CALGARY, AB, June 22, 2021 /CNW/ - Surge Energy Inc. ("Surge"
or the "Company") (TSX: SGY) and Astra Oil Corp. ("Astra") announce
that they have entered into an arrangement agreement (the
"Arrangement Agreement"), pursuant to which Surge has agreed to
acquire all of the issued and outstanding common shares of Astra
("Astra Shares") by way of a statutory arrangement (the
"Transaction") for total consideration of approximately
$160 million. The Transaction is to
be funded by the issuance of Surge common shares ("Surge Shares"),
and the assumption of approximately $15
million of net debt1.
![Surge Energy Inc. Announces Strategic $160 Million Southeast Saskatchewan Light Oil Acquisition; New $215 Million Credit Facility; and Upward Revision to 2021 Exit Rate and 2022 Production Guidance (CNW Group/Surge Energy Inc.) Surge Energy Inc. Announces Strategic $160 Million Southeast Saskatchewan Light Oil Acquisition; New $215 Million Credit Facility; and Upward Revision to 2021 Exit Rate and 2022 Production Guidance (CNW Group/Surge Energy Inc.)](https://mma.prnewswire.com/media/1539231/Surge_Energy_Inc__Surge_Energy_Inc__Announces_Strategic__160_Mil.pdf?p=pdfthumbnail)
The Astra assets ("Astra Assets") include more than 4,100 boepd
(90 percent liquids) of operated, light oil production, focused
primarily in SE Saskatchewan with
an operating netback1 of more than $42 per boe at US $65 WTI pricing. The Transaction is accretive to
Surge's forecast debt-adjusted 2022 cash flow per share1
and free cash flow1 per share, and adds highly
concentrated light oil reserves, production, land, and operations.
The Astra Assets are forecast to generate $58.1 million of net operating income1
over the next 12 months at US $65 WTI
(less than current strip pricing), and the Company now estimates
that its exit 2022 net debt to annualized Q4 2022 adjusted funds
flow1 ratio will be approximately 1.0 times.
The Astra Assets will also contribute significantly to Surge's
ongoing ESG initiatives of reducing the impact of its operations on
the environment. Astra is in the process of constructing a
45-kilometer gas gathering infrastructure system to conserve gas at
critical facilities in SE
Saskatchewan, reducing emissions from several operating
fields. The project is estimated to cost approximately $12 million and will be partially funded by
Natural Resources Canada's Emissions Reduction Fund. Additionally,
the Astra Assets have a very attractive corporate liability
management rating ("LMR") of 5.4, with a very low total
undiscounted decommissioning liability of only $12.9 million.
The Transaction will result in a high quality, well-positioned
20,200 boepd (85 percent oil and liquids weighted), light and
medium gravity, intermediate public oil company. The Astra Assets
represent an exciting re-entry into southeast Saskatchewan for the Surge team. Surge
management strategically targeted SE
Saskatchewan as a new core area based on its high light oil
netbacks, low cost production efficiencies and quick drilling
payouts. Surge's operational track record of execution in southeast
Saskatchewan, combined with proven
in-house technical expertise, positions the Company for both
organic and acquisitive growth in this new core area.
Pro forma the Transaction, Surge's two core growth areas rank in
the top echelon for drilling economics2 in the entire
Western Canadian Sedimentary Basin. Surge's dominant position in
the medium gravity Sparky crude oil play, and Astra's SE Saskatchewan light oil assets,
independently3 rank by rate of return (i.e. with the
Clearwater and Lower Charlie Lake
oil plays) as two of the top five crude oil plays in Canada.
In conjunction with the Transaction, Surge is pleased to
announce that it has reached an agreement in principle with its
lending syndicate, confirming the Company's pro forma first lien
revolving credit facility at $215
million, and extending the maturity from July 1, 2022 to November
30, 2022.
