Surge Energy Seeking More Deals to Expand in Williston Basin

Surge Energy Inc., the oil producer that announced five acquisitions since June, is seeking more deals this year to expand its holdings in southeast Saskatchewan, said Chief Executive Officer Paul Colborne.

Surge is interested in some oil properties held by Penn West Petroleum Ltd., Colborne said in a phone interview yesterday. The company is focused on expanding in the Williston Basin, an expanse of oil-soaked rock stretching from Saskatchewan to South Dakota. Surge is looking for reservoirs with large oil reserves where it can boost recovery through horizontal drilling, hydraulic fracturing and water floods.

“We do see other deals out there,” Colborne said. “Our goal now would be to probably consolidate more around our core areas.” He declined to specify how much the company, with a market cap of C$1.1 billion ($1 billion), may spend.

Colborne, also chairman of Calgary-based Surge, became CEO in May to turn around a company whose share price fell by more than half in the prior year amid management changes and missed production targets. The stock is up 75 percent since he took over as Surge focuses on modest output growth and paying a “sustainable” dividend, he said.

“There’s a cachet and a confidence in his name and there was the execution of a series of deals, coupled with increases in that dividend that are giving investors confidence that he’s building a sustainable company,” Mason Granger, a portfolio manager at Sentry Investments Inc. in Toronto who owns shares in Surge, said yesterday in a phone interview.

In addition to Penn West, assets owned by Renegade Petroleum Ltd. and Lightstream Resources Ltd. may also fit within Surge, Don Rawson, an analyst at AltaCorp Capital Inc. in Calgary, said yesterday in an e-mail. Penn West is targeting as much as C$2 billion in asset sales, it said in November.

Surge is poised to keep boosting its dividend along with output in 2014, Colborne said. The company said on Jan. 13 it will raise the annual dividend to 54 cents a share based on a C$109 million light-oil purchase. It considered a dividend of 56 cents and instead opted to “save some amount” for later, he said.

Before it's here, it's on the Bloomberg Terminal.