CALGARY, AB, May 8, 2024 /CNW/ - Surge Energy Inc. ("Surge" or the "Company") (TSX:SGY) is pleased to announce the Company's financial and operating results for the quarter ended March 31, 2024, an update on Surge's latest drilling results, an increase to Surge's first lien revolving credit facilities, and the release of the Company's 2023 sustainability report. Select financial and operating information is outlined below and should be read in conjunction with the Company's unaudited interim financial statements and management's discussion and analysis for the three months ended March 31, 2024, available at www.sedarplus.ca and on Surge's website at www.surgeenergy.ca. Q1 2024 FINANCIAL AND OPERATING HIGHLIGHTS Surge's Board and Management continue to be optimistic regarding the outlook for crude oil prices based on a tight physical market, ongoing geopolitical issues, and the significant underinvestment in the energy industry over the past several years. During Q1/24, Western Canadian oil producers were significantly impacted by wide crude oil differentials. The Western Canadian Select ("WCS") differential (a discount to US WTI per barrel) averaged US$19 per barrel in Q1/24, however, has now tightened to approximately US$12 per barrel on the spot market. Additionally, the Mixed Sweet Blend ("MSW") light oil differential, which averaged a discount to WTI of US$9 per barrel in Q1/24, is now currently trading at a US$3 per barrel discount to WTI. Surge's forecasted 2024 annual cash flow from operating activities increases by approximately $9 million for every US$1 per barrel increase in the WTI price1. Furthermore, every US$1 per barrel decrease in either the WCS or MSW differential increases the Company's forecasted 2024 annual cash flow from operating activities by approximately $4.5 million1. A US$1 per barrel decrease in both differentials increases Surge's forecast 2024 annual cash flow by $9 million1. Surge is pleased to report the Company reduced its Scope 1 greenhouse gas emissions intensity by 18 percent in 2023 as compared to 2022. Surge has now reduced its Scope 1 emissions intensity by 28 percent since 2021. These results demonstrate the Company's continued commitment to reducing the emissions intensity of its operations.  In Q1/24, Surge achieved average daily production of 24,903 boepd (86 percent liquids). These strong quarterly production levels were achieved with Surge having drilled four less (net) wells than originally budgeted for Q1/24, as the Company reacted to earlier than anticipated spring break up conditions in both SE Saskatchewan and Sparky core areas. Highlights from the Company's Q1 2024 financial and operating results include: Delivered cash flow from operating activities of $66.8 million, and generated adjusted funds flow2 ("AFF") of $62.5 million; Achieved average daily production of 24,903 boepd (86 percent liquids); Returned over $12 million of cash dividends to shareholders; and Drilled 24 gross (21.4 net) wells, with activity focused in the Company's Sparky and SE Saskatchewan core areas. ________________________________ 1  Sensitivities are based on the Company's 2024 guidance production of 25,000 boepd and the following pricing assumptions: US$75 WTI, US$16 WCS differential, US$3.50 EDM differential, $0.725 CAD/USD FX and $2.95 AECO. 2  This is a non-GAAP and other financial measure which is defined under Non-GAAP and Other Financial Measures. FINANCIAL AND OPERATING HIGHLIGHTS FINANCIAL AND OPERATING HIGHLIGHTS Three Months Ended March 31, ($000s except per share and per boe) 2024 2023 % Change Financial highlights Oil sales 150,716 152,664 (1) % NGL sales 3,935 3,618 9 % Natural gas sales 3,516 5,688 (38) % Total oil, natural gas, and NGL revenue 158,167 161,970 (2) % Cash flow from operating activities 66,785 54,506 23 % Per share - basic ($) 0.66 0.56 18 % Per share diluted ($) 0.66 0.55 20 % Adjusted funds flowa 62,487 63,331 (1) % Per share - basic ($)a 0.62 0.65 (5) % Per share diluted ($) 0.62 0.64 (3) % Net income (loss)c (3,630) 14,789 (125) % Per share basic ($) (0.04) 0.15 (127) % Per share diluted ($) (0.04) 0.15 (127) % Expenditures on property, plant and equipment 49,400 45,733 8 % Net acquisitions and dispositions (8) (678) nmb Net capital expenditures 49,392 45,055 10 % Net debta, end of period 295,924 331,917 (11) % Operating highlights Production: Oil (bbls per day) 20,620 21,055 (2) % NGLs (bbls per day) 860 721 19 % Natural gas (mcf per day) 20,539 20,172 2 % Total (boe per day) (6:1) 24,903 25,138 (1) % Average realized price (excluding hedges): Oil ($ per bbl) 80.32 80.57 — % NGL ($ per bbl) 50.25 55.78 (10) % Natural gas ($ per mcf) 1.88 3.13 (40) % Netback ($ per boe) Petroleum and natural gas revenue 69.79 71.59 (3) % Realized gain (loss) on commodity and FX contracts 0.06 (0.88) nm Royalties (13.30) (12.84) 4 % Net operating expensesa (21.81) (22.26) (2) % Transportation expenses (1.18) (1.79) (34) % Operating netbacka 33.56 33.82 (1) % G&A expense (2.26) (2.04) 11 % Interest expense (3.73) (3.80) (2) % Adjusted funds flowa 27.57 27.98 (1) % Common shares outstanding, end of period 100,581 98,334 2 % Weighted average basic shares outstanding 100,529 97,087 4 % Stock based compensation dilution — 2,296 (100) % Weighted average diluted shares outstanding 100,529 99,383 1 % a This is a non-GAAP and other financial measure which is defined under Non-GAAP and Other Financial Measures. b The Company views this change calculation as not meaningful, or "nm". c Q1/24 includes a $15.1 million unrealized loss on financial contracts (Q1/23 - $3.6 million unrealized gain on financial contracts). OPERATIONS UPDATE: CONTINUED DRILLING SUCCESS IN SPARKY AND SE SASKATCHEWAN CORE AREAS SPARKY (MANNVILLE) During Q1/24, Surge continued the Company's core area Sparky development program, drilling a total of 10 gross (10.0 net) wells in the area. Approximately 3.5 years ago, Surge announced the discovery of a large new Sparky crude oil pool at Betty Lake with an internally estimated 150 million barrels (25° API) of original oil in place ("OOIP")3. In April 2024, Surge acquired a 50% working interest and operatorship of the 6-8 gas plant in the Betty ...