How Surge Energy is ensuring long-term sustainable growth
Since forming in 2015 Surge Energy (Surge) has been focused on growing a long-term, sustainable oil and gas company. Travis Guidry, Vice President of Corporate Development and Investor Relations, outlines this journey. “The company began by acquiring two assets in Texas, the first is a 5000-acre water flood asset in Crosby County, the second is a 76,000-acre position in the Northern Midland Basin, a sub-basin of the Permian Basin and has been a key growth asset for the company.
“The acreage in the Northern Midland Basin has grown significantly through bolt-on acquisitions and now sits at 105,000 acres. Key expansions of 10,000 acres in 2019 and 22,000 acres in 2021 have both been key drivers of the business setting an annual production record of just over 61,000 barrels of oil equivalent per day in 2023. Production has grown over 15 times the initial rate of 2015, and we have a proven track record of organic growth, growth via acquisitions, and testing of new intervals.”
Senior Vice President of Development and Operations, Chris Alonzo elaborates further. “Surge’s strong results to date come from not only developing our legacy acreage position but also from our success in acquiring and developing new areas, including testing and delineation of new intervals.” The most recent example of successful organic growth is in the Middle Spraberry. “We initially began testing this zone in 2018, and in 2020 and 2021 proved that this area could be co-developed with other productive areas. We focused our development efforts on new acquisitions in 2022 and 2023 but returned in 2024 to continue to delineate and prove up new areas for the Middle Spraberry development and further expand our inventory from this resource.”
Chris goes on to explain how recent innovations have improved production operations. “Historically, we have used ‘dry sand’ sourced from the nearest regional mine and delivered to our Moss Creek asset. In 2024 we shifted to the practice of utilizing ‘wet sand’. This has allowed us to source sand at much closer proximity to our assets since it comes from mines near Big Spring, Texas which is approximately ten-to-30 miles from our acreage position. We estimate this will reduce trucking miles by approximately 2.5 million miles per year. Additionally, from an industrial hygiene standpoint, utilizing wet sand effectively eliminates silica dust on site. All in, the usage of wet sand has reduced our sand related costs by over 30 percent, and we do not anticipate any change to production performance as a result of this change.”
Chris continues: “We are continuing to pilot new artificial lift strategies on our footprint including gas lift, plunger lift and gas assisted plunger lift. New downhole tools are also being tested that are designed to better handle produced gas in our electric submersible pump and beam pump operations. This ensures we are using the latest technology to both maximize and optimize our production volumes.
“Surge has also invested over $145 million in water recycling, pipeline infrastructure and produced water disposal wells. This investment has been key to our highly successful produced water recycling program, which significantly minimizes the need for freshwater during completion operations. Surge has been utilizing recycled produced water for completion operations since 2017 and in total the company has conserved over six billion gallons of fresh water.”
Responsible operator
These innovations, while improving operational efficiency and reducing costs, also reflect the company’s commitment to sustainability. Chris outlines Surge’s approach: “We believe it is important for our industry to not only conduct our operations in an environmentally conscious manner but also communicate our environmental and social governance (ESG) performance because significant progress has been made industry-wide in the last few years. At Surge, being a responsible operator is deeply embedded in our corporate culture. Our current sustainability report is our fifth annual report and the fourth available to the general public. We feel communicating our historical performance and our future goals to all our stakeholders and to the public is very important; it displays our transparency and commitment to these issues. Surge has been proactive and is an industry leader in many ESG topics. This report demonstrates some of the many initiatives where our team has made significant progress.
“In total Surge has eliminated approximately 365 thousand metric tons of CO2e through operational excellence, innovation, and investments in emissions-eliminating infrastructure and operations such as water infrastructure, electrical infrastructure, and the use of dual fuel completions operations.”
Since its inception Surge has been focused on transporting as much oil and produced water in pipelines to avoid trucks on the road. Eliminating truck trips has many benefits including improved safety for the community and eliminating emissions. Transporting oil and produced water in pipelines has led to avoiding over seven million truck miles.
With the business celebrating its ninth anniversary this year, Travis highlights some key contributing factors to the ongoing success. “Surge has grown to the company it is today thanks to our employees’ work ethic and strong technical capabilities, our operational excellence, our strong underlying assets, and our conservative financial approach.
Improving efficiencies
“Beginning with work ethic and strong technical capabilities, we purposefully run a lean organization with people who have a proven track record of technical capabilities and innovation. Our staff excels at problem solving and have proven their willingness to put in extra effort to meet and exceed our corporate goals year after year. Through operational excellence, we maintain a top-tier cost structure, from our investment in water and electrical infrastructure to developing key long-term partnerships, and constantly improving efficiencies.
“Our financial strategy has positioned us to weather volatile commodity price markets. Surge has generated free cash flow for four consecutive years that has allowed us to reduce our net debt by over $1 billion from the end of 2021 to the second quarter of 2024. As we approach our ten-year anniversary, Surge has significant liquidity to facilitate continued growth; from the perspective of the balance sheets, we are the healthiest we’ve ever been with a liquidity of over $1.2 billion.”
Surge has also made a substantial contribution to the Texas economy. “We estimate the contribution to the state’s economy cumulatively since our inception totals approximately $10 billion. This includes cumulative oil and gas revenues, royalty and working interest payments, and production taxes since the company’s inception in 2015.”
Looking to the future, the business is aiming to capitalize on its position of strength. Travis elaborates on the plans: “We are actively seeking to continue to grow responsibly. We believe the oil and gas industry remains a vital part of the Texas and global economies and we aim to increase our footprint and operations in oil-producing basins.”