TRANSACTION HIGHLIGHTS
The Transaction has the following key benefits to Surge
stakeholders @ US$65 WTI per barrel
pricing4:
- 20 percent accretive to Surge's forecast 2022 debt-adjusted
cash flow per share;
- Surge's net debt to annualized Q4 2022 adjusted funds flow
ratio is forecast to decrease to 1.0 times;
- Increases Surge's 2022 adjusted funds flow per boe by
approximately 10 percent;
- Improves Surge's forecast 2022 all-in payout ratio5
to 58 percent; and
- Increases Surge's light oil weighting from 35 percent oil to 50
percent.
Paul Colborne, President and CEO
of Surge, stated: "We believe this Transaction is an exciting
opportunity for both Surge and Astra shareholders. Shareholders in
the combined Company will have ownership in a sustainable,
intermediate, light and medium gravity crude oil public company.
Shareholders will benefit from Surge's existing dominant position
in the Sparky crude oil play, and from Astra's highly focused,
operated asset base, targeting high value light oil in SE Saskatchewan.
We now anticipate that Surge will generate free cash flow of
more than $85 million in 2022 at
US$65 WTI per barrel pricing,
providing free cash flow per share of $0.146 in 2022."
Andrew Greenslade, President and
CEO of Astra, stated: "We are very excited about the Transaction
with Surge. With Surge's high quality, low decline, crude oil asset
base, their dominant Sparky play, and their exciting financial free
cash flow 'torque' to rising oil prices, we feel that pro forma
Surge/Astra will prove to be one of the best positioned
intermediate crude oil public companies in Canada as the recovery in energy continues.
Astra's high netback, SE
Saskatchewan light oil asset base, low debt leverage, and
its large 10 year drilling inventory, nicely complements Surge's
existing, low cost, conventional crude oil assets."
TRANSACTION METRICS
Purchase
Price
|
$160
million
|
Annual Net Operating
Income
|
$58.1
million
|
Current
Production
|
>4,100 boepd (87%
light oil)
|
Proved plus probable
reservesa
|
16.6 MMboe (73% light
oilb)
|
Proved plus probable
RLI
|
11 years
|
Estimated operating
netback @ US $65 WTIc,5
|
$42/boe
|
Liability Management
Rating ("LMR")
|
5.4
|
Total Asset Retirement
Obligation ("ARO")
|
$12.9
million
|
Notes:
|
a - Based upon Astra
Oil Corp.'s Sproule reserve report titled "Evaluation of the
P&NG Reserves of Astra Oil Corp. (as of December 31,
2020).
|
b - Lower oil
percentage booked is due to Sproule's assumption that Steelman,
Viewfield and Minard gas is tied in (total liquids booked at
85%)
|
c - Based on 2021
pricing averaging as follows: US$65.00WTI/bbl; CAD$81.25WTI/bbl;
EDM CAD$75.00/bbl; WCS CAD $64.38/bbl; AECO $2.50/mcf
|
Net operating income
multiple1,7
|
2.75x
|
Production per
boepd
|
$39,024 /
boepd
|
Proved plus probable
reserves
|
$9.63 / boe
|
Proved plus probable
recycle ratio8
|
> 4.4x
|
PRO FORMA HIGHLIGHTS – AN EXCITING, SUSTAINABLE, INTERMEDIATE
OIL PRODUCER
The Transaction is consistent with Surge's defined business
model of acquiring high quality, operated, light and medium gravity
crude oil reservoirs with large OOIP9 with low recovery
factors. The combined Company will have over 850 internally
estimated net development drilling locations10,
providing a 13 year drilling inventory. The combined entity
possesses a high quality, operated, light and medium gravity crude
oil asset base, with extensive infrastructure in place to
facilitate years of future development drilling and waterflood.
Operational platform to continue to execute on sustainable
business model:
- Over 2.5 billion barrels of net combined, internally estimated,
conventional OOIP - with a 6 percent recovery factor to date;
- Combined proven plus probable year end 2020 reserves of over 95
million boe (85 percent total liquids)9;
- 20,200 boepd light and medium gravity oil producer (85 percent
oil and liquids weighted);
- Combined corporate base decline of 25 percent;
- Development drilling upside: >850 net locations10
(internally estimated); providing a development drilling inventory
of more than 13 years; and
- A 13 year reserve life index (total proved plus probable).
