Surge Energy Inc (Alberta) T.SGY

Tax Pool benefit...

[zack50]

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. 

[pennydredful]

if   they   didn,t  spend  a nickel  to  maintain  production  you  have a point. However  they  will  spend    money   to  maintain  production   which  will  increase  tax pools   so  the   new  pools  added  might   equal&

[downtozero]

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).

[pennydredful]

 In   other  words  a   tiny  portion  of  the pool  will  be  useful  if  oil  prices  remain   high  but   if  oil  corrects  somewhat  the  pool will  just  carry  forward  to future  years  . So   yes  the  pool

[downtozero]

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.

[fortunefavorsus]

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.

[fortunefavorsus]

We know they are on talking terms with pension funds having supplied new loans to Surge.

[pennydredful]

Another  way  to look  at  it  is that all dividends should  be foregone  which  are  taxable , so  the company   can    maximize  CAPEX  to increase production as the income  will  be  tax free within the corporation with  all  the pools  available  , and   the shares