Select financial and operating information is outlined below and should be read in conjunction with the Company's audited financial statements and management's discussion and analysis for the three months and the year ended December 31, 2025, available at www.sedarplus.ca and on Surge's website at www.surgeenergy.ca.
2025 HIGHLIGHTS
Based on the Company's disciplined capital allocation model, combined with continued strong drilling and waterflood results in Surge's Sparky and SE Saskatchewan core operating areas, the Company exceeded its budgeted production estimates for 2025 by approximately 1,000 boepd, with production averaging 23,491 boepd in 2025 (88% liquids), as compared to Surge's initial 2025 production guidance of 22,500 boepd (91% liquids). The Company exceeded production estimates while spending approximately $10 million less than originally forecasted, with 2025 capital expenditures totaling $159.7 million, compared to initial 2025 capital guidance of $170 million.
In 2025, capital expenditures were reduced by more than $35 million as compared to 2024. This significant improvement in capital efficiencies represents an 18 percent reduction in capital spending year over year, with expenditures on property, plant and equipment of $159.7 million in 2025, decreasing materially from $195.1 million in 2024. Additionally, Surge reduced net operating costs1 from $20.02 per boe in 2024 to $17.91 per boe in 2025, an 11 percent improvement year over year.
During 2025 West Texas Intermediate ("WTI") crude oil prices decreased by nearly US$11 per barrel, from an average of US$75.72 in 2024 to US$64.77 per barrel in 2025. Despite this significant decrease in oil prices, Surge generated adjusted funds flow ("AFF")1 of $279.2 million in 2025 ($2.81 per share), and cashflow from operating activities of $266.0 million ($2.68 per share).
As a result of much lower capital spending in 2025, together with lower net operating expenses1, Surge generated meaningfully higher free cash flow ("FCF")1 in 2025 as compared to 2024, despite WTI crude oil prices declining 14 percent (approximately US$11 per barrel). On this basis, the Company generated FCF of $119.5 million in 2025, representing 43 percent of the Company's 2025 AFF of $279.2 million. This compares to FCF of $99 million in 2024, which represented 34 percent of Surge's 2024 AFF of $294.1 million.
In 2025, the Company returned a total of $86.9 million, more than 31 percent of 2025 AFF, to shareholders pursuant to the following:
$51.7 million from Surge's monthly base dividend ($0.52 per share, per annum);
$8.7 million in share buy backs under the Company's Normal Course Issuer Bid ("NCIB"), repurchasing 1,504,700 shares; and
$26.5 million reduction in net debt1, from $247.1 million as at December 31, 2024 to $220.6 million as at December 31, 2025.
Surge strategically allocated the majority of remaining FCF to a combination of decommissioning expenditures, cash settlement of dilutive instruments, and small core area "tuck-in" acquisitions.
In 2025, the Company generated its strongest finding and development ("F&D") costs, including changes in future development costs ("FDC"), in the past three years. Surge delivered a 2025 Total Proved & Probable ("TPP") F&D of $14.87/boe, which provided a 2.4x recycle ratio2 based on a 2025 operating netback1 (before realized gains on commodity and FX contracts) of $36.23/boe. These results illustrate the strength of Surge's ongoing drilling and waterflood programs.
In 2025, the Company achieved a 136 percent TPP reserves replacement2 ratio and reported a TPP reserve life index2 of 11.4 years. Furthermore, the Company reported a TPP Net Asset Value ("NAV")2 of $13.06 per share, based on Surge's December 31, 2025 independent reserve report.
FOURTH QUARTER AND YEAR END 2025 FINANCIAL AND OPERATIONAL HIGHLIGHTS
Exceeded budgeted 2025 production estimates by nearly 1,000 boepd, producing an average of 23,491 boepd in 2025 compared to initially budgeted production of 22,500 boepd;
Generated $119.5 million in FCF in 2025 (WTI: US$64.77/bbl), a 21 percent increase from $99.0 million in 2024 (WTI: $75.72/bbl);
Distributed cash dividends to shareholders in the amount of $51.7 million in 2025, representing less than 19 percent of 2025 AFF of $279.2 million;
Returned an additional $8.7 million to shareholders through the Company's ongoing NCIB, repurchasing over 1.5 million shares in 2025;
Reduced net debt by $26.5 million in 2025 to $220.6 million as at December 31, 2025, a decrease of over 10 percent as compared to $247.1 million as at December 31, 2024;
On a combined basis, Surge provided total returns of approximately $86.9 million to shareholders in 2025 through the base dividend, share repurchases, and net debt reductions. This represents more than 31 percent of 2025 AFF returned to shareholders;
Reduced net operating expenses1 by $2.11 per boe during 2025, to $17.91 per boe in 2025 from $20.02 per boe in 2024. This represents a decrease in net operating expenses of 11 percent year over year;
Maintained an undrawn $250 million first lien credit facility;
Replaced 136% of 2025 production on a TPP reserves replacement basis (excluding A&D);
Reported a year end 2025 TPP F&D, inclusive of changes in FDC, of $14.87/boe and a 2.4x recycle ratio;
Exceeded the Company's budgeted 2025 2H/25 production guidance of 22,500 boepd, with Q4/25 production averaging 23,186 boepd;
Generated Q4/25 cash flow from operating activities of $59.7 million and AFF of $56.2 million;
Annualized Q4/25 AFF represented 0.98 times net debt as at December 31, 2025;
Paid $12.9 million in dividends to shareholders in Q4/25, which represents only 23 percent of Q4/25 AFF of $56.2 million; and
Returned an additional $0.8 million to shareholders in Q4/25 through Surge's ongoing NCIB, repurchasing 106,800 shares.
FINANCIAL AND OPERATING HIGHLIGHTS
FINANCIAL AND OPERATING HIGHLIGHTS
Three Months Ended December 31,
Years Ended December 31,
($000s except per share and per boe)
2025
2024
% Change
2025
2024
% Change
Financial highlights
Oil sales
121,211
158,405
(23) %
556,350
635,618
(12) %
NGL sales
2,493
3,378
(26) %
8,042
14,218
(43) %
Natural gas sales
2,677
1,389
93 %
7,227
6,867
5 %
Total oil, natural gas, and NGL revenue
126,381
163,172
(23) %
571,619
656,703
(13) %
Cash flow from operating activities
59,697
64,838
(8) %
265,903
278,647
(5) %
Per share - basic ($)
0.60
0.64
(6) %
2.68
2.76
(3) %
Per share - diluted ($)
0.59
0.64
(8) %
2.64
2.72
(3) %
Adjusted funds flowa
56,242
76,121
(26) %
279,155
294,123
(5) %
Per share - basic ($)a
0.57
0.75
(24) %
2.81
2.92
(4) %
Per share - diluted ($)
0.55
0.75
(27) %
2.77
2.87
(3) %
Net income (loss)b
(7,093)
(2,656)
nmc
40,259
(53,716)
nm
Per share - basic ($)
(0.07)
(0.03)
nm
0.41
(0.53)
nm
Per share - diluted ($)d
(0.07)
(0.03)
nm
0.40
(0.53)
nm
Expenditures on property, plant and equipment
41,672
58,277
(28) %
159,706
195,103
(18) %
Net acquisitions and dispositions
--
(8,868)
nm
5,661
(42,389)
nm
Net capital expenditures
41,672
49,409
(16) %
165,367
152,714
8 %
Net debta, end of period
220,569
247,126
(11) %
220,569
247,126
(11) %
Operating highlights
Production:
Oil (bbls per day)
19,746
20,675
(4) %
20,241
20,228
-- %
NGLs (bbls per day)
673
777
(13) %
522
818
(36) %
Natural gas (mcf per day)
16,599
17,199
(3) %
16,366
18,672
(12) %
Total (boe per day) (6:1)
23,186
24,319
(5) %
23,491
24,158
(3) %
Average realized price (excluding hedges):
Oil ($ per bbl)
66.72
83.28
(20) %
75.30
85.85
(12) %
NGL ($ per bbl)
40.29
47.26
(15) %
42.25
47.49
(11) %
Natural gas ($ per mcf)
1.75
0.88
99 %
1.21
1.00
21 %
Netback ($ per boe)
Petroleum and natural gas revenue
59.25
72.93
(19) %
66.67
74.27
(10) %
Realized gain (loss) on commodity and FX contracts
1.36
(0.12)
nm
1.64
(0.40)
nm
Royalties
(9.82)
(13.27)
(26) %
(11.52)
(13.56)
(15) %
Net operating expensesa
(18.09)
(19.12)
(5) %
(17.91)
(20.02)
(11) %
Transportation expenses
(1.05)
(1.39)
(24) %
(1.04)
(1.29)
(19) %
Operating netbacka
31.65
39.03
(19) %
37.84
39.00
(3) %
G&A expense
(2.60)
(2.33)
12 %
(2.58)
(2.34)
10 %
Interest expense
(2.68)
(2.68)
-- %
(2.72)
(3.40)
(20) %
Adjusted funds flowa
26.37
34.02
(22) %
32.54
33.26
(2) %
Common shares outstanding, end of period
98,877
100,382
(1) %
98,877
100,382
(1) %
Weighted average basic shares outstanding
98,947
101,142
(2) %
99,321
100,832
(1) %
Stock-based compensation dilutiond
2,594
745
248 %
1,590
1,568
1 %
Weighted average diluted shares outstanding
101,541
101,887
-- %
100,911
102,400
(1) %
a This is a non-GAAP and other financial measure which is defined in Non-GAAP and Other Financial Measures.
b The twelve months ended December 31, 2024 includes a non-cash impairment charge of $96.5 million.
c The Company views this change calculation as not meaningful, or "nm".
d Dilution is not reflected in the calculation of net loss for the three months ended December 31, 2025 and for the three months and year ended December 31, 2024.
OPERATIONS UPDATE
2025 Operations Overview
In 2025, Surge successfully drilled a total of 58 gross (48.8 net) wells, spending a total of $159.7 million, including expenditures on facilities, equipment, land, and capitalized G&A. Drilling operations were focused on the Company's premium medium and light gravity crude oil assets in the Sparky and SE Saskatchewan core areas, where 29 gross (29 net) and 28 gross (18.8 net) wells were drilled, respectively.
In 2025, Surge drilled 17 gross (17 net) multi-lateral wells utilizing the application of modern open hole drilling technology in its Sparky core area, all of which were drilled at the Company's Hope Valley property.
At Surge's 100 percent owned and operated Hope Valley play, the Company continues to experience better than anticipated well results from its modern open hole multi-lateral ("OHML") drilling techniques. Surge drilled 17 gross (17 net) OHML wells at Hope Valley in 2025, with average IP90 production rates of 197 bopd. These results are 22 percent better than the Company's independent reserve auditor IP90 Proved Undeveloped type curve expectations of 162 bopd. Surge successfully drilled and brought on production 6 gross (6.0 net) wells in Hope Valley in Q4/25.
As at December 31, 2025, 53 percent of the Company's current production is supported by legacy vertical waterfloods, horizontal waterfloods, and natural aquifer support, which help to maintain Surge's low (internally estimated) 25 percent corporate decline2. Surge has significantly increased the Company's horizontal waterflood program, from seven injector conversions in 2024, to 14 conversions in 2025, based on the continued success of its Sparky, Lloyd, Ratcliffe, Slave Point, and Midale waterfloods. In 2H/25, Surge drilled the Company's first waterflood injector to initiate secondary recovery at Surge's Hope Valley discovery, with the goal of increasing estimated ultimate recoveries from this large Sparky (Mannville) crude oil discovery. The Company has five more dedicated injectors planned for Hope Valley in 2026.
Additionally, over the past 15 months the Company has drilled 20 gross (20 net) single lateral multi-frac wells in the Sparky core area where Surge has successfully implemented high-density frac technology. This approach has doubled the number of frac stages per 1,400m lateral; increasing from 26 stages per well, to 52 stages per well. This strategic modification to Surge's frac design has resulted in a 50 percent increase in IP90 average production rates4 as compared to Surge's previous single lateral Sparky wells, for a modest additional cost increase of approximately 15 percent ($0.3 million per well).
Surge's 2025 SE Saskatchewan drilling program focused primarily on the Frobisher formation, with a total of 28 gross (18.8 net) wells drilled. This included the use of modern OHML drilling techniques, with 9 gross (7.5 net) wells drilled as stacked multi-lateral wells, each consisting of two to three open-hole legs. Additionally, the program included 1 gross (1 net) single-leg Frobisher well and 1 gross (0.5 net) Frobisher re-entry. Over the last three years, Surge has achieved industry leading results with average 90 day production rates of 195 bopd for all Frobisher wells drilled in the Province of Saskatchewan between January 1, 2022 and December 31, 20253.
In 2025, Surge drilled two (1.8 net) 8 leg OHML wells in the Frobisher 'State A' formation. The second of these drills had an average 90 day production rate of 175 bopd. Surge internally estimates 23 gross (17.2 net) future State A drilling locations, and 9 gross (8.5 net) of these were booked by GLJ in the YE2025 Reserve Report.
A 4 leg multi-lateral well (0.8 net) was drilled in the Oungre / Ratcliffe formation at Surge's Freda waterflooded Lake property. This well came on production in late December and had a 30 day peak production rate of 325 bopd. Surge internally estimates 9 gross (8.5 net) offsetting drilling locations, with 4 gross (4 net) of these booked by GLJ in the YE2025 ...
