Today, Calgary-based Surge Energy Inc. agreed to acquire all of the issued and outstanding common shares of Astra Oil Corp. Indeed, the transaction is in the way of a statutory agreement for total consideration of approximately $160 million.
Read more of our news content, here; Betsy Schaefer joins FuelCell Energy as Chief Marketing Officer
Moreover, the issuance of surge common shares will fund the transaction; and the assumption of approximately $15 million of net debt.
About the Astra Assets
Worth noting, the acquired Astra assets include more than 4,100 boepd (90 percent liquids) of operated light oil production. Moreover, the assets are in Southeast Saskatchewan with an operating netback of more than $42 per boe at US $65 WTI pricing.
In this sense, Surge Energy expects the Astra Assets to generate $58.1 million of net operating income over the next 12 months at the US $65 WTI. Besides, Astra Oil estimates that its exit 2022 net debt flow ratio will be approximately 1.0 times.
The Astra Assets will also contribute significantly to Surge’s ongoing ESG initiatives; particularly, on the environmental side. Therefore, the current Astra construction of a 45-kilometer gas gathering infrastructure system to conserve gas at critical facilities will help reduce emissions from several operating fields.
Indeed, the parties expect the project to cost approximately $12 million. Moreover, Natural Resources Canada’s Emissions Reduction Fund will partially fund the Project.
Benefits of the transaction – Surge Energy and Astra Oil
According to the companies, this transaction will result in high quality, well-positioned 20,200 boepd (85 percent oil and liquids weighted), light and medium gravity intermediate public oil company.
In fact, Surge Energy strategically targeted SE Saskatchewan as a new core area; the Company shared in a media reléase. It is mainly based on the region’s high light oil netbacks, low-cost production efficiencies, and quick drilling payouts.
Besides, the oil-focused E&P company is further advancing its efforts on two core growth areas ranking for drilling economics in the entire Western Canadian Sedimentary Basin.
Lastly, Surge Energy also announced that it reached an agreement with its lending syndicate to amend and extend its first-lien credit facilities. Thus, the Company confirmed its first-lien revolving credit facility at $215 million.
Finally, this re-determination is forecast to provide the Company with ample available liquidity upon closing the transaction. Besides, to return Surge to a standard, single-tranche first lien credit facility. And lastly, to significantly reduce Surge’s annual interest expense going forward.
