Spartan Delta (SDE.TO) Valuation Update - Nov 18

[dan_s]

SDE was trading at $3.37Cdn when I posted this.

Spartan Delta is a recent addition to our Small-Cap Growth Portfolio. I don't have a high level of confidence in my forecast model, but their Q3 results were close to my forecast. My Q4 forecast is based on what I believe are conservative assumptions.

My current valuation is $5.50Cdn, which translates to $4.07US for DALXF.

The Company's management has a strong track record of buying under-developed assets, building up production and selling them for large gains. Their most recent sale was an asset package that sold for $1.7Cdn billion to Veren (VRN).

Current production is about 38,000 Boepd, 67% natural gas. My 2025 forecast is based on 45,000 Boepd.

Despite very low natural gas prices in Western Canada, the Company still reported a profitable Q3 and generated $33.7Cdn million of Adjusted Cash Flow from Operations. Based on my forecast, Operating Cash Flow should cover their 2024 D&C capital expenditures.

If their realized natural gas price is $2.50Cdn/mcf in 2025 the Company's operating cash flow should be approximately $320Cdn million, which will be used to ramp up their oil production.

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