RE:Blue CollarFantome wrote:
Well here we are again on the Board!!!...lol......Great Post!!!...I agree with your assessment of SGY.... I might also add a couple of points to your post...in my 40 plus years as an investment professional (now retired) one of the big things I look for is management that does what it says it is going to do and also one where the management has "skin in the game"...in the case of Surge I believe that these two characteristics exist...I also like the fact that as opposed to dilution that most other producers are doing...CPG being the "poster child"...Surge doesn't dilute and in fact is planning the opposite...buying back shares which IMHO at current prices and the dividend yield is highly accretive to existing shareholders....better than any acquisition that they could possibly make right now....in addition I also like the math associated with the Upper Shaunavon...the capital efficiency is significantly higher than any other Western Canadian producer...most have capital efficiencies which are a third to half as efficient
I agree Management is critical. When Long View was taken over by Surge although the $ value was a bit disappointing I simply asked myself. “I have some number of Long View shares, will I be better off with some number of Surge shares. Due to the substantially better management at Surge the answer was absolutely YES.
Surge did take on quite a bit of debt to acquire Long View. But when it became a problem they proactively and effectively fixed the problem.
My impression of Paul Colborne is that he is not interested in a quick flip. His goal is to build a GOOD company and create shareholder value.
Bigger isn’t necessarily better. Companies can grow quite quickly with Dilution and Debt or they can grow gradually with earnings and the prudent use of Equity and Debt.
The Crescent Point model has been to grow by leaps and bounds with Equity. Actually their share based acquisitions have been very good. The problem “in my opinion” has been the dependency on a heavily subscribed DRIP which I view as “structural dilution”.
Enough of that this is the Surge board.
The Q2 results were very good! The only minor issue I see is a lack of hedging to date for 2016.
I was half expecting a dividend reduction which I would have been OK with.
Instead we have a potential “Share Buy Back”
Somebody asked “where will they get the money?”
With an “All In POR” of less than 100% that surpluses cash can be used.
Debt is not necessarily a bad thing if well managed. The Q2 Debt / FFO ratio was a very impressive .9. Surge has the room to take on a bit more debt. When they buy back shares at a discount the dividend savings will more than offset the interest cost. It’s a very good investment for the shareholders. They stated that they would buy shares when they are at a discount. If the share price is high they won’t. The NCIB will be a Tool in the Financial Tool Box and used appropriately.
In my “opinion” although the downturn in the Oil industry is not over and could / probably get worse before it gets better It’s All Good!!
As Always; Do Your Own Due Diligence; It’s Your Money !!