Surge Energy (SGY-TSX) Valuation Update - Mar 15

[dan_s]

I spent most of this morning "tweaking" my forecast/valuation model for Surge Energy (SGY.TO and ZPTAF).
At the time of this post SGY was trading at $6.95Cdn.

Surge pays monthly dividends of $0.04/share for annualized yield of ~6.9%.

My updated valuation is $13.85Cdn, which translates to $10.25US for ZPTAF. < This is $0.25US lower than the valuation in my February newsletter.

I've lowered my production forecast to 25,000 Boepd for 2024, to agree with Surge's updated guidance, but I think that the Company's production will ramp up after Q1 to an exit rate of close to 26,500 Boepd. They have an active four rig drilling program and well results in their two core areas have been very good.

The Company's production will be down ~1,000 Boepd in Q1 due to weather related issues. The production should surge (pun intended) in Q2 because the Company will be completed a lot of new wells in March and April that were drilled during the winter drilling program.

From their Q4 press release on March:
"Surge has continued the Company's operational momentum into early 2024, with 4 drilling rigs active in its Sparky and SE Saskatchewan core areas. Surge plans to drill 70 gross (70.0 net) wells in 2024, comprised of 37 gross (37.0 net) Sparky wells and 33 gross (33.0 net) SE Saskatchewan wells, with total capital expenditures budgeted at $190 million.

In the Sparky core area, Surge's 2024 capital program will consist of 25 gross (25.0 net) net single-leg frac'ed Sparky horizontal wells, 8 gross (8.0 net) net multi-leg Sparky wells, and 4 gross (4.0 net) horizontal wells in the Lloydminster formation. In 2024, Management is focused on the continued growth of Surge's multi-lateral well footprint in the Mannville stack, with approximately 30 percent of drilling capital directed to multi-lateral development.

The Company commenced Surge's winter drilling program in December of 2023, and has now completed the drilling of 14 gross (14.0 net) Sparky locations and 15 gross (14.5 net) wells in SE Saskatchewan. All wells from both the Q1/24 Sparky and SE Saskatchewan drilling programs are anticipated to be completed and on production prior to March 31, 2024."

My updated forecast model has been posted to the EPG website.

[Fraser921]

Surge is surging and the WCS discount has narrowed combined with wti moving up means this name could double.
Im anxious to see what ROK has to say this week. I think that name is cheap and also have a position in it