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Resilience Pays Off

No one could argue that 2020 and 2021 were tumultuous years on many fronts for many industries and especially for many small to midsize companies. For Surge Energy, an independent oil and natural gas company focused on the development, exploitation, production and acquisition of oil and natural gas reserves in the Midland Basin of West Texas, the eighteen months from April 2020 to Mar 2021 had its challenges. The period began, like many companies, with sending most employees home to work, fearing in-person engagement could lead to COVID-19 infection, and with no clear line of sight of when it would end. Add to that an increasing global oil supply excess driven by political maneuvers while the world-wide demand was plummeting, leading to a historic drop in the price of oil, which dipped to negative $37 per barrel on April 20th. The tail end of those twelve months brought Winter Storm Uri, a snow and ice storm in Texas that drove an unprecedented full operational shut in for Surge Energy that lasted for seven days in February 2021. 

As a company that had only five years under its belt as of April 2020, Surge Energy could have fallen victim to such turbulent times.

As a company that had only five years under its belt as of April 2020, Surge Energy could have fallen victim to such turbulent times. The operational, business, and financial obstacles that accompanied the devastatingly low oil price in 2020 or the complete halt of business in February 2021 could have been too much for a young oil company such as Surge Energy to overcome. Instead, Surge applied the values on which it was built starting in April 2015 including safety, integrity, teamwork, excellence, and transparency, and cleared the path for its talented team of engineers, financial planners, marketing experts and field personnel to execute at their very best ability when it mattered most.

At the end of March 2021, Surge Energy emerged intact and anxious to grow. The company’s on-going practice of conservative financial strategies and efficient operations had provided the necessary capital to execute quickly on an opportunity. On the last day of March 2021, Surge completed an acquisition for $420 million USD. The purchase added production of approximately 9,000 barrels of oil equivalent per day (“BOEPD”) to an existing production base of approximately 38,000 BOEPD, increased Surge’s net leasehold acreage by 20% to 104,000 acres, and added over 100 future drilling locations.

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In June 2021, Surge celebrated a company milestone surpassing 100 million gross barrels of oil equivalent produced since the company’s inception. Surge Energy celebrated this milestone as a major accomplishment for the company, but also took pride in the benefit its production provides to the Texas economy and community through significant capital investment, royalty payments to mineral owners who have interest under Surge Energy’s producing acreage, contribution to local and state taxes, as well as creating local employment opportunities. Since inception, the Company has paid over $1 billion to royalty owners, working interest partners, the State of Texas and several counties with Texas.

Surge acted on another opportunity for growth in August 2021 with another acquisition of leasehold interest for $37.5 million USD. This acquisition added approximately 4,000 net leasehold acres adjacent to Surge’s existing acreage in Howard County, TX. The new acreage added 800 net BOEPD and included useful surface acreage and infrastructure for salt water disposal.

Rounding out Q3 of 2021 Surge enjoyed being listed in Houston Business Journal’s 2021 Best Places to Work list for the second consecutive year. The award is based on an independent survey completed by the employees of nominated companies. Surge’s CEO, Linhua Guan was very proud to have made the list for a second time. “Surge is proud to a part of HBJ’s Best Places to Work in 2021," stated Chief Executive Officer Linhua Guan. “Obtaining a place on this list two years in a row is evidence of our on-going commitment to Surge’s greatest asset, its people." 

As a final feather in Surge’s cap for 2021, in October, Surge announced the completion of an amendment to its existing revolving credit facility that, among other things, increases the elected commitments to $860 million from $850 million and extends the maturity of the facility from April 2023 to October 2025. Not only did Surge receive the vote of confidence through the increased dollar amount and extension, but also in the number of new institutions that partook in the facility. "Surge greatly values the continued and new support of the fifteen banks in our lending group," stated Chief Executive Officer Linhua Guan. "We believe the confidence shown by these banks demonstrates their belief in Surge's quality assets, innovative employees, and financial discipline."

Britta Hedlund Promo Image

Surge began operating in April 2015 with the stated values of safety, integrity, teamwork, excellence, and transparency. After reflecting on the company’s bounce-back in 2021, it seems resilience is another value befitting Surge Energy today.

Britta Hedlund