Financial platform to deliver solid shareholder
returns:
- Operating netbacks (before hedging) of more than $34.50 per boe at US $65 WTI per bbl;
- Full cycle corporate production efficiencies9 of
less than $22,000 per flowing
boepd;
- Greater than $85 million of free
cash flow in 2022 at US $65 WTI crude
oil prices;
- Free cash flow per share of $0.14
in 2022, providing a free cash flow yield11 of over 20
percent12.
Upward Revision to 2021 Exit PRODUCTION Rate & 2022
Guidance
The following is the Company's increased guidance for Surge's
2021 exit production rate, as well as financial and operational
guidance for 2022 (after giving effect to the
Transaction):
Upwardly Revised
Guidance
|
@ US $65
WTI*
|
@ US $70
WTI*
|
@ US $75
WTI*
|
Exit 2021 production
(boepd)
|
20,200
|
Average 2022
production (boepd)
|
20,200
|
% oil and
NGL's
|
85%
|
2022 Adjusted funds
flow ($MM)
|
$210
|
$235
|
$265
|
2022 Cash flow from
operations ($MM)
|
$195
|
$220
|
$250
|
2022 Exploration and
Development Capital Expenditures ($MM)
|
$110
|
$110
|
$110
|
2022 Free cash flow
($MM)
|
$85
|
$110
|
$140
|
2022 All-in payout
ratio
|
56%
|
50%
|
44%
|
2022 Net debt to
annualized Q4/22 adjusted funds flow[13]
|
1.0x
|
0.8x
|
0.6x
|
*All pricing
variables including differentials (WCS: US$13.50, EDM US$5.00), Fx
of $0.80 and AECO of $2.50 per mcf remain constant. Adjusted funds
flow and cash flow from operations exclude realized gains/losses
from financial derivatives.
|
NEW $215 MILLION CREDIT
FACILITY
In combination with the Transaction, the Company is pleased to
announce that it has reached an agreement in principle with its
lending syndicate to amend and extend its first lien credit
facilities.
Concurrent with the closing of the Transaction, Surge's fully
conforming first lien revolving credit facilities will be
$215 million, with the Company's next
bank review scheduled to be on or before November 30, 2021. Additionally, the maturity of
Surge's first lien revolving credit facilities will be extended
from July 1, 2022 to November 30, 2022.
This re-determination is forecast to provide the Company with
ample available liquidity upon the closing of the Transaction,
return the Company to a standard, single-tranche first lien credit
facility, and significantly reduce Surge's annual interest expense
going forward.
TRANSACTION DETAILS
The purchase price payable by Surge under the Transaction will
be $160 million, comprised of: 1) the
issuance of approximately 3.1746 Surge Shares for every issued and
outstanding Astra Share; and in
addition, 2) the assumption of approximately $15 million of Astra net debt upon completion of
the Transaction, before accounting for transaction costs.
The Transaction is expected to close in August 2021. Completion of the Transaction is
subject to the approval of at least 66 2/3 of the voting
Astra shareholders and approval of at least a simple majority of
the voting shareholders of the issuance of Surge Shares pursuant to
the Transaction. The meeting of Surge shareholders is currently
expected to be held in mid-August
2021 and, in connection therewith, it is currently expected
that a joint information circular and proxy statement will be sent
to Surge shareholders in mid-July
2021. Completion of the Transaction is also subject to,
among other things, the receipt of court approval, regulatory
approvals and other customary closing conditions.
All of the directors and officers of Astra, as well as Astra's
largest shareholders, collectively holding approximately 68 percent
of the outstanding Astra Shares, have entered into support and
lock-up agreements pursuant to which they have agreed to vote their
Astra Shares in favor of the Transaction and have agreed to certain
escrow agreements with respect to any Surge Shares received from
the Transaction following the completion of the Transaction,
subject to certain exceptions.
Each of Astra and Surge has agreed to pay a termination fee of
$4.35 million to the other party in
certain circumstances, including in the case of Astra, if Astra
recommends, approves, or enters into an agreement with respect to a
superior proposal. Astra has agreed not to solicit or initiate any
discussions regarding any other acquisition proposals or sale of
material assets. Astra has also granted Surge a three business day
right to match any superior proposal.
ADVISORS
Scotiabank is acting as exclusive financial advisor to Surge
with respect to the Transaction and has provided a fairness opinion
to the Surge Board of Directors. ATB Capital Markets, and BMO
Capital Markets have been appointed strategic advisors to Surge on
the Transaction. McCarthy Tétrault LLP is acting as legal advisor
to Surge with respect to the Transaction.
National Bank Financial Inc. is acting as exclusive financial
advisor to Astra. Burnet, Duckworth & Palmer LLP is acting as
legal advisor to Astra with respect to the Transaction.
CONFERENCE CALL DETAILS
A conference call hosted by Paul
Colborne, President and CEO of Surge, will be held for the
investment community to discuss the Transaction. Details of the
conference call are as follows:
Date:
|
June 23,
2021
|
Time:
|
9:00AM MST
|
Dial-In:
|
1-888-390-0608 (toll
free)
|
Conference
ID:
|
52957679
|
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 management's expectations and assumptions concerning the
anticipated benefits of the Transaction and the transaction metrics
related thereto; the anticipated terms of the amendments to Surge's
first lien credit facility, the timing thereof and the anticipated
benefits to Surge thereof; the timing of various matters in
connection with the Transaction and the conditions to completion of
the Transaction, Surge's revised guidance for the remainder of 2021
and preliminary guidance for 2022. 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.
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 March 9,
2021 and in Surge's MD&A for the year ended December 31, 2020, 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.
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 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. All internal estimates
contained in this new release have been prepared effective as of
Jan 1, 2021.
Net of Surge disposition from March 25,
2021, the pro forma Company (Surge + Astra) will have 2020YE
TPP reserves of 98.9 mmboe. Astra reserves have been audited
by Sproule from 2016YE through to 2020YE. Similarly, Sproule
has audited all of Surge's assets from 2015YE to 2020YE.
Production efficiencies are calculated by dividing capital
expenditures of a project by the average production from that
project for a given period of time. IP180 is the average production
rate of a well over the first 180 days on production.
Net asset value per share is calculated as total proved plus
probable reserve value discounted before tax at 10 percent plus
undeveloped land and seismic less net debt divided by basic common
shares outstanding.
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.
Net of Surge March 25, 2021
disposition, the pro forma Company (Surge + Astra) will have over
>925 gross (>850 net) drilling locations identified herein,
of these >450 gross (>400 net) are unbooked locations. Of the
446 net booked locations identified herein, 352 net are Proved
locations and 95 net are Probable locations based on Sproule's
2020YE reserves. Assuming an average number of net wells drilled
per year of 65, Surge's >925 net locations provide 13 years of
drilling.
Surge's internally developed type curves (for both Surge and
Astra) were constructed using a representative, factual and
balanced analog data set, as of Jan 1,
2021 for Surge type curves and April
15, 2021 for Astra type curves. 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 Qualified Reserve
Evaluators. All type curves fully comply with Part 5.8 of the
Companion Policy 51 – 101CP.
"Top Echelon for drilling economics" refers to payouts under 9
months at US$65/bbl WTI flat pricing
($75.63/bbl Cromer).
Non-GAAP Financial Measures
Certain secondary financial measures in this press release –
including, "cash flow", "adjusted funds flow", "free cash flow",
"net debt", and "net operating income", 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:
Cash Flow & Adjusted Funds Flow
Cash flow is defined as cash from operating activities before
changes in non-cash working capital. The Company further adjusts
cash flow from operating activities in calculating adjusted funds
flow for changes in 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.
