McCarthy Tétrault and TingleMerrett advised on the deal
Alberta-based oil and gas company Surge Energy Inc. has expanded its Saskatchewan operations with a $58-million acquisition of Fire Sky Energy Inc.
Surge announced Monday that it has completed its purchase of Fire Sky under an amalgamation agreement. Surge paid a total consideration of $58 million, comprised of common shares and the assumption of Fire Sky’s $3-million debt. McCarthy Tétrault LLP acted as legal advisor to Surge and TingleMerrett LLP acted for Fire Sky.
Fire Sky is a private oil and gas production company with headquarters in Estevan, Saskatchewan. The deal is right on the heels of Surge’s $160 million acquisition of another Saskatchewan-based company, Astra Oil Corp. According to Surge’s announcement, the company strategically targeted southeast Saskatchewan as a new area of growth based on its high-value light-oil netbacks, low-cost production efficiencies and quick drilling payouts. The acquisition of Fire Sky added highly concentrated light oil reserves, production, land and infrastructure in Surge’s southeast Saskatchewan core area.
Fire Sky’s assets are currently producing more than 1,500 barrels of oil equivalent per day (boepd) of operated light oil. Following the deal’s closing, the combined company is forecasted to have an average production of 21,500 boepd of primarily light and medium gravity crude oil in 2022. The company will likewise have 2.6 billion barrels of net combined, internally estimated, conventional original oil in place (OOIP). Fire Sky assets are also expected to increase Surge’s cash flow by $26 million over the next 12 months.
According to Surge, the acquisition is consistent with its defined business model of acquiring high quality, operated, light and medium gravity crude oil reservoirs with large OOIP and low recovery factors. The combined company is expected to facilitate years of future development drilling and waterflood. The acquisition was approved by 97.6 per cent of the Fire Sky shares voted at the special meeting of Fire Sky shareholders to approve the transaction.
