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Surge Energy Inc (Alberta) T.SGY

Alternate Symbol(s):  ZPTAF | T.SGY.DB.B

Surge Energy Inc. is a Canada-based oil focused exploration and production (E&P) company. The Company's business consists of the exploration, development and production of oil and gas from properties in Western Canada. It holds focused and operated light and medium gravity crude oil properties in Alberta, Saskatchewan and Manitoba, characterized by large oil in place crude oil reservoirs with low recovery factors. It offers exposure to two of the five conventional oil growth plays in Canada: the Sparky and SE Saskatchewan. It holds a dominant land position and is drilling a mix of horizontal multi-frac and horizontal multi-lateral wells in the Sparky area. Sparky is a large, well established oil producing fairway in Western Canada. SE Saskatchewan is a focused operated asset base with light oil operating netbacks. SE Saskatchewan operates low-cost wells with short payouts and offers potential for continued area consolidation.


TSX:SGY - Post by User

Post by PUNJABIon Jan 24, 2022 10:00pm
410 Views
Post# 34356440

Oil Co with FCF that can fund their privatization

Oil Co with FCF that can fund their privatizationEric Nuttall tweeted a chart that shows 13 Canadian oil companies that can buy back their shares with FCF under 4 years and SGY is one of them. There are others that will take longer. It covers up to 7 yr period.

There is some confusion about this chart. I will try to explain how  I understand it.

This is a research graph for educational and illustration purposes made by Ninepoint partners and Peters & Co. According to this SGY can buy back all its shares in 2.5 years at $80 WTI. This graph shows two things. On the Y-axis it shows how many years it will take for the oil companies to buy back their shares. On X-axis it shows the life of their drilling inventory.

So what does it really mean?

First, it shows that the stock is very cheap and missed prices based on its ability to generate substantial free cash flow.  It shows the relations of share prices /market cap to the FCF that they are generating. According to this data, VET is number one and  SGY is number two all the other Canadian oil companies are higher than them. The difference between VET & SGY is very small and a matter of few months

Bottom line is that SGY has underperformed and its market cap and share price  is so low that with its FCF at WTI 80 it can buy back all their shares in 2.5 yrs. The market is missing pricing the stock just based on the huge FCF it should be trading much higher than its current price and will when the market realizes how missed prices this stock is. Another way of putting it is that based on the market cap to FCF VET is the worst-priced stock and SGY is the second-worst.

The other thing the graph shows is the life span of the drilling inventory of the companies that can buck back their shares in 7 years.

Someone commented that Eric has added SGY on his chart and will be buying SGY. Cannot speak for Eric and don't know what he is doing. I think this is research that shows all the oil companies that fall in this category,  and SGY is one of them. Eric may decide to buy or not buy all or a few of the companies listed on the chart. This is not a buying list.

But if he uses this thesis to buy and rate underpriced companies then SGY being number 2 qualifies to be purchased.


Personally, I like this method of rating the companies for purchase.


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