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Energy Summary for May 13, 2015

2015-05-13 19:14 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for June delivery lost 25 cents to $60.50 on the New York Merc, while Brent for June lost five cents to $66.81 (all figures in this para U.S.). Western Canadian Select traded at a discount of $8.20 to WTI ($52.30), down from a discount of $8.10. Natural gas for June added 3.8 cents to $2.93. The TSX energy index lost 1.36 points to close at 222.46.

Paul Colborne's Surge Energy Inc. (SGY) lost eight cents to $4.21 on 4.71 million shares, after releasing its first quarter financials. Production of 20,585 barrels of oil equivalent a day was well ahead of Surge's first-half guidance of 20,000 barrels a day. That becomes less impressive, however, upon realizing that the first-half budget was $22-million and Surge actually spent $25.8-million in just the first quarter. To be fair, once acquisitions and dispositions are factored in, net spending was negative in the first quarter, and second quarter spending should be relatively low. Spring breakup limits companies' drilling ability. Surge's first-half budget included the drilling of 3.8 net wells, but its first quarter figure came to 4.6, so it is ahead of its plans. In addition, some of the wells are doing better than forecast. Over their first 25 days, as noted by Scotia analyst Cameron Bean, Surge's two most recent Upper Shaunavon wells in Saskatchewan flowed at 170 barrels a day (meeting the company's type curve) and 230 barrels a day (above type curve), respectively. The 230-barrel-a-day well is particularly interesting because it was a step-out that confirms a southwest extension of one of the Upper Shaunavon trends. At another core asset, Valhalla in Alberta, Surge boasts that one of its wells came on production 20 per cent under budget and another "has now qualified as the top-producing oil well in the province of Alberta for the past three consecutive months." Given all that, the company figures that it will exceed its year-end production target of 14,250 barrels a day. The year-end target is lower than the first quarter rate because last month, Surge agreed to sell $430-million of assets to TORC Oil & Gas Ltd. (TOG: $9.98), with the proceeds initially going toward debt. Surge's net debt was $552-million as of March 31.

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