CALGARY, AB, July 30, 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 June 30, 2024, as well as an update on Surge's latest operational achievements. MESSAGE TO SHAREHOLDERS Surge has a high quality, conventional light and medium gravity crude oil asset and opportunity base, with more than 85 percent of the Company's production strategically focused in two of the top four crude oil plays in Canada (as independently evaluated)1. Crude oil prices in Q2/24 averaged US$80.57 per bbl West Texas Intermediate ("WTI"), and combined with the US/CAD exchange rate, averaged C$110.38 WTI pricing per barrel in the quarter. In Q2/24, the Company's adjusted funds flow ("AFF")2 increased by more than 32 percent to $82.8 million, up from $62.5 million in Q1/24. After Q2/24 expenditures on property, plant, and equipment of $36.1 million, Surge generated free AFF2 of $46.7 million in Q2/24, representing more than 56 percent of Q2/24 AFF. Cash flow from operating activities increased by 10 percent as compared to Q1/24, up to $73.6 million in the second quarter of 2024 from the $66.8 million realized during the first quarter of 2024. Strong cash flow from operating activities, combined with proceeds from the Company's previously announced non-core asset sales, contributed to Surge realizing a substantial $61.2 million reduction in net debt2 during Q2/24. The Company also distributed $12.1 million to shareholders in Q2/24 by way of Surge's base cash dividend, representing just 14.6 percent of AFF generated in the quarter. Additionally, the Company was able to further enhance shareholder returns by repurchasing approximately $1.0 million of Surge common shares during the last two weeks of June under the Company's recently approved Normal Course Issuer Bid ("NCIB"). With the $61.2 million reduction in net debt in Q2/24, Surge met the Company's previously stated $250 million net debt target and reached Phase 2 of its Return of Capital Framework. With the commencement of Phase 2, and after giving effect to the recent 8 percent increase in the base dividend from $0.48 to $0.52 per share per year (paid monthly), the Company now forecasts having $48 million of excess free cash flow ("FCF")2 to allocate annually, based on US$75 WTI pricing per barrel oil pricing3. Surge's Board and Management are strategically allocating this $48 million of excess FCF to share buybacks pursuant to the Company's NCIB, and to further reductions of Surge's net debt. During Q2/24, Surge also announced a significant, new Sparky oil discovery at Hope Valley, and identified the potential for up to 100 multi-lateral drilling locations4 on the large, 32.5 net section contiguous land base that the Company now owns on the play. Furthermore, Surge's technical interpretation of its recent 46 square kilometer 3-D seismic program has allowed the Company to de-risk future drilling locations in Hope Valley. The Company has now drilled and brought on production three multi-lateral oil wells at Hope Valley. The latest Hope Valley well brought on production (the first well drilled utilizing the Company's new 3-D seismic data), has exceeded Management's type curve expectations, with an IP90 production rate of 236 bopd4. FINANCIAL AND OPERATING HIGHLIGHTS FINANCIAL AND OPERATING HIGHLIGHTS Three Months Ended June 30, Six Months Ended June 30, ($000s except per share and per boe) 2024 2023 % Change 2024 2023 % Change Financial highlights Oil sales 168,034 149,530 12 % 318,750 302,194 5 % NGL sales 3,572 2,642 35 % 7,507 6,260 20 % Natural gas sales 1,567 3,305 (53) % 5,083 8,993 (43) % Total oil, natural gas, and NGL revenue 173,173 155,477 11 % 331,340 317,447 4 % Cash flow from operating activities 73,604 60,608 21 % 140,389 115,114 22 % Per share - basic ($) 0.73 0.62 18 % 1.40 1.18 19 % Per share diluted ($) 0.73 0.60 22 % 1.40 1.15 22 % Adjusted funds flowa 82,805 64,640 28 % 145,292 127,971 14 % Per share - basic ($)a 0.82 0.66 24 % 1.44 1.31 10 % Per share diluted ($) 0.82 0.64 28 % 1.44 1.27 13 % Net income (loss)c (64,693) 14,055 (560) % (68,323) 28,844 (337) % Per share basic ($) (0.64) 0.14 (557) % (0.68) 0.30 (327) % Per share diluted ($) (0.64) 0.14 (557) % (0.68) 0.29 (334) % Expenditures on property, plant and equipment 36,065 30,589 18 % 85,465 76,322 12 % Net acquisitions and dispositions (33,493) (1,696) nmb (33,501) (2,374) nm Net capital expenditures 2,572 28,893 (91) % 51,964 73,948 (30) % Net debta, end of period 234,707 311,833 (25) % 234,707 311,833 (25) % Operating highlights Production: Oil (bbls per day) 19,628 19,758 (1) % 20,124 20,403 (1) % NGLs (bbls per day) 856 629 36 % 858 674 27 % Natural gas (mcf per day) 18,805 18,458 2 % 19,672 19,310 2 % Total (boe per day) (6:1) 23,618 23,463 1 % 24,261 24,295 — % Average realized price (excluding hedges): Oil ($ per bbl) 94.07 83.17 13 % 87.03 81.83 6 % NGL ($ per bbl) 45.85 46.16 (1) % 48.06 51.31 (6) % Natural gas ($ per mcf) 0.92 1.97 (53) % 1.42 2.57 (45) % Netback ($ per boe) Petroleum and natural gas revenue 80.57 72.82 11 % 75.04 72.19 4 % Realized loss on commodity and FX contracts (1.47) (0.93) 58 % (0.68) (0.91) (25) % Royalties (12.80) (12.11) 6 % (13.06)