Surprise in 5e isn't too confusing, but is a pain because anyone who has played a previous editions is familiar with Surprise Rounds, which 5e does not have. In 5e, Surprise is basically a condition that a creature who is not aware of a threat before Initiative is rolled takes on and lasts until the end of their first turn. They cannot move or take any actions on their first turn and until their first turn passes they also can't use any reactions. So, yeah, you did surprise these guys and basically means I'll roll everyone's Initiative, you all can post a turn of actions, and then we'll go as normal. Just be aware if your initiative falls after the goblins they'll be able to take Opportunity Attacks like normal
Appreciate everyone's patience. I haven't heard from Vorpal Glaive in a little bit and it looks like they haven't been on in almost two weeks, so for now Myrus will be my responsibility mechanically. If we don't hear from Vorpal by the time you decide you're done with the cave, we'll figure out what to do from there.
Edit: Smelkie might not get Sneak Attack. The advantage you've gained is Surprise, no one was actually hiding at the time, at least that I could tell. If someone gets into melee with your target before your turn you might get it though