Surge exceeds 2014 exit rate; announces large new crude oil discovery; upward revision to 2014 exit rate

CALGARY, April 8, 2014 /CNW/ - Surge Energy Inc. ("Surge" or the "Company") (SGY: TSX) announced today that, based upon better than anticipated first quarter 2014 development drilling results, a large new crude oil discovery in SW Saskatchewan, and excellent results from several of the Company's ongoing waterflood projects, Surge has already exceeded the Company's 2014 year end production exit rate.

Accordingly, Surge is now revising upward the Company's 2014 year end production estimate from 16,550 boepd to 16,850 boepd (85 percent oil and NGLs).

On this basis, proforma the previously announced acquisition of Longview Oil Corp. ("Longview"), Surge is now projecting an increased 2014 production exit rate of 21,350 boepd (84 percent oil and NGLs).

Exciting First Quarter 2014 Drilling Results; Large New Oil Pool Discovery

In the first quarter of 2014, Surge experienced better than anticipated development drilling results across the Company's entire asset base. During the quarter Surge drilled a total of 18 wells (13.3 net), with a success rate of 100 percent.

At Shaunavon in SW Saskatchewan, Surge drilled an exciting new pool discovery in the Upper Shaunavon horizon (100% WI) at 16-36-5-20-W3. The horizontal well encountered 1,175 meters of reservoir section and was completed with 21 frac stages. This discovery well is currently producing over 300 bopd. The success of this well confirms Surge's 3-D seismic interpretation of the Upper Shaunavon interval over its lands.

Surge now maps over 125 million barrels of OOIP¹ in the Upper Shaunavon formation, with the potential for more than 64 additional locations (4 wells per section).

Surge also successfully drilled four (3 net) Lower Shaunavon wells in SW Saskatchewan during the first quarter of 2014 with excellent type curve results. In addition, Surge has observed significant re-pressuring of the Lower Shaunavon formation on both of the Company's four and eight well per section waterflood pilots, as a result of the injection commenced in the fourth quarter of 2013. Production from wells that had been shut in (in order to re-pressure the reservoir) was re-started at the end of March, 2014. Surge maps over 220 million barrels of OOIP in the Lower Shaunavon formation, with a 1.96% recovery factor to date. Surge has over 215 net Lower Shaunavon drilling locations in SW Saskatchewan, and full waterflood upside.

At Nipisi in NW Alberta, Surge drilled one successful (100% WI) Slave Point horizontal, multi-frac development well, immediately off-setting a horizontal injection well. This exciting new well encountered near virgin reservoir pressure, and is producing over 300 bopd. A third horizontal injector was added to the pool during the first quarter of 2014. The net waterflood response to date from the three existing horizontal injectors is estimated currently to be approximately 230 bopd. The capital invested to establish this waterflood was $3.75 million, providing a production efficiency of $13,250 per bopd. This high netback 80 million barrel OOIP light oil pool has a recovery factor of less than one percent, with numerous follow-up locations, and further waterflood upside. Surge anticipates converting two more horizontal wells to injection at Nipisi over the remainder of 2014.

At Eyehill in Central Alberta, during the first quarter of 2014 Surge successfully drilled two (2 net) wells into the Sparky formation. The wells are producing well above the expected 180 day type curve rate. As a result of successful farm-ins, Surge now estimates over 90 million barrels of net OOIP in the Sparky formation, with less than one percent recovered to date. Surge will be converting a horizontal well to injection in the second quarter of 2014.

A successful offsetting 200 meter development well indicates that this level of pool development will likely be required to fully develop and waterflood this high quality Sparky oil pool. The Company has over 47 (45 net) development locations at Eyehill based on 400 meter inter-well spacing, however, with full development and waterflood, this well count could double. In the last year at Eyehill, Surge has organically grown production to over 900 boepd.

At Provost, Surge drilled one (1 net) horizontal, multi-frac, Sparky well. The well was brought on production late in the first quarter of 2014, and is producing at expected 180 day type curve rates. The battery facilities will be expanded at Provost on this 45 million barrel OOIP pool to accommodate the conversion of a well to injection, which is planned for the second quarter of 2014. Surge has over 18 net development locations remaining at Provost.

At Macoun in SE Saskatchewan, Surge drilled two (2 net) horizontal, multi frac, Midale wells. The wells are producing significantly above the expected 180 day initial rate. Since acquiring this elite Midale Marly pool in the fourth quarter of 2013, Surge has now increased net oil production to over 900 boepd, from approximately 550 boepd at the time of purchase. This has been accomplished through successful development drilling, a pump optimization program, and the fracing of an existing, non- stimulated, horizontal well.

At Manson in SW Manitoba, during the first quarter of 2014 Surge focused on an expansion of the waterflood through the conversion of two (2 net) horizontal, Bakken wells to injection.  The gathering and water injection pipeline system was expanded to accommodate the single well battery development locations that were drilled in 2013. Waterflood approval was received for two additional sections of this elite, high netback 76 million barrels OOIP light oil pool. Accordingly, Surge will continue to expand the waterflood in these sections with the conversion of two wells to injection in the third quarter. Surge plans to drill two (1 net) wells at Manson over the balance of 2014. During the first quarter of 2014 Surge also participated with a joint venture operator in the drilling of two (1 net) Bakken development wells. These wells were bought on production at the end of the quarter. Surge has over 33 net development locations remaining at Manson.

At Valhalla in NW Alberta, Surge drilled an exciting farm-in, horizontal, multi-frac Doig well in section 13-75-9W6 (0.875 net). This step-out well came on production March 26, and is currently producing significantly above type curve expectations. Surge now expects the well to be very similar in production potential to the prolific wells drilled by Surge in 2013 to the south in sections 12-75-9W6 and 7-75-8W6. Surge has over 36 net development locations remaining at Valhalla.

In the Viking area of Southwest Saskatchewan, Surge successfully drilled 2 (2 net) Viking development wells. In addition, an experienced local operator farmed-in on Surge's more exploratory acreage and drilled two (0.4 net) Viking earning, horizontal wells. The wells were placed on production at the end of March. Surge has over 100 net development locations remaining in the Viking area.

Upward Revision to 2014 Exit Rate

Based upon the excellent development drilling results discussed above, the large new crude oil pool discovery in the Upper Shaunavon formation in SW Saskatchewan, and the excellent results from several of Surge's ongoing waterflood projects, Surge has already exceeded the Company's projected 2014 production exit rate target of 16,550 boepd (85 percent oil and NGLs).

Accordingly, Surge is now revising upward the Company's 2014 exit rate to more than 16,850 (85 percent oil and NGLs).

On this basis, proforma the previously announced acquisition of Longview, Surge is now projecting an increased 2014 production exit rate of 21,350 boepd (84 percent oil).

Surge management will provide new updated guidance following the closing of the Longview acquisition in early June 2014.

FORWARD LOOKING STATEMENTS:

This press release contains forward-looking statements.  More particularly, it contains forward-looking statements concerning: (i) estimated 2014 exit rates of production, (ii) ultimate recovery factors at certain of Surge's properties, (iii) planned drilling, development and waterflood activities, (iv) the potential number of drilling locations at certain of Surge's properties, and (v) the anticipated production profile of certain of Surge's wells.

The forward-looking statements contained in this press release are based on certain key expectations and assumptions made by Surge, including expectations and assumptions concerning the success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the viability of waterflood projects, the availability and performance of facilities and pipelines, the geological characteristics of Surge's properties, the successful application of drilling, completion and seismic technology, prevailing weather conditions, commodity prices, royalty regimes and exchange rates, the application of regulatory and licensing requirements and the availability of capital, labour and services.

Although Surge believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Surge can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Certain of these risks are set out in more detail in Surge's Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and Surge undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Note: Boe means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas.  Boe may be misleading, particularly if used in isolation.  A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.  Boe/d means barrel of oil equivalent per day.

In this press release: (i) mcf means thousand cubic feet; (ii) mcf/d means thousand cubic feet per day (iii) mmcf means million cubic feet; (iv) mmcf/d means million cubic feet per day; (v) bbls means barrels; (vi) mbbls means thousand barrels; (vii) mmbbls means million barrels; (viii) bbls/d means barrels per day; (ix) bcf means billion cubic feet; * mboe means thousand barrels of oil equivalent; and (xi) mmboe means million barrels of oil equivalent

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Surge Energy Inc.