Surge

Purchased Manitoba assets in a light oil play focused in the Bakken/Three Forks formation.

Surge Energy Inc. made two strategic light oil acquisitions Oct. 22 in Saskatchewan and Manitoba, Alberta, Canada, for $282 million.

The deal puts Surge’s holdings at more than 1 billion barrels of light and medium gravity original oil in place with a recovery factor of less than 3%, the company said.

In one deal, Surge bought Privateco, a Calgary-based private oil and gas company for $147 million. The company has high netback, operated producing light oil assets that are focused in the Steelman and Dodsland areas of Saskatchewan.

The other $135 million acquisition gives Surge access to Manitoba assets in a high netback light oil play focused in the Bakken/Three Forks formation located in southwest.

The sales are expected to close on Nov. 15, 2013, Surge said.

The Privateco acquisition provides a strategic entry point for Surge into the prolific Midale Marly, light oil play trend in southeast Saskatchewan and the Viking light oil play in southwest Saskatchewan.

Privateco shareholders will receive between 15.7 and 20.7 million shares of Surge, subject to the cash consideration elected by Privateco shareholders to a maximum of $30 million, plus the assumption of $23 million of debt.

The Manitoba assets will be for with 14.2 million shares of Surge and $50 million in cash.

The company said the acquisitions fit squarely within Surge's business strategy of investing growth capital to acquire elite, operated, light and medium gravity crude oil reservoirs, with large original oil in place and low recovery factors.

The acquisitions are highly accretive to Surge shareholders and provide Surge with exposure to three of the top light oil plays in Canada. They also provide an excellent operational platform for additional growth on these proven trends.

The acquisitions comprise and possess large original oil-in-place reservoirs, together with low recovery factors, operatorship and high working interests. Corporately, the light oil acquisitions significantly increase Surge’s operating netback by more than 11% and increase the company's oil weighting to more than 84%.

Assets include key producing infrastructure, including batteries, pipelines and waterflood facilities.