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by Stockwatch Business Reporter

West Texas Intermediate crude for September delivery added 74 cents to $41.83 on the New York Merc, while Brent for October added 84 cents to $44.19 (all figures in this para U.S.). Western Canadian Select traded at a discount of $14.80 to WTI ($27.03), unchanged. Natural gas for September lost two cents to $2.83. The TSX energy index added 2.32 points to close at 190.12.

Surge Energy Inc. (SGY) lost a cent to $2.40 on 3.76 million shares, failing to impress investors despite narrowing its net loss for the second quarter. It did not discuss the loss in its press release, preferring to emphasize its operations -- which already had a comprehensive update on July 21 -- but SEDAR filings show a loss of $8.08-million, down from $9.76-million a year earlier. As well, cash flow of 10 cents a share was double analysts' predictions of five cents a share, even though production of 12,182 barrels of oil equivalent a day was below predictions of around 12,800 barrels a day. Current production is over 13,000 barrels a day, thanks to a recent 14-well drill program. Surge points out that 13,000 barrels a day was actually its target for year-end production. It also says it has been able to expand its drill program without touching its $55-million budget because of cost improvements. At its core Shaunavon area in Saskatchewan, for example, well costs are now $1.1-million to $1.2-million instead of the budgeted $1.6-million, while at the Valhalla project in Alberta, costs are now $3.5-million instead of $3.6-million. Even so, neither the production target nor the budget is being increased. Surge says it feels comfortable with its current guidance, including its 0.625-cent monthly dividend, which yields 3 per cent. If WTI oil prices stabilize above $50 (U.S.), Surge says it might increase its spending and aim for "substantial production-per-share growth." What substantial means is anybody's guess, so of course analysts will go right ahead and do so. A new research note from Scotia Capital's Cameron Bean predicts that in 2017, Surge will spend $85-million and produce about 13,250 barrels a day. One thing Surge definitely plans to do in 2017 is test the "exciting new Sparky reservoir" on newly acquired assets. Surge already has Sparky assets in southeast Alberta with net OOIP (oil originally in place) of 430 million barrels, and says it has just acquired nine new Sparky sections with a total estimated OOIP of over 65 million barrels. There has been vertical drilling on these sections, but no horizontal drilling. Surge plans to change that next year.

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