Post by
zack50 on Feb 03, 2022 10:01am
Tax Pool benefit...
Surge has over 1.1B$ of tax pools, so with regard to Surge's dividend model... (a) their operating model of those elite water flooded low decline assets and (b) their financial model of the increasing compounding dividend plus the tax pool coverage...
they have about a 5 year tax ride with 1.1B$ of tax pools so they can shelter a lot of that FCF away from the Feds and be able to distribute it out through dividends on a tax efficient basis to shareholders.
Comment by
downtozero on Feb 03, 2022 12:06pm
From 2020 preliminary guidance @80.00... $280M cash flow, $120M CAPEX, $160 FCFM. They can claim the $120M CAPEX against the $160M FCF, leaving $40M for the tax pool to cover. If oil averages $70 this year, then they don't need the tax pool (CAPEX > Profit).
Comment by
downtozero on Feb 03, 2022 3:44pm
Correct.... I just gave a simple example to help show your point. I'm sure there's more writeoffs they'd come up with if oil stays high. As you say, there's very little value in the current tax pool unless SGY can make FCF become significantly larger than CAPEX, which is not part of their current forcast.
Comment by
fortunefavorsus on Feb 03, 2022 4:01pm
Can private equity or a pension fund use tax pool. If they can makes a lot of sense to buy a company like Surge. Would management take 1.0 billion offer with pension fund assuming debt. Teine Energy Ltd., the company backed by Canada Pension Plan Investment Board, has agreed to buy oil-producing properties from Penn West Petroleum Ltd. for $975 million in cash.
Comment by
fortunefavorsus on Feb 03, 2022 4:03pm
We know they are on talking terms with pension funds having supplied new loans to Surge.