Surge Global Energy Inks Deal for Alberta Acreage

Surge Global Energy has entered into a Farmout Agreement with Kelso Energy for oil and gas exploration of two and a half sections in the Keg River Formation, also known as the 'Granite Wash,' in the Kitty area of North Central Alberta, Canada. Volumetric calculations of the Farmout Lands show potential original light oil in place of approximately five million barrels with large recovery factors expected to be in excess of 25% as is the norm for this field. Upon the completion of its Farmee commitments, Surge will earn from 60 to 100 percent working interest in oil and gas produced from the Farmout Lands.

"This is a strategic milestone for Surge Global Energy as we continue to grow our portfolio of oil and gas properties," said David Perez, Chairman and Chief Executive Officer of Surge Global Energy. "In today's geopolitical environment, there is a need for exploring and developing oil and gas resources from regions that can help provide a more reliable energy supply. As such, and following Surge's investment in the Sawn Lake Oil Sands development, we are continuing to focus on opportunities in Alberta, Canada."

Per the Farmout agreement, by April 30, 2006, Surge is required to either commence a program of 3D seismic or commit to the drilling of a Test Well by December 15, 2006. Upon drilling of the Test Well, Surge will earn working interest in the Farmout Lands per the following terms:

-- Before payout, Surge shall earn 100 percent of the Farmor's

Interest in that portion of the Farmout Lands comprising the Test

  • Well spacing unit, subject to a gross overriding royalty of 1/150
  • (5-15 percent) on oil, 15 percent on natural gas, and 15 percent
  • on other petroleum substances.

-- At payout, Kelso Energy (the Farmor) has the option to either

remain in the gross overriding position or to convert to an

undivided 40 percent working interest.

-- Surge also shall earn 60 percent of Farmor's Interest in the

balance of the Farmout Lands other than the spacing unit for the

Test Well.

Following the completion of the Test Well, Surge can elect to drill an Option Well and earn interest in the Option Lands, per the same terms outlined above.