Surge Energy Valuation Update - Mar 10

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Surge Energy Valuation Update - Mar 10

Post by dan_s »

I watched the Surge webinar yesterday and got lots of good information that raises the confidence that I have in my forecast/valuation model for Surge Energy, that has been posted to the EPG website.

Surge Energy is a recent addition to our Small-Cap Growth Portfolio, but it has been on my Watch List for several years.
At the time of this post SGY.TO was trading for $8.94Cdn and ZPTAF was trading for $6.54USD

My updated valuations are $16.00Cdn and $12.00USD respectively. < My model is in Canadian dollars and all I do is multiple the Cdn valuation by 75% to arrive at a USD valuation.

Current dividend is $0.48Cdn per year for annualized yield of ~5.34%

> SGY is trading at a deep discount to it PV10 Net Asset Value of $13.72/share for just P1 reserves and $22.37/share for P2. < Commodity prices used by Canadian listed companies are based on more conservative commodity prices than what SEC rules require in the U.S.
> The Company closed an acquisition from ERF that will increase production to ~25,000 Boepd (~87% oil)
> The hedge book is in good shape as they are using purchased Puts and Collars with floors in the mid $80s
> Operating cash flow in 2023 should be in the $350 to $370Cdn range, with free cash flow over $150Cdn
> They should raise their dividends in 2H 2023 after they reach debt reduction targets
> The balance sheet is in good shape and they have lots of "running room"
Dan Steffens
Energy Prospectus Group
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