Surprised that SDE is down at these levels. CIBC has a $1.50 target for LGN. GLTA
LOGAN ENERGY CORP.
Q3/23 Solid Update: In Logan We Trust
Our Conclusion
Logan’s Q3/23 update did not disappoint, with well results at Simonette
tracking ahead of our expectations and validating our thesis on
management’s ability to execute its development plan. As a result of strong
well performance, H2/23 guidance was increased, while 2024 production
guidance came in slightly ahead of Street. Cost guidance for opex &
transportation for 2024 is ~5% better than consensus, and we expect cash
flow estimates to move higher as a result. Logan continued to expand its
land position in Simonette, acquiring ~33 net sections of Montney rights for
$5MM, and advanced its infrastructure and egress strategy at Pouce Coupe
through additional firm transportation commitments. Overall we take this
update as being positive for the stock which is trading at 6.0x 2024E
EV/DACF on strip versus gas-weighted peers at 4.7x.
Key Points
Headline metrics trounced expectations. Production of 5,394 Boe/d (24%
liquids) was ahead of our estimate of 4,680 Boe/d (26% liquids) and Street at
4,719 Boe/d (25% liquids). Capital spending of $34MM was below our
estimate of $40MM and Street at $36MM. Adjusted funds flow of $5.2MM
($0.01/sh) was ahead of our estimate of $3.5MM ($0.01/sh) and 27% ahead
of Street at $4.1MM ($0.01/sh).
South Simonette well results tracking ahead of expectations and
validating a core component of our thesis. Logan brought two wells on
production at Simonette in each of its two sub-plays (North and South). The
completion intensity at North Simonette was ~6x higher than offsetting
legacy wells on a proppant tonnage per metre basis. The resultant initial oil
rates are 4x higher than the legacy analog well despite limited downhole
pumping capacity. In South Simonette, a 2x higher frac intensity and lower
landing depth resulted in an initial condensate-gas ratio (CGR) of 87
Bbl/MMcf and an average production rate of 9,600 Mcfe/d in October versus
our base case of 85 Bbl/MMcf at 6,000 Mcfe/d.
2023 guidance updated to reflect strong well results at Simonette.
Logan increased its H2/23 guidance to 6 MBoe/d which exceeds our
previous estimate of 5.3 MBoe/d and Street at 5.4 MBoe/d with capital
spending unchanged at $75MM, in line with Street at $73MM. The company
has commenced drilling a three-well pad at South Simonette and deferred its
Flatrock well to 2024. Logan also acquired additional Montney acreage at
Simonette, including a 14-section block in the Lator area to the west, where it
will drill one Montney well in 2024.
2024 guidance tops expectations. Planned spending of $120MM is slightly
ahead of our prior estimate of $110MM and Street at $115MM. Production
guidance of 8.7 MBoe/d (31% liquids) is ahead of our prior estimate of 7.7
MBoe/d (32% liquids) and in line with Street at 8.6 MBoe/d (31% liquids).
Logan’s operating and transportation expense guidance of $16.10/Boe is
better than Street at $17.05/Boe while G&A and royalties are in line