CALGARY — Surge Energy Inc. (SGY.TO) has signed a deal to acquire Mount Bastion Oil and Gas Corp. for $320 million in cash and stock.

Mount Bastion shareholders may choose between cash, Surge shares or a combination of both, with a limit of $145 million cash available and roughly 75.4 million shares.

Surge says it expects to increase its dividend to 12.5 cents per year from 10 cents once the deal closes.

The Mount Bastion assets include roughly 5,500 barrels of oil equivalent per day of operated, light oil production.

The deal is expected to close in October, subject to approval of at least two-thirds of Mount Bastion shareholders and a simple majority of Surge shareholders.

All of the directors and officers of Mount Bastion as well as the company's largest shareholder, collectively holding about 70 per cent of the company's outstanding Shares, agreed to support the deal.