Surge Energy and Fire Sky Energy have entered into an amalgamation agreement, pursuant to which Surge has agreed to acquire all of the issued and outstanding common shares of Fire Sky by way of a statutory amalgamation for total consideration of approximately $58 million. The Transaction is to be funded by the issuance of approximately 11.2 million Surge common shares, and the assumption of approximately $3 million of net debt1, inclusive of transaction costs.

With the Company's recent acquisition of Astra Oil Corp., Surge management strategically targeted SE Saskatchewan as a new area of growth based on its high value light oil netbacks, low-cost production efficiencies, and quick drilling payouts. Surge's operational track record of execution in SE Saskatchewan, combined with its proven in-house technical expertise, make this an exciting new core area for the Company.

The Fire Sky assets are currently producing more than 1,500 boepd (>95 percent liquids) of operated, light oil, focused in Surge's SE Saskatchewan core area, with an operating netback of more than $52 per boe at US$70 WTI pricing – which is now less than 2022 average strip pricing.

Following the Transaction, Surge now forecasts average production in 2022 of 21,500 boepd (86% liquids) of primarily light and medium gravity crude oil.

STRATEGIC RATIONALE

• The Transaction is accretive to Surge's 2022 free cash flow1 per share, and debt adjusted cash flow per share;
• The Fire Sky Assets are forecast to increase the Company's cash flow from operating activities by $26 million over the next 12 months at US $70 WTI;
• The Company now estimates that its exit 2022 net debt to annualized Q4 2022 adjusted funds flow1 ratio will be approximately 0.7 times at US$70 WTI;
• The Transaction adds highly concentrated light oil reserves, production, land, and infrastructure in Surge's SE Saskatchewan core area;
• The Fire Sky Assets include a large internally estimated development drilling inventory of more than 100 locations;
• The Fire Sky Assets are an excellent operational fit providing numerous synergies with the attractive light oil assets recently acquired through the Astra transaction; and
• Fire Sky has an attractive corporate Licensee Liability Rating ("LLR") in Saskatchewan of 3.5, with a total undiscounted decommissioning liability of only $9.8 million.

TRANSACTION HIGHLIGHTS

The Transaction has the following key benefits to Surge stakeholders @ US$70 WTI per barrel pricing:

• Accelerates Surge's return to its traditional value-based shareholder returns business model, including the potential for reinstatement of a dividend and share buy-back program;
• Five percent accretive to Surge's forecast 2022 debt-adjusted cash flow per share;
• Surge's net debt to annualized Q4 2022 adjusted funds flow ratio is forecast to decrease to 0.7 times;
• Increases Surge's 2022 adjusted funds flow per boe by approximately five percent;
• Improves the forecast 2022 all-in payout ratio to 47 percent from 50 percent;
• Raises Surge's forecast 2022 free cash flow to over $120 million ($1.44 per share); and
• Increases the Company's light oil weighting from 50 percent to approximately 53 percent.