Surge Energy (SGY.TO and ZPTAF) Update - May 24

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Surge Energy (SGY.TO and ZPTAF) Update - May 24

Post by dan_s »

Here are some bullet points from an analysis of Surge Energy, one of my recent additions to our Small-Cap Growth Portfolio.
Also, Surge has not been impacted by the Canadian Wildfires.

Surge Energy – SGY – T (in Canadian dollars)

Market Cap $869M/~EV $1.221B

Current net Debt (~$330M)

HIGHLIGHTS OF 2022 & Q1 2023

· Surge recently closed their 3,850/boepd of long life, water flooded assets from ERF. They have been chasing these assets for seven years and the acquisition should be 5% accretive to FCF/share

· Increases production to 25,000boepd (87% liquids and lowers their corporate decline to 23%

· This expands their asset base in their key areas in the Sparky and SW & SE Sask which are rated two of top four plays in Canada

· Maintenance Capex $175M which will deliver $335M in CF @ $80WTI

· Increased their dividend from $0.44/year to $0.48/year, paid monthly

· PDP NAV increased by 107% to 1P Value of $13.72/share and 2P NAV of $22.37 < Current share price is $7.98Cdn

· Not only are they very adept at M&A they also made two new pool discoveries last year and in Q1 a new discovery at Cadogen which adds 32 new locations

· Their Steelman light oil pool extensions added > 40 top tier drilling locations

· SGY has 3Billion barrels OIP which is only booked to recovery factor of 11.5%, most of their core areas will deliver 20% on primary 35% recovery with water flood. Undiscounted, every 1% change in recovery factor will add $1BIL in NPV.

· They have 1,050 drilling locations with only 550 booked in their reserve report


· Expect the company to continue to provide excellent well results as they continue to utilize new/better completion techniques in both the Sparky (AB) and in SESask.

· They are already ahead of their exit production forecast of 25,000boepd

· SGY is only company of their size with the best leverage to oil prices and their market cap only needs to increase by $400M to be a contender for index inclusion.

· Estimated cashflow $335M and $16OM of FCF before dividends.

· Pricing benefit from narrowing differentials

· 87% levered to oil best company in the mid tier group to benefit from tightening supply and higher oil prices

· Next dividend increase will likely be implemented when they meet their next debt target likely Q4 2023

· $1.4B in tax pools

· In a few months expect to be undrawn on $150 million 1L RBL facility

Currently trading at 3.0x EV/DACF & 20% FCF Yield
Dan Steffens
Energy Prospectus Group
Posts: 2185
Joined: Mon Mar 22, 2021 11:48 am

Re: Surge Energy (SGY.TO and ZPTAF) Update - May 24

Post by Fraser921 »

I like it..I nibbled on the name today
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