CALGARY, AB – Surge Energy Inc. (“Surge” or the “Company“) (TSX: SGY) is pleased to announce that it has entered into an agreement with a syndicate of underwriters, led by Cormark Securities Inc. and National Bank Financial Inc. (collectively, the “Underwriters“), pursuant to which the Underwriters have agreed to purchase, on a “bought deal” basis, 25,425,000 common shares (the “Flow-Through Shares“) of Surge to be issued as “flow-through shares” with respect to “Canadian development expenses” within the meaning of the Income Tax Act (Canada) and the regulations thereunder in force as of the date hereof (the “Tax Act“) at a price (the “Offering Price“) of $0.59 per Flow-Through Share, for gross proceeds to the Company of approximately $15 million (the “Offering“).
Surge has granted to the Underwriters an option to purchase additional Flow-Through Shares, equal to 15% of the number of Flow-Through Shares sold pursuant to the Offering at the Offering Price, for market stabilization purposes and to cover over-allotments for a period expiring 30 days after the date of closing.
Surge will use proceeds from the Offering to incur eligible “Canadian development expenditures” within the meaning of the Tax Act in an aggregate amount of not less than the gross proceeds raised from the Offering and will renounce qualifying expenditures to purchasers of the Flow-Through Shares on or before December 31, 2021. The proceeds from the Offering will fund an expanded 2H/21 capital program, focused in the Company’s Sparky core area.
The Flow-Through Shares will be offered by way of short form prospectus in each of the provinces of Canada, other than for Québec, pursuant to National Instrument 44-101 – Short Form Prospectus Distributions and some may be resold in the United States pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended (the “U.S. Securities Act“) and in such other jurisdictions outside of Canada and the United States as agreed to by the Company, in each case in accordance with all applicable laws and provided that no prospectus, registration statement or similar document is required to be filed in such jurisdiction.
Closing is expected on or about May 7, 2021 and is subject to Toronto Stock Exchange and other necessary regulatory approvals. The Company intends to release its 2H/21 and preliminary 2022 guidance following closing of the Offering. Surge anticipates releasing its Q1/21 financial statements on or before May 14th, 2021. The Company anticipates production of approximately 16,500 boepd for Q1/21, and cashflow from operating activities are expected to be $15.6 million for Q1/21 (after estimated realized hedging losses of $16.8 million on the quarter) with WTI oil prices averaging US$57.84 per barrel.
The Flow-Through Shares have not been, and will not be, registered under the U.S. Securities Act or any U.S. state securities laws, and may not be offered or sold in the United States or to, or for the account or benefit of, United States persons absent registration or any applicable exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor will there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.