The following table reconciles forecast cash flow from operating
activities to adjusted funds flow:
|
2022e
|
($millions)
|
@ US $65
WTI
|
@ US $70
WTI
|
@ US $75
WTI
|
Petroleum and natural
gas revenue
|
425
|
458
|
499
|
Royalties
|
(51)
|
(55)
|
(60)
|
Net operating
expenses
|
(113)
|
(113)
|
(113)
|
Transportation
expenses
|
(8)
|
(8)
|
(8)
|
Loss on financial
contracts
|
(8)
|
(12)
|
(18)
|
Operating
netback
|
245
|
269
|
300
|
G&A
expense
|
(14)
|
(14)
|
(14)
|
Interest
expense
|
(21)
|
(21)
|
(20)
|
Adjusted funds
flow
|
210
|
235
|
265
|
Changes in non-cash
working capital
|
-
|
-
|
-
|
Lease
repayments
|
(9)
|
(9)
|
(9)
|
Abandonments
|
(6)
|
(6)
|
(6)
|
Cash flow from
operating activities
|
195
|
220
|
250
|
Barrels of oil
equivalent (boe)
|
7.4
|
7.4
|
7.4
|
Operating netback ($
per boe)
|
$
|
33
|
$
|
36
|
$
|
40
|
Adjusted funds flow
($ per boe)
|
$
|
28
|
$
|
32
|
$
|
36
|
Free Cash Flow
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.
Free cash flow yield is calculated as free cash flow divided by
the Company's share price at the date indicated herein. Management
uses this measure as an indication of the cash flow return to
shareholders based on current share prices.
Net Debt
There is no comparable measure in accordance with IFRS for net
debt. Net debt is calculated as bank debt, term debt, dividends
payable 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.
Net debt to annualized adjusted funds flow ratio is calculated
as net debt divided by annualized three month adjusted funds flow
(adjusted funds flow for the quarter multiplied by four).
Management uses this ratio to assess the period of time that it
would take to fund net debt based on the adjusted funds flow from
the quarter.
All-in payout ratio
All-in payout ratio is calculated as exploration and development
expenditures divided by cash flow.
Net Operating Income
Net operating income is calculated as petroleum and natural gas
revenue less royalties, net operating expenses and transportation
expenses.
Net operating income multiple is calculated as purchase price of
the acquisition divided by the annual net operating income related
to the acquisition. Management uses this metric as an indication of
the cost of the acquisition in relation to the net operating income
from the acquired business.
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. Additional information relating to non-IFRS measures can be
found in the Company's most recent management's discussion and
analysis MD&A, which may be accessed through the SEDAR website
(www.sedar.com).
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 This is a non-GAAP
financial measure which is defined in the Non-GAAP Financial
Measures section of this document.
|
2 See the
Drilling Inventory section of this document for further
details.
|
3 As
per National Bank of Canada Thematic Research "Expanding on the
Emerging Clearwater", September 8, 2019.
|
4 Based on
the following price assumptions: US$65.00WTI/bbl; CAD$81.25WTI/bbl;
EDM CAD$75.00/bbl; WCS CAD $64.38/bbl; AECO
$2.50/mcf
|
5 This is
a non-GAAP financial measure which is defined in the Non-GAAP
Financial Measures section of this document.
|
6
Calculated as $85 million divided by approximately 608 million pro
forma basic shares.
7 Calculated as $160 million purchase price divided
by $58.1 million of forecast 2022 annual net operating
income.
|
8 Recycle ratio is calculated as
operating netback of $42/boe divided by the cost of proved plus
probable reserves of $9.63/boe.
|
9 See the
Oil and Gas Advisories section of this document for further
details.
|
10 See the Drilling Inventory section
of this document for further details.
|
11 This is a non-GAAP financial
measure which is defined in the Non-GAAP Financial Measures section
of this document.
|
12 Calculated as $0.14/sh of free
cash flow, divided by a SGY share price of $0.64/sh.
|
13 This is a non-GAAP financial
measure which is defined in the Non-GAAP Financial Measures section
of this document.
|
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SOURCE Surge Energy Inc.