Surge Energy (SGY-TSX) Valuation Update - July 31
Posted: Wed Jul 31, 2024 2:42 pm
I have updated my forecast/valuation model for Surge.
Here is why my valuation increases:
> Significant balance sheet improvement and final debt goal now achievable early in 2025, should raise dividends and increase stock buybacks.
> Hope Valley adds high-quality "Running Room". < ~100 development drillign
> Oil price differentials have significantly improved (over $10Cdn/bbl) since the end of March, thanks to opening of the TMX pipeline. < Surge's realized oil price went from $80.36Cdn/bbl in Q1 to $91.84Cdn/bbl in Q2. < 83% of Surge's production is oil.
Q2 Reported Net Loss included a lot of non-cash "noise". Adjusted After Tax Net Income was $23.2Cdn million ($0.23Cdn/share).
Key Stat for my valuation is that operating cash flow increased from $57.8Cdn million in Q1 to $80.4Cdn million in Q2. < This does not include $37.4Cdn million of proceeds from non-core asset sales.
My valuation increases to $14.53Cdn, which equates to $10.75US for ZPTAF. < Just 5X annualized operating CFPS.
As of July 30th, there were ten Canadian based analysts that cover Surge. Their price targets range from $10.00Cdn to $14.00Cdn. This morning, I received an update from Mark Heim, a respected analyst at Velocity Trade Capital. He rates SGY as Outperform with a price target of $13.00Cdn. His 2025 forecast ($3.26 operating CFPS) is very close to my forecast.
My updated forecast/valuation model for Surge has been posted to the EPG website. Scroll to the right to see all ten current price targets.
Here is why my valuation increases:
> Significant balance sheet improvement and final debt goal now achievable early in 2025, should raise dividends and increase stock buybacks.
> Hope Valley adds high-quality "Running Room". < ~100 development drillign
> Oil price differentials have significantly improved (over $10Cdn/bbl) since the end of March, thanks to opening of the TMX pipeline. < Surge's realized oil price went from $80.36Cdn/bbl in Q1 to $91.84Cdn/bbl in Q2. < 83% of Surge's production is oil.
Q2 Reported Net Loss included a lot of non-cash "noise". Adjusted After Tax Net Income was $23.2Cdn million ($0.23Cdn/share).
Key Stat for my valuation is that operating cash flow increased from $57.8Cdn million in Q1 to $80.4Cdn million in Q2. < This does not include $37.4Cdn million of proceeds from non-core asset sales.
My valuation increases to $14.53Cdn, which equates to $10.75US for ZPTAF. < Just 5X annualized operating CFPS.
As of July 30th, there were ten Canadian based analysts that cover Surge. Their price targets range from $10.00Cdn to $14.00Cdn. This morning, I received an update from Mark Heim, a respected analyst at Velocity Trade Capital. He rates SGY as Outperform with a price target of $13.00Cdn. His 2025 forecast ($3.26 operating CFPS) is very close to my forecast.
My updated forecast/valuation model for Surge has been posted to the EPG website. Scroll to the right to see all ten current price targets.