nine Months Ended
Sep 30,
|
($000s)
|
|
2020
|
2019
|
2020
|
|
2019
|
Petroleum and natural
gas revenue
|
|
56,931
|
97,026
|
151,142
|
|
302,559
|
Processing and other
income
|
|
934
|
1,483
|
3,766
|
|
2,740
|
Royalties
|
|
(6,285)
|
(13,892)
|
(18,005)
|
|
(38,741)
|
Realized gain (loss)
on commodity and FX contracts
|
|
(2,627)
|
(1,674)
|
26,346
|
|
(4,927)
|
Operating
expenses
|
|
(23,204)
|
(28,680)
|
(75,109)
|
|
(86,890)
|
Transportation
expenses
|
|
(2,187)
|
(2,763)
|
(7,874)
|
|
(9,242)
|
Operating
netback
|
|
23,562
|
51,500
|
80,266
|
|
165,499
|
G&A
expense
|
|
(3,000)
|
(3,525)
|
(9,518)
|
|
(10,647)
|
Interest
expense
|
|
(8,039)
|
(6,462)
|
(19,343)
|
|
(20,746)
|
Adjusted funds
flow
|
|
12,523
|
41,513
|
51,405
|
|
134,106
|
Barrels of oil
equivalent (boe)
|
|
1,572,407
|
1,951,893
|
4,982,521
|
|
5,859,104
|
Operating netback ($
per boe)
|
|
$
|
14.99
|
$
|
26.38
|
$
|
16.11
|
|
$
|
28.25
|
Adjusted funds flow
($ per boe)
|
|
$
|
7.97
|
$
|
21.26
|
$
|
10.32
|
|
$
|
22.89
|
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
|
Based on bank debt of
$296.1 million as at September 30, 2020 and a Credit Facility of
$335 million, combined with $40 million of credit availability
under the Term Facility.
|
2
|
See Drilling
Inventory section.
|
3
|
See Oil and Gas
advisories.
|
4
|
See Drilling
Inventory section.
|
SOURCE Surge Energy Inc.