Surge Energy Inc (Alberta) T.SGY

RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Re: Debt

[Kontrary]

So you don't hold shares now and (you claim) you've never held shares. Yet you religiously patrol this bulletin board looking for people who have opinions you don't agree with just so that you can dump all over them anonymously. You must have a very rich and rewarding life. Given the tone of your comments, I'm guessing you don't have many friends, so that partially explains why you can devote as much time to this as you do. 

There's a reason I used Cashflow from Operations instead of FCF. For one thing, the company includes CFO in every MD&A (as well as in its presentation of what next year could look like), so it makes for a clear apples-to-apple presentation. 

The second reason is more complicated and it may be harder for you to understand. You may not be familiar with what CAPEX actually is. By definition, it's an expense used to create a long-term asset. Depending on the nature and lifetime of that asset, companies only recognize that expense across several years. They do this through something called depreciation.If Free Cash Flow was truly the only useful metric, then there's an easy way to increase it - just don't spend any money maintainng or developing your assets. 

Much of Surge's early focus (before they got more heavily into the M&A game) was to explore and develop the Sparky area that they'd stumbled upon in the early years. That development included spending a lot of capital to drill walls and build pipelines and other facilities so that they could turn the area into a major producer. Those wells are still produicng and the pipelines and facilities that they built then are still in use. 

IF (and this is a big "IF") Surge actually follows through on its forecast and only spends $120M on CAPEX next year (which will be necessary just to maintain it's going-in-to-2022 production levels), it will only be able to spend this limited amount because of the investments that it made in previous years.

But don't let me stop you from buying up boatloads of shares in December. After all, IF WTI stays at $80/bbl and IF the company meets its production forecasts and IF it only spends $120M to replace production then the company might generate a lot of FCF. IF that happens, and IF management doesnt just decide to take that FCF and make more bad acquisitions, it might boost the share price. I won't be a buyer at any point next year (this was just a very small portion of my holdings and I hold shares in other companies with much better prospects), so if you sell at a higher price, it won't be to me.  

sclarda wrote: Kontrary wrote

You're quite bitter, aren't you? It seems you believe that people should only comment here if they're going to pump up a stock. I'm not actually "spouting" numbers, I'm analyzing the current situation. Your point that things would look better if it rose to $70-80 a few years ago is irrelevant, not only because it didn't happen but also because the company was actually doing better for shareholders back when Oil was trading at $55 than it plans to next year even if Oil stays at $80.

That's the point you seem to keep missing. Management has actually actively made things worse in a very tangible way. On a per-share basis, cash-flow was higher from 2017 to 2019 than it is today and will be next year. Even though Oil prices were much lower in those years.

As for your condescending little lesson on how companies work, part of the problem for us retail investors is that there are no large institutional investors interested in Surge, which means there is no investor large enough to get management's attention. Only 30% of shareholders voted on the Astra acquisition and share consolidation (I voted against both).

So while I'm pulling on "my big-boy pants", tell me this: This management team just reduced your holdings by 50%. You now earn less on each of your shares than you were 3-4 years ago and will still earn less next year, even if prices stay high. The share prices of most of Surge's competitors have increased by several multiples (CJ is up 10X in the past year) who will be selling at the same prices as Surge. Surge is barely above its 2020 lows.

You're obviously unhappy with me, but why aren't you unhappy with Surge's management?

sclarda wrote:

            It is very easy to be a Monday morning quarterback. The numbers you spout would have looked a lot better if oil had risen to $70 to $80 or more a few years ago. Surge would be sitting pretty with no debt and  a very large cashflow and big dividend.  If that would have happened people like you would be crowing about all the money you made with Surge and what a great investor you are.

And now that things didnt work out because oil prices never rose until now you put all the blame on Surge management.     Did anyone force you to buy shares years ago?  Time to put on your big boy pants and accept responsibility for your own actions and mistakes. 


The way it works  is a companies management CEO and board of directors decide the companies strategy and if and when to make acquisitions etc. If enough shareholders dont like the direction the company is taking they can get rid of management and hire new people. Since that doesnt seem to be happening with Surge the present management will follow the strategy that they are following no matter how many posts people like you make on Stockhouse.

If you dont like it you can sell your shares anytime and go away.  

I wont miss you.
 

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  "You're quite bitter arent you."

  Says the guy who spends everyday here foaming at the mouth endlessly repeating the same tired old b.s. over and over.

"It seems that you believe that people should only comment here if they are going to pump up a stock."

I am not pumping this stock. The reason that Surge has a very low shareprice that you cant seem to understand  is because it was a 15 000 barrel per day high decline   producer with $292 million in debt and a lot of bad hedges for this year not to mention a very poor performer over the last many years.  That is why the Surge shareprice is low. You bought a dog of an oil company and have held on to it for many years. Congratulations. 

"The company was actually doing better for shareholders back when oil was trading at $55 than it plans to next year even if oil stays at $80."

Well then lets all pray for oil to get back to $55 next year then Surge will make a pile more money than they would at $80.


"On a per share basis cashflow was actually higher from 2017 to 2019 than it is today and will be next year."

This is the cause of your problems. Although you spout a lot of numbers you cant seem to read a  simple financial statement. Cashflow alone means very little. It is Free cashflow after Capex that is important.  

In 2017 Surge had Cashflow of aprox. $104 million and Capex of aprox. $98 million. They had Free cashflow of aprox. $6 million.  Divide the 6 million by the 27 million shares and Surge had Free cashflow per share of aprox.  23 cents per share in 2017.

In 2018 Surge had Cashflow or aprox. $122 million and Capex of $120 million. Divide the $2 million in Free cashflow remaining by the 27 million shares and in 2018 Surge had Free cashflow per share of aprox.  8 cents.

In 2019 Surge had Cashflow or aprox. $149 million and Capex of $120 million leaving aprox. $29 million in Free cashflow  Divide that by the 38 million shares from that year and in 2019 Surge had Free cashflow of aprox.  75 cents per share in 2019.

In 2022 if oil stays around $80 Surge is forecasting aprox. $280 million of cashflow and $120 million in Capex leaving  $160 million in FREE Cashflow. Divide the $160 million by aprox. 83 million shares outstanding and next year Surge will have FREE Cashflow of aprox.  $1.90 per share vs. the $1.06 per share they had in total from the three years from 2017 to 2019.

In other words Surge next year at $80 oil will have Free Cashflow  $160 million.

In the three years from 2017 to 2019 they had aprox.  Free Cashflow of $37 million.

So next year Surge will have over 4 times the Free Cashflow that they had in the three years from 2017 to 2019.   

In those 3 years that you remember so fondly Surge burned up aprox.  20 million barrels of oil resources and produced $37 millon in Free cashflow which would not be enough to replace a fraction of the resources burned up. 

 And you keep wondering why the shareprice is so low?

You keep dreaming about those good old days.

"This management team just reduced your holdings by 50%. You now earn less on each of your shares than you were 3-4 years ago and will still earn less next year even if prices stay high."

Wrong on all counts. As i explained above  if oil stays at $80 next year Surge will have more than 4 times the free cashflow it had from 2017 to 2019.

And i am not "earning" anything more or less  on my Surge shares than i was 3 or 4 years ago because i never held any shares of this bloated pig  3 or 4 years ago and i am still not holding any now. 



I am waiting until tax loss season  to load up at rock bottom shareprices when people like you who cant add very well and  are extremely bitter and like to live in the past and  who bought  lots of shares at much higher prices and held on through all those glory years of  zero Free cashflow will be selling to people like me who can add and read a basic financial statement.

And next year i will ride your shares back up to double what you payed for them and then sell them back to you at the top.