Here's their response to earnings. Target is still 65% above current level. GLTA



Surge Energy Inc.

Reduced Production Guidance For 2012

? Q3/12 production was 8,292 Boe/d (68% oil), below our estimate of 8,900 Boe/d (70% oil). CFPS was $0.28, below our estimate of $0.32 and consensus of $0.33. In the quarter, SGY had ~1,200 Boe/d delayed or curtailed at Nipisi, Valhalla and Silver Lake.

? For 2012, SGY increased capex guidance by ~$20 MM, reduced average production by 7% to 9,100 Boe/d (70% oil), and maintained exit guidance (with a higher gas bias) at ~11,000 Boe/d (73% oil). SGY is confident it will achieve the exit rate as it has 23 wells coming on stream in Q4/12.

? SGY lowered its peak 30-day rate for its Nipisi Slave Point wells to 250 Bbl/d (from 310 Bbl/d), but maintained the EUR of ~240 MBbl. The new frac design is expected to result in longer frac length and better sand placement, allowing for a shallower long-term decline.

? Incorporating updated guidance has reduced our production and CFPS estimates by 4% and 5% for 2012 and 3% and 4% for 2013. Our RNAV decreased 2% to $9.16, including the lower Nipisi type well and higher debt. We have decreased the PT to $9.50 (from $10.50) based on 1.0x our RNAV