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CALGARY, July 3, 2013 /CNW/ - Surge Energy Inc. ("Surge" or the "Company") (TSX: SGY) is pleased to announce the closing of the previously announced $240 million acquisition of an elite, operated, crude oil producing asset in the southwest area of Saskatchewan; the conversion of 34,500,000 Subscription Receipts into common shares of the Company pursuant to the previously announced $247.5 million equity financing; and continued excellent drilling results at Valhalla and Silver.

CLOSING OF ELITE CRUDE OIL ACQUISITION:

Surge announced today the closing of its previously announced $240 million acquisition of an elite, operated, crude oil producing asset in the southwest area of Saskatchewan, with Original Oil in Place ("OOIP")¹ of over 250 million barrels and a recovery factor of less than 1.5 percent (the "Acquisition"). This strategic Acquisition is accretive to Surge on a debt-adjusted production and cash flow per share basis.  Surge estimates more than 271 gross / 264 net, lower risk, development drilling locations, and full (unbooked) waterflood upside with respect to the Acquisition.  Concurrent with the Acquisition, Surge increased its bank line from $277 million to $350 million.

As a result of Surge's orderly transition to a sustainable, moderate growth, dividend paying oil and gas company (announced on June 11, 2013), the Company will be paying its first monthly dividend of $0.0333 per share ($0.40 per share annually) payable for August 2013 on September 16, 2013.

Macquarie Capital Markets Canada Ltd ("Macquarie") acted as exclusive financial advisor to Surge with respect to the Acquisition.

EXCELLENT DRILLING SUCCESS CONTINUES:

Surge continues to experience significantly better than anticipated drilling results at its core operated properties of Valhalla and Silver.

At Valhalla, the Company drilled another successful 100 percent working interest ("WI") well in the northern portion of Surge's Doig light oil pool. This well continues to significantly exceed management's type curve for the Valhalla property, and adds numerous additional drilling locations on this elite asset.  Management's type curve at Valhalla has a 30 day IP of 600 boepd.

At Valhalla, Surge now estimates over 160 million barrels of OOIP, and over 46 gross / 38.6 net drilling locations.

In the Silver area, Surge successfully drilled the Company's second 100 percent WI oil well into the previously announced Sparky new pool discovery.  This well is also producing at rates significantly above the Company's type curve for this medium gravity crude oil asset.  Management's type curve at Silver has a 30 day IP of 100 bopd.

Surge now estimates that this new Sparky pool has over 47 million barrels of OOIP, over 37 gross / 35 net additional follow-up development drilling locations, and significant (unbooked) waterflood upside.

Also at Silver, Surge successfully drilled the Company's third 100 percent WI stepout development oil well into a separate, new Sparky pool.  This well is presently producing at rates that significantly exceed the Company's Silver area type curve as well.

Surge estimates that this Sparky pool has in excess of 50 million barrels of OOIP, over 29 gross / 29 net additional follow-up development drilling locations, and significant (unbooked) waterflood upside.

CONVERSION OF SUBSCRIPTION RECEIPTS:

Upon completion of the Acquisition, the 34,500,000 Subscription Receipts issued pursuant to the previously announced $247.5 million equity financing have now been converted into common shares of Surge.

2013/2014 GUIDANCE:

With the closing of the accretive Acquisition and the concurrent equity financing, Surge now confirms management's guidance for 2013 and 2014 as follows:

As a result of the recent continued successful drilling results at Valhalla, and the two new Sparky oil pool discoveries at Silver, Surge now anticipates that the Company will exceed management's estimated 2013 production exit rate of 12,000 boepd (78% Oil/NGLs).

NEW CORPORATE PRESENTATION POSTED ON SURGE WEBSITE:

With the closing of the strategic, accretive Acquisition, and the exciting new drilling results that Surge is delivering, the Company has now posted a new corporate presentation on the Surge website at: www.surgeenergy.ca.

FORWARD LOOKING STATEMENTS:

This press release contains forward-looking statements. More particularly, this press release contains statements concerning anticipated: (i) potential development opportunities and drilling locations, (ii) the timing and amount of future dividend payments, (iii) hedging results, and (iv) realization of anticipated benefits of the Acquisition.

The forward-looking statements are based on certain key expectations and assumptions made by Surge, including expectations and assumptions concerning the performance of existing wells and success obtained in drilling new wells, anticipated expenses, cash flow and capital expenditures and the application of regulatory and royalty regimes.

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 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 uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in Surge's Annual Information Form for the year ended December 31, 2012 which has 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.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

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.

SOURCE: Surge Energy Inc.