Surge Energy Inc. provides operations update
Thursday, Dec 13, 2012

CALGARY, Dec. 10, 2012 /CNW/ - Surge Energy Inc. ("Surge" or the "Company") (TSX: SGY) announces operations update.

Surge has drilled, completed and placed on production all 22 gross (17.9 net) planned wells in the fourth quarter of 2012.  As such, Surge is well positioned to meet its targeted exit production guidance of 11,000 boe per day.

At Valhalla South, Surge drilled, completed and tied-in three gross (1.96 net) horizontal multi-frac wells.  All wells are currently on production, and although all of the wells have not produced for an entire month, it appears that on average the wells will exceed the Company's best 30 day average production rate of 620 boe per day per well.  The Company is currently in the process of drilling one gross (0.44 net) horizontal multi-frac well, which is planned to be on production in early January 2013.

On November 27, 2012, Surge's 6-18 battery at Valhalla South experienced an unplanned outage.  The battery was fully operational on Sunday December 9, 2012.  The repair cost impact to Surge is estimated to be less than $300,000.

As a result of this unplanned outage, Surge's fourth quarter production will be negatively impacted by approximately 600 boe per day.

The five gross (five net) horizontal multi-frac wells that were drilled and  completed at Nipisi during the third quarter of 2012 have now cleaned up
approximately 90 percent of their load fluid.  Wells in the core of the
structure are cleaning up well and are proving capable of meeting the Company's type curve expectations.  Light oil production rates from recent down-dip step-out horizontal wells drilled along the south and west perimeter of the Slave Point pool have proved very encouraging,supporting the Company's belief that the pool is over 30 percent larger than originally thought.  The Company's current estimate of DPIIP1 is 85 million barrels in the northern block and 30 million barrels in the southern block.

At South East Alberta, Surge drilled and completed two gross (two net)
horizontal wells into a new Cretaceous pool.  These wells are producing at their best 30 day average production rate of 100 barrels of oil per day per well.  In addition, two gross (two net) horizontal multi-frac wells were drilled and completed and have recovered most of their load fluid.  These two wells are trending towards their best 30 day average production rate of 125 barrels of oil per day per well.

In North Dakota, all five of Surge's 100 percent operated wells, drilled from a single pad, are currently producing and are in various stages of load fluid recovery.  All of these wells will be cleaned up before the end of the year and are forecast to produce at their best 30 day average production rate of 125 barrels of oil per day per well.  The five gross (1.9 net) joint venture wells that Surge participated in during the third quarter were on production early in the fourth quarter.  Production from these wells has exceeded the Company's type curve expectations. Management continues to protect Surge's balance sheet with a strong risk management program. Surge has protected 61 percent of its forecast fourth quarter oil and NGL production after royalties with 70 percent participation in the upside above an average WTI floor price of C$89.84 per barrel.  Surge also has a WTI-to-Edmonton oil differential swap for 2,000 barrel per day at $0.00 (no differential) for the fourth quarter of 2012.  The Company has assembled more than 570 gross (435 net) oil drilling locations, made significant progress in reducing its cost structure and increasing netbacks and gained exposure to an internally estimated gross DPIIP of more than 680 million barrels, with multiple aterflood opportunities and exploration initiatives.

Surge expects to release its 2013 capital expenditure plans in mid-January 2013. Surge is committed to delivering top quartile corporate performance and creating value for shareholders by growing reserves, cash flow and production on a per share basis.

Surge is an oil focused oil and gas company with operations throughout Alberta, Manitoba and North Dakota. Surge's common shares trade on the Toronto Stock Exchange under the symbol SGY.  The Company currently has 71.2 million basic and 79.8 million fully diluted common shares outstanding.

SOURCE Surge Energy Inc.

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