GREY:LSTMF - Post by User
Post by
jerrybeon May 25, 2015 12:33pm
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Post# 23761081
Why Surge over LTS? Three reasons...
Why Surge over LTS? Three reasons...1. Better assets
2. Better management
3. Lower debt
They made a material "conventional" oil discovery in the Upper Shaunavon (next to CPG if I am correct). This is a game changer with 250M barrel of oil (equivalent) in place...producing at a breakeven of $20-25 a barrel...this is the Saudi field of Canada. No drilling risk, huge running room, low decline.
There other assets (Sparky, Vahlalla) are also phenomenal with high net backs and relatively low netbacks with lots of EOR potential.
Check every press release since the fall in oil prices late last year...every step taken was the right decision...solid management led by a solid CEO. Lots of insiders buying in the open market recently is also a positive.
The recent asset sale, while cutting production, cuts also the debt by a huge amount. We go from a relatively highly leveraged firm (hence its massive price drop earlier this year) to a relatively low leverage firm.
The div yield is about 6% but they will most likely increase dividends within 18 to 24 months.
Lastly, the fact that prices have recovered is comfort to me. Chantal, I am not quite sure your trading strategy of only buying on the way down makes sense but I imagine it has worked well for you to stick to it. Momentum investing has been around since the 80s on Wall Street (if not before) and is known (academic research) to do well. The trend is your friend....
Anyhow, at the end of the day, Surge makes me sleep like a baby while I try to catch what I believe to be a very big window of opportunity to load up on the oil and gas sector before a secular recovery.
LTS, on the other hand, keeps me up at night, and you guys too according to the amount of posting you do 24/7. Yes, maybe more upside with an asset sale but also higher risk due to poor management and high leverage. I am not counting on those two "high impact Fahler" wells. As for the BXE comparison, it does not hold very well. BXE is much better run and has a huge midstream plant coming online in July that will significantly improve the netbacks on its gas. Plus it has some serious activists holding large stakes. I actually like BXE much more than LTS would I have to chose between the two!
PWT (PWE)...massive accounting manipulation?!? First of all, it turned out to be much more minor than anticipated...second, it was done by previous management, third, well, it was fixed and I do not believe it will happen again...although I agree that the lawsuits will keep on knocking at the door. Surge is definitely the better place to park your proceeds once LTS is sold to CPG or VET or whoever will put us out of our misery!