History of Surge Energy

Surge Energy America (“Surge”) was formed in early 2015 as a U.S. subsidiary of China-based Shandong Xinchao Energy Corporation Limited (“Shandong”), a publicly traded company on the Shanghai Stock Exchange, with a strategy to build a sustainable U.S. oil & gas company. Shandong entered into an agreement in May 2015 to purchase its first asset, Hoople Field, and recruited a team of talented individuals to establish the Surge organization and assume operations of the asset which consisted of roughly 5,000 acres in Crosby County, TX.

The Surge organization immediately began to assimilate expertise and talent to provide strong oil-industry technical, operating, and business capabilities for not only the original acquisition but also to position the company for growth in the prolific Permian Basin. By the time Surge began operating Hoople in September 2015, a much larger acquisition was on the horizon.

In November 2015, Surge closed on the acquisition of the Moss Creek asset from two private equity-backed operations teams. This new asset consisted of approximately 80,000 acres of leasehold, along with a large drilling and development inventory, in the Midland Basin. The acquired acreage stretches between northern Howard County and southern Borden County of Texas. At the time of the acquisition, the Moss Creek field consisted of approximately 30 producing wells, ~6,500 BOE/D of production, and a large opportunity slate of greenfield development.

In late 2019, 6,000 additional acres were acquired directly to the east of Surge’s Borden County acreage, and in early 2021, a significant addition of 18,000+ acres to the southeast of the company’s original footprint was acquired. As of May 2021, Surge’s total position is approximately 114,000 acres.

The development of Moss Creek has fueled impressive growth and success for Surge. This highly talented and experienced Surge team has drilled and completed over 425 horizontal wells; achieved a Permian Basin record for the longest lateral drilled during the region’s first one hundred years of history; and has driven production as high as 56,000 BOE/D net, reaching a milestone of 100 million gross BOE produced by mid-2021.

In order to support the robust drilling program, Surge has designed and built significant infrastructure projects across the Moss Creek field. Some of these projects include pipelines, batteries, electrical, and water facilities ensuring numerous offtakes to markets for oil, gas, and produced water. The extensive water management system built by the company has allowed Surge to reach, at times, 100% recycling of produced water for purposes of hydraulic fracturing. In addition, the electrical infrastructure built by Surge has nearly eliminated the need for supplemental power such as propane-fueled generators for operated well sites.

In Surge’s short history of roughly six years, it has proven to be a team with deep experience, high capabilities and standards as well as technical, operating, and business expertise. The team has effectively executed capital programs close to $1 Billion, annually running up to eight drilling rigs at one time. All of the exceptional performance and results have been executed while continuing to deliver on a conservative and flexible financial strategy to ensure a strong balance sheet. This delivery on both operating and financial commitments has allowed Surge to attract U.S funding from 22 institutional banks and over 100 high yield bond investors. The company has also been recognized for multiple honors including Houston Business Journal’s 2019 Inaugural Innovation Award. In 2020, Surge was the only oil & gas company to earn a place in both Houston Business Journal’s 2020 Middle Market 50 and Houston Business Journal’s 2020 Best Places to Work.

During 2020, a truly unprecedented year due to the COVID-19 pandemic and a market dip creating the lowest oil prices in recorded history, Surge demonstrated resilience operationally and financially. An effective reduction in drilling activity and temporary curtailment of production, coupled with a strong balance sheet and hedging strategy, allowed Surge to sustain through the perilous year. Surge not only maintained its existing $850 million borrowing base but also finished the fiscal year with positive cash flow.

As Surge continues on the journey set forth in the original strategy to develop a long-term, sustainable premier oil and gas company in the U.S., the company believes it is uniquely positioned to couple investors from both the U.S. and China to deliver outstanding financial and operating results for the benefit of all stakeholders: our investors, our Employees, our Communities, and our industry partners.