Surge Energy Inc. (Surge) and Mount Bastion Oil and Gas Corp. (Mount Bastion) have announced that they have entered into an arrangement agreement, pursuant to which Surge has agreed to acquire all of the issued and outstanding common shares of MBOG (MBOG Shares) by way of a statutory arrangement (the Transaction).
The Transaction is 11% accretive to Surge’s forecast 2019 adjusted funds flow per share1, and adds over 600 million barrels of net internally estimated light original oil in place (OOIP), concentrated reserves, production, land, and operations. The addition of the MBOG assets increases Surge’s operating netback per boe by 12%, and is forecast to add over USD 85M of net operating income in 2019.
Surge anticipates increasing its dividend by 25%, from $0.10 per share annually to $0.125 per share annually, while improving Surge’s all-in payout ratio from 89% to 87%. Any dividend increase will be subject to the approval of Surge’s Board of Directors, with consideration given to the business environment upon closing of the Transaction.
The MBOG Assets include 5,500 boepd (98% liquids) of operated, light oil production from the structural reef complexes within the geological Beaverhill Lake Group – with a corporate decline of 23%. The Transaction results in a 22,500 boepd (85% oil-weighted), light and medium gravity, intermediate, growth and dividend paying company. The MBOG Assets are located near Surge’s core, water-flooded, light oil pools at Nipisi and Nipisi South in Western Alberta.
