SURGE ENERGY INC. ANNOUNCES SECOND QUARTER FINANCIAL & OPERATING RESULTS; INCREASED 2025 PRODUCTION GUIDANCE AND A LOWER CAPITAL BUDGET
CALGARY, AB, July 28, 2025 /CNW/ - Surge Energy Inc. ("Surge" or the "Company") (TSX:SGY) is pleased to announce financial and operating results for the quarter ended June 30, 2025, as well as an update on the Company's latest operational achievements.
As a result of continued, successful drilling results in Surge's two core areas, the Company is revising its 2025 operating and capital budget guidance. Average 2025 production guidance has now been increased from 22,500 boepd to 23,000 boepd, while budgeted capital expenditures for 2025 are now estimated to be $155 million, $15 million lower than Surge's original capital guidance of $170 million.
Select financial and operating information is outlined below and should be read in conjunction with the Company's unaudited condensed interim financial statements and management's discussion and analysis for the three and six months ended June 30, 2025, available at www.sedarplus.ca and on Surge's website at www.surgeenergy.ca.
Q2/25 MESSAGE TO SHAREHOLDERS
During Q2/25, WTI crude oil prices averaged US$63.88 per barrel, and Surge generated adjusted funds flow ("AFF")1 of $72.8 million, with cash flow from operating activities of $56.3 million.
Strong drilling results in the Company's Sparky and SE Saskatchewan core areas continue to drive production outperformance, as compared to Surge's 2025 budget guidance press released on December 19, 2024.
In the 1H/25, Surge's average production was 23,579 boepd (89 percent liquids), more than 1,000 boepd ahead of the Company's 22,500 boepd production guidance for 2025. In Q2/25, Surge's production averaged 23,589 boepd (89 percent liquids), also above the Company's budgeted average 2025 production estimate. This consistent production outperformance is primarily due to continued, successful drilling results in Surge's two core operating areas.
At Hope Valley in the Company's Sparky core area, Management is encouraged by the lower decline production profile of the initial wells drilled in the play. Notably, the key discovery well at Hope Valley (09-30-046-4W4) has now been on production for 17 months, with cumulative production of more than 73,000 bbl. This well is currently producing significantly above Surge's internal type curve expectations2.
Based on these consistent core area drilling results, Surge is now upwardly revising the Company's 2025 average production guidance from 22,500 boepd to 23,000 boepd. Additionally, with the improved capital efficiencies experienced in its Sparky and SE Saskatchewan core areas, Surge is also reducing its capital expenditure budget guidance for the year. The Company now anticipates spending $155 million on property, plant, and equipment in 2025, a decrease of $15 million from Surge's previous capital guidance of $170 million.
On this basis, the Company's capital efficiencies are now projected to have improved by more than 20 percent year-over-year, with annual capital expenditures dropping by over $40 million, from $195.1 million in 2024 to an estimated $155 million in 2025.
In Q2/25, net operating expenses1 were $17.08 per boe, a decrease of $3.23 per boe (16 percent) as compared to $20.31 per boe in Q2/24. This decrease in operating expenses is due to the Company's continued drilling and operational success in the Sparky and SE Saskatchewan core areas, which now represent over 92 percent of Surge's production.
The combination of increased 2025 production guidance levels, together with lower than budgeted exploration and development expenditures and net operating expenses, has resulted in an increase to the Company's estimated 2025 free cash flow ("FCF")1. Surge's 2025 annualized FCF is now forecasted to increase to $105 million from the previously budgeted $85 million3.
Surge's proactive hedging program continues to work as designed, reducing the impact of recent crude oil pricing volatility on the Company's cash flow from operating activities and FCF. In this regard, Surge has hedged 8,750 bbl/d of its Q3/25 oil production with an average floor price of approximately US$71WTI per barrel, representing approximately 50 percent of the Company's forecasted net after royalty production over this period.
Q2/25 FINANCIAL AND OPERATIONAL HIGHLIGHTS
In Q2/25, Surge's production averaged 23,589 boepd (89 percent liquids), above the Company's budgeted average 2025 production estimate of 22,500 boepd. During the quarter, WTI crude oil prices averaged US$63.88 per barrel, and Surge generated AFF of $72.8 million, with cash flow from operating activities of $56.3 million.
During Q2/25, the Company spent $30.8 million on property, plant, and equipment, resulting in FCF of $41.9 million for the quarter. On this basis, FCF represented 58 percent of the AFF generated in the quarter.
In Q2/25, Surge distributed $12.9 million in dividends to shareholders, representing only 18 percent of AFF generated during the period. In addition, Surge reduced net debt1 by $16.9 million in Q2/25, decreasing from $246.0 million as at March 31, 2025 to $229.1 million as at June 30, 2025.
Furthermore, Surge returned an additional $2.2 million to shareholders in Q2/25 through its ongoing share buyback program, repurchasing 431,100 shares under the Company's normal course issuer bid ("NCIB").
In total, Surge returned $32.0 million to shareholders during Q2/25 through its monthly base dividend, net debt reduction, and share buybacks. These shareholder returns represent 44 percent of Q2/25 AFF.
Highlights from the Company's Q2/25 financial and operating results include:
Higher than budgeted average daily production of 23,589 boepd (89 percent liquids);
Generated $72.8 million of AFF, with WTI crude oil prices averaging US$63.88 per barrel;
Decreased net operating expenses by 16 percent over the past year, from $20.31 per boe in Q2/24 to $17.08 per boe in Q2/25;
Drilled 5 gross (5.0 net) wells in the quarter;
Distributed $12.9 million to Surge's shareholders by way of the Company's $0.52 per share per annum base dividend (paid monthly);
Decreased net debt by $16.9 million, from $246.0 million in Q1/25, to $229.1 million;
Returned an additional $2.2 million to shareholders by way of the Company's NCIB;
On an annualized basis, Q2/25 AFF represented 0.79 times Q2/25 net debt of $229.1 million; and
The Company's $250 million first lien credit facility remained undrawn as at June 30, 2025, providing Surge with substantial available liquidity.
FINANCIAL AND OPERATING HIGHLIGHTS
FINANCIAL AND OPERATING HIGHLIGHTS
Three Months Ended June 30,
Six Months Ended June 30,
($000s except per share and per boe)
2025
2024
% Change
2025
2024
% Change
Financial highlights
Oil sales
137,145
168,034
(18) %
294,351
318,750
(8) %
NGL sales
2,182
3,572
(39) %
3,311
7,507
(56) %
Natural gas sales
1,888
1,567
20 %
4,275
5,083
(16) %
Total oil, natural gas, and NGL revenue
141,215
173,173
(18) %
301,937
331,340
(9) %
Cash flow from operating activities
56,344
73,604
(23) %
139,814
140,389
— %
Per share - basic ($)
0.57
0.73
(22) %
1.40
1.40
— %
Per share diluted ($)
0.56
0.72
(22) %
1.39
1.37
1 %
Adjusted funds flowa
72,756
82,805
(12) %
152,863
145,292
5 %
Per share - basic ($)a
0.73
0.82
(11) %
1.53
1.44
6 %
Per share - diluted ($)a
0.73
0.81
(10) %
1.52
1.42
7 %
Net income (loss)c
31,907
(64,693)
nmb
40,153
(68,323)
nm
Per share basic ($)
0.32
(0.64)
nm
0.40
(0.68)
nm
Per share diluted ($)d
0.32
(0.64)
nm
0.40
(0.68)
nm
Expenditures on property, plant and equipment
30,830
36,065
(15) %
85,229
85,465
— %
Net acquisitions and dispositions
(60)
(33,493)
(100) %
(16)
(33,501)
(100) %
Net capital expenditures
30,770
2,572
nm
85,213
51,964
64 %
Net debta, end of period
229,139
234,707
(2) %
229,139
234,707
(2) %
Operating highlights
Production:
Oil (bbls per day)
20,332
19,628
4 %
20,502
20,124
2 %
NGLs (bbls per day)
554
856
(35) %
402
858
(53) %
Natural gas (mcf per day)
16,217
18,805
(14) %
16,048
19,672
(18) %
Total (boe per day) (6:1)
23,589
23,618
— %
23,579
24,261
(3) %
Average realized price (excluding hedges):
Oil ($ per bbl)
74.12
94.07
(21) %
79.32
87.03
(9) %
NGL ($ per bbl)
43.29
45.85
(6) %
45.51
48.06
(5) %
Natural gas ($ per mcf)
1.28
0.92
39 %
1.47
1.42
4 %
Netback ($ per boe)
Petroleum and natural gas revenue
65.79
80.57
(18) %
70.75
75.04
(6) %
Realized gain (loss) on commodity and FX contracts
2.83
(1.47)
nm
1.76
(0.68)
nm
Royalties
(11.25)
(12.80)
(12) %
(12.32)
(13.06)
(6) %
Net operating expensesa
(17.08)
(20.31)
(16) %
(17.93)
(21.